UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~March~~June 3130, 2013

Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______.

000-50029

(Commission file number)

CHINA HEALTH RESOURCE, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		73-1629948
(State or other jurisdiction		(IRS Employer
of incorporation or organization)		Identification No.)

343 Sui Zhou Zhong Road
Suining, Sichuan Province, P.R. China	629000
(Address of principal executive offices)	(zip code)

+(86-825) 239-1788

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Indicate the number of shares of the Registrant’s ordinary stock outstanding as of the latest practicable date:

On ~~April~~August 1030, 2013, ~~177~~227,435,953 shares of the registrant's ordinary stock, par value $0.001 were outstanding.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	43
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2524
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3336
ITEM 4T.	CONTROLS AND PROCEDURES	3336
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	3537
ITEM 1A.	RISK FACTORS AFFECTING FUTURE RESULTS	3537
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3537
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3538
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	3538
ITEM 5.	OTHER INFORMATION	3538
ITEM 6.	EXHIBITS	3538
SIGNATURES		3639
INDEX TO EXHIBITS

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS REPORT

When this report uses the words “we,” “us,” “our,” “CHRI,” and the “Company,” they refer to China Health Resource, Inc. and its subsidiaries. “SEC” refers to the Securities and Exchange Commission.

PART I – FINANCIAL INFORMATION

~~Item~~China 1.Health ~~Financial~~Resource, ~~Statements~~Inc.

~~China~~Unaudited ~~Health~~Consolidated ~~Resource,~~Financial ~~Inc. and Subsidiaries~~Statements

~~Unaudited~~June ~~Consolidated~~30, ~~Balance~~2013 ~~Sheets~~and December 31, 2012

As(Stated ofin ~~March~~US ~~31, 2013 and December 31, 2012~~Dollars)

~~(Expressed in USD)~~4

	3/31/2013		12/31/2012
			(Audited)
ASSETS
Current Assets
Cash and Cash Equivalents	$	1,043,304	$	1,295,149
Accounts Receivable		6,687,498		6,036,252
Advance to Suppliers		4,208,243		4,291,635
Prepayment For Land Usage		3,539,399		3,520,020
Deferred Inventory Cost		8,014,620		8,253,292
Inventory		1,759,099		1,648,759
Total Current Assets		25,252,163		25,045,107
Fixed Assets
Property, Plant and Equipment, Net		795,556		786,097
Total Assets	$	26,047,719	$	25,831,204
LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities	$	5,758,506	$	5,665,986
Other Payable		421,719		326,781
Due to Shareholder		376,457		376,457
Taxes Payable		670,038		684,559
Notes Payable		-		-
Short-Term Loan Payable		5,425,590		5,395,883
Total Current Liabilities	$	12,652,310	$	12,449,666
Total Liabilities	$	12,652,310	$	12,449,666
STOCKHOLDERS' EQUITY
Common Stock Class A (500,000,000 shares authorized, 177,435,953 and 177,435,953 issued and outstanding, par value US$0.001) at March 31, 2013 and December 31, 2012.	$	177,436	$	177,436
Preferred Stock (50,000,000 shares authorized , 0 issued and outstanding)		-		-
Additional Paid in Capital		1,736,497		1,736,497
Retained Earnings		740,104		662,205
Accumulated Other Comprehensive Income		10,741,372		10,805,400
Total Stockholders’ Equity		13,395,409		13,381,538
Total Liabilities & Stockholders’ Equity	$	26,047,719	$	25,831,204

China Health Resource, Inc. and Subsidiaries

4Unaudited Consolidated Balance Sheets

~~China~~As ~~Health~~of ~~Resource~~June 30, ~~Inc.~~2013 and ~~Subsidiaries~~December 31, 2012

~~Unaudited~~(Expressed ~~Consolidated~~in ~~Statements of Operations~~USD)

For the three months ended March 31, 2013 and 2012

		6/30/2013		12/31/2012
	Note	(Unaudited)
ASSETS

Current Assets
Cash and Cash Equivalents	2(h)	$	1,010,587	$	1,295,149
Accounts Receivable	2(i), 3		6,008,877		6,036,252
Other receivables and advance to suppliers	2(j), 4		4,641,455		4,291,635
Prepayment For Land Usage	5		5,580,462		3,520,020
Deferred Inventory Cost	6		6,466,367		8,253,292
Inventory	2(k), 7		1,775,266		1,648,759
Total Current Assets			25,483,014		25,045,107

Fixed Assets
Property, Plant and Equipment, Net	2(l), 8		788,743		786,097
Total Assets		$	26,271,757	$	25,831,204

LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities	9	$	5,772,638	$	5,665,986
Other Payable	10		512,334		326,781
Due to Shareholder			419,458		376,457
Taxes Payable			689,883		684,559
Notes Payable	11		-		-
Short-Term Loan Payable	12		5,502,776		5,395,883
Total Current Liabilities		$	12,897,089	$	12,449,666

Total Liabilities		$	12,897,089	$	12,449,666
STOCKHOLDERS' EQUITY

Common Stock Class A (500,000,000 shares authorized, 177,435,953 and 177,435,953 issued and outstanding, par value US$0.001) at June 30, 2013 and December 31, 2012.		$	177,436	$	177,436
Preferred Stock (50,000,000 shares authorized , 0 issued and outstanding)			-		-
Additional Paid in Capital			1,736,497		1,736,497
Retained Earnings			940,085		662,205
Accumulated Other Comprehensive Income			10,520,650		10,805,400
Total Stockholders’ Equity			13,374,668		13,381,538

Total Liabilities & Stockholders’ Equity		$	26,271,757	$	25,831,204

~~(Expressed~~See inAccompanying ~~USD)~~Notes to the Financial Statements and Accountant’s Report

	For the three months ended			For the three months ended
	3/31/2013			3/31/2012
REVENUES
Sales	$	1,230,066		$	8,955,361
Cost of Sales		968,276			6,972,090
Gross Profit		261,790			1,983,271
Operating Expenses
Selling, General and Administrative Expense		230,207			199,805
Interest Expense		95,606			22,248
Total Operating Expenses		325,813			222,053
Operating Income		(64,023	)		1,761,218
OTHER INCOME / (EXPENSES)
Other Expense		(5	)		(1	)
Total Other Income/(Expense)		(5	)		(1	)
Net Income (Loss) Before Taxes		(64,028	)		1,761,217
Provision( Credit) Income Tax		-			444,687
Net Income (Loss)		(64,028	)		1,316,530
Other Comprehensive Income (Loss)
Foreign Currency Translation (Loss) & Gain
		77,898			15,988
Comprehensive Income (Loss)	$	13,870		$	1,332,518
Weighted Average Common Shares Outstanding
Basic		177,435,953			171,327,620
Fully diluted		177,435,953			171,327,620
Net Gain(Loss) Per Common Share
Basic	$	0.00		$	0.01
Fully diluted	$	0.00		$	0.01

~~See~~China ~~Accompanying Notes~~Health toResource, ~~the~~Inc. ~~Financial Statements~~ and ~~Accountant’s Report~~Subsidiaries

5Unaudited Consolidated Statements of Operations

~~China~~For ~~Health~~the ~~Resource~~period ended June 30, ~~Inc.~~2013 and ~~Subsidiaries~~ 2012

~~Unaudited~~(Expressed ~~Consolidated~~in ~~Statements of Cash Flows~~USD)

For the three months ended March 31, 2013 and 2012

	For the three months ended						For the six months ended
	June 30,			June 30,			June 30,			June 30,
	2013			2012			2013			2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
REVENUES
Sales	$	1,934,290		$	6,305,200		$	3,164,356		$	15,260,561
Cost of Sales		1,544,651			4,891,526			2,512,927			11,863,616
Gross Profit		389,639			1,413,674			651,429			3,396,945

Operating Expenses
Selling, General and Administrative Expense		503,159			293,054			733,366			492,859
Interest Expense		107,207			7,495			202,813			29,743
Total Operating Expenses		610,366			300,549			936,179			522,602

Operating Income		(220,727	)		1,113,125			(284,750	)		2,874,343

OTHER INCOME / (EXPENSES)
Other Expense		5			-			-			(1	)
Total Other Income/(Expense)		5			-			-			(1	)

Net Income (Loss) Before Taxes		(220,722	)		1,113,124			(284,750	)		2,874,341

Provision( Credit) Income Tax		-			280,281			-			724,968

Net Income (Loss)		(220,722	)		832,843			(284,750	)		2,149,373

Other Comprehensive Income (Loss)
Foreign Currency Translation (Loss) & Gain		199,982			(88,483	)		277,880			(72,495	)

Comprehensive Income (Loss)	$	(20,740	)	$	744,631		$	(6,870	)	$	2,076,879

Weighted Average Common Shares Outstanding
Basic		177,435,953			177,435,953			177,435,953			177,435,953
Fully diluted		177,435,953			177,435,953			177,435,953			177,435,953

Net Gain(Loss) Per Common Share
Basic	$	(0.00	)	$	0.00		$	(0.00	)	$	0.01
Fully diluted	$	(0.00	)	$	0.00		$	(0.00	)	$	0.01

~~(Expressed~~See inAccompanying ~~USD)~~Notes to the Financial Statements and Accountant’s Report

	For the three months ended
	March 31, 2013			March 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	(64,028	)	$	1,316,530
Adjusted to reconcile net income to net cash used in operating activities
Depreciation		14,562			14,416
Stock-based compensation		-			7,958
Accounts Receivable		(616,977	)		183,666
Employee Advance and Other Receivable		106,839			(101,750	)
Prepayment for land usage		283,633			(876,169	)
Inventory		(101,092	)		(158,917	)
Accounts Payable and Accrued Liabilities		64,117			(22,046	)
Other Payable		92,982			(38,580	)
Others		2,589			2,576
Tax Payable		(18,887	)		579,718
Net Cash Provided by (used in) Operating Activities		(236,262	)		907,402
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		(22,273	)		-
Net Cash Provided by (used in) Investing Activities		(22,273	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceed on short-term Loan Payable		-			-
Payment From short-term Notes payment		-			(475,564	)
Net Cash Provided by Financing Activities		-			(475,564	)
Foreign Currency Translation		6,690			1,218
Net Increase (Decrease)in Cash and Equivalents		(251,845	)		433,056
CASH AND CASH EQUIVALENTS:
Beginning of period		1,295,149			241,755
End of period	$	1,043,304		$	674,811

~~See~~China ~~Accompanying Notes~~Health toResource, ~~the~~Inc. ~~Financial Statements~~ and ~~Accountant’s Report~~Subsidiaries

6Unaudited Consolidated Statements of Cash Flows

~~China~~For ~~Health~~the ~~Resource~~period ended June 30, ~~Inc.~~2013 and 2012 ~~Subsidiaries~~

~~Notes~~(Expressed toin ~~Unaudited Consolidated Financial Statements~~USD)

For the three months ended March 31, 2013 and 2012

	For the six months ended
	June 30, 2013			June 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)	$	(284,750	)	$	2,149,373
Adjusted to reconcile net income to net cash used in operating activities
Depreciation		29,986			28,839
Bad debt expenses		348,416			-
Stock-based compensation		-			7,958
Accounts Receivable		(202,957	)		393,776
Other Receivable and advance to suppliers		(3,107,268	)		(979,028	)
Prepayment for land usage		2,805,281			(876,336	)
Inventory		(92,890	)		(1,124,770	)
Accounts Payable and Accrued Liabilities		2,316			53,225
Other Payable		177,258			(34,718	)
Due to shareholders		43,000
Others		5,207			5,153
Tax Payable		(8,246	)		846,046
Net Cash Provided by (used in) Operating Activities		(284,647	)		469,488

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		(22,397	)		-
Net Cash Used in Investing Activities		(22,397	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceed on short-term Loan Payable		-			1,427,009
Payment From short-term Notes payment		-			(1,205,029	)
Net Cash Provided by Financing Activities		-			221,979

Foreign Currency Translation		22,482			(2,879	)
Net Increase (Decrease)in Cash and Equivalents		(284,562	)		688,588

CASH AND CASH EQUIVALENTS:
Beginning of period		1,295,149			241,755
End of period	$	1,010,587		$	930,343

Supplementary cash flow information:
Income taxes paid	$	-		$	724,968
Interest paid		202,643			29,743

~~(Expressed~~See inAccompanying Notes ~~USD)~~to the Financial Statements and Accountant’s Report

~~1. ORGANIZATION AND BUSINESS BACKGROUND~~7

China Health Resource ~~Inc.~~, ~~f/k/a~~ ~~Voice Diary~~ Inc. ~~(the “Company” or “CHRI”) was incorporated in the State of Delaware on February 26, 2002. In June~~ and July 2002, the Company acquired approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation (“VDL”), through the exchange of shares of the Company with former shareholders of the Subsidiary. VDL was disposed of on August 22, 2006 pursuant to the agreement between the Company, VDL and Arie Hinkis, the former president of the Company. On May 21, 2007, the Company changed its name to “China Health Resource Inc.”.Subsidiaries

OnNotes June 13, 2006, CHRI (“acquiree”) executed a Plan of Exchange with Sui Ning Shi Yin Fa Bai Zhi Chan Ye You Xian Gong Si, a corporation organized and existing under the laws of the Peoples’ Republic of China (“Yin Fa” or ‘acquirer”), the shareholders of Yin Fa (the “Yin Fa Shareholders”) and the Majority Shareholder of the CHRI, pursuant to ~~which~~Unaudited ~~six~~Consolidated ~~simultaneous transactions~~Financial were consummated at closing, as follows: (1) settlement of the liabilities of CHRI, (2) a deposit of 7,977,023 (pre-split) new shares of Class A Common Stock and 2,000 new shares of Class B Common Stock via hand delivery by Mr. Hinkis in exchange for a payment of $264,000 in cash , (3) a deposit of 1,305,000 (pre-split) shares of Class A Common Stock via hand delivery by Mr. Hinkis in exchange for a payment of $136,000 in cash, (4) the issuance of 30,000,000 (post-split) investment shares of Class A Common Stock of the Registrant to the Yin Fa shareholders pursuant to Regulation S under the Securities Act of 1933, as amended, in exchange for all of the shares of registered capital of Yin Fa, (5) vending out the CHRI subsidiary after closing, and (6) retirement of 744 shares of Class B Common Stock owned Mr. Hinkis at closing against payment of $74,000 and settlement of all unpaid salaries and severance pay to Mr. Hinkis in the amount of $100,000, of which both amounts was taken from the payment made to CHRI for the issued shares.Statements

~~The~~For ~~Plan~~the ofsix-month ~~Exchange~~ended ~~was~~June ~~consummated on August 22~~30, ~~2006; as a result, Yin Fa became a wholly-owned subsidiary of CHRI. The transaction was treated for accounting purposes~~2013 ~~as a capital transaction~~ and ~~recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree.~~2012

~~Accordingly,~~(Expressed ~~the~~in ~~consolidated financial statements include the following:~~USD)

(1). ~~The~~ORGANIZATION ~~balance~~AND ~~sheet~~BUSINESS ~~consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.~~BACKGROUND

China Health Resource Inc., f/k/a Voice Diary Inc. (2the “Company” or “CHRI”) ~~The~~was ~~statement~~incorporated in the State of ~~operations~~Delaware ~~includes~~on February 26, 2002. In June and July 2002, the ~~operations~~Company acquired approximately 99% of the ~~acquirer~~outstanding ~~for~~shares of Voice Diary Ltd., an Israeli corporation (“VDL”), through the ~~periods~~exchange ~~presented~~of ~~and~~shares of the ~~operations~~Company with former shareholders of the ~~acquiree~~Subsidiary. ~~from~~VDL was disposed of on August 22, 2006 pursuant to the ~~date~~agreement between the Company, VDL and Arie Hinkis, the former president of the Company. On May 21, 2007, the ~~merger~~Company changed its name to “China Health Resource Inc.”.

On June 13, 2006, CHRI (“acquiree”) executed a Plan of Exchange with Sui Ning Shi Yin Fa ~~was~~Bai ~~founded~~Zhi onChan ~~April 24~~Ye You Xian Gong Si, ~~2001~~a incorporation ~~China. The~~organized ~~main~~and ~~business~~existing ~~plan~~under the ~~includes~~laws of the ~~manufacturing,~~Peoples’ ~~processing~~Republic of China (“Yin Fa” or ‘acquirer”), ~~and~~the ~~sales~~shareholders of ~~Dahurian~~Yin ~~Angelica~~Fa ~~Root~~ (~~DAR~~the “Yin Fa Shareholders”) and ~~its~~the ~~related~~Majority ~~products. DAR~~Shareholder isof ~~one~~the CHRI, pursuant to which six simultaneous transactions were consummated at closing, as follows: (1) settlement of the ~~major~~liabilities ~~herbs~~of ~~used~~CHRI, in(2) ~~Chinese~~a ~~traditional~~deposit ~~medicines. In~~of 7,977,023 (pre-split) new shares ~~2004~~of Class A Common Stock and ~~2005~~2,000 ~~the~~new ~~company~~shares ~~and~~of ~~Sichuan~~Class ~~Yingfa~~B ~~Resource~~Common ~~Development~~Stock Covia hand delivery by Mr. Hinkis in exchange for a payment of $264,000 ~~Ltd.~~in cash , (~~Sichuan~~3) ~~began~~a ~~the~~deposit ~~process~~of 1,305,000 (pre-split) shares of ~~applying~~Class ~~for~~A ~~Good~~Common Stock via hand delivery by Mr. Hinkis in ~~Agricultural~~exchange ~~Practice~~for a payment of ~~Medical~~$136,000 ~~Plants~~in ~~and~~cash, ~~Animals~~(4) the issuance of 30,000,000 (~~GAP~~post-split) ~~for~~investment ~~DAR.~~shares ~~The~~of ~~project~~Class ~~passed~~A Common Stock of the ~~inspection~~Registrant ofto the ~~State~~Yin ~~Food~~Fa ~~and~~shareholders ~~Drug~~pursuant to Regulation S under the Securities Act of 1933, as amended, ~~Administration~~in exchange for all of the shares of registered capital of Yin Fa, (~~SFDA~~5) vending out the CHRI subsidiary after closing, and ~~the~~(6) ~~SFDA~~retirement of ~~made~~744 ~~the~~shares ~~final~~of Class B Common Stock owned Mr. Hinkis at closing against payment of $74,000 ~~official~~and ~~announcement~~settlement onof ~~February~~all 26unpaid salaries and severance pay to Mr. Hinkis in the amount of $100,000, ~~2006~~of which both amounts was taken from the payment made to CHRI for the issued shares.

7The Plan of Exchange was consummated on August 22, 2006; as a result, Yin Fa became a wholly-owned subsidiary of CHRI. The transaction was treated for accounting purposes as a capital transaction and recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree.

~~China~~Accordingly, ~~Health~~the ~~Resource,~~consolidated financial ~~Inc.~~statements ~~and~~include ~~Subsidiaries~~the following:

~~Notes~~(1) toThe ~~Unaudited~~balance ~~Consolidated~~sheet ~~Financial Statements~~consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.

~~For~~(2) The statement of operations includes the ~~three~~operations ~~months~~of ~~ended~~the ~~March~~acquirer ~~31,~~for ~~2013~~the periods presented and ~~2012~~ the operations of the acquiree from the date of the merger.

Yin Fa was founded on April 24, 2001 in China. The main business plan includes the manufacturing, processing, and sales of Dahurian Angelica Root (~~Expressed~~DAR) and its related products. DAR is one of the major herbs used in ~~USD~~Chinese traditional medicines. In 2004 and 2005, the company and Sichuan Yingfa Resource Development Co., Ltd., (Sichuan) began the process of applying for Good Agricultural Practice of Medical Plants and Animals (GAP) for DAR. The project passed the inspection of the State Food and Drug Administration (SFDA), and the SFDA made the final, official announcement on February 26, 2006.

A GAP certificate means that the planning, quality, and manufacturing of DAR meet a high and certifiable standard. The GAP certificate is in the name of Sichuan and the company manages the processing and sales of DAR.8

InChina ~~2011,~~Health ~~Suining Yinfa DAR Industrial Co~~Resource, ~~Ltd~~Inc. had invested 95,223 USD (600,000 RMB) to establish an agricultural planting business entity called Suining Yinfa DAR Planting Co, Ltd. This Yinfa DAR Planting Company is in process of obtaining business approval and ~~certificate from different government departments, and no business activity has occurred.~~Subsidiaries

~~CHRI~~Notes ~~and its wholly owned subsidiaries, Suining Yinfa DAR Industrial Co, Ltd. and Suining Yinfa DAR Planting Co, Ltd, are hereafter referred~~ to asUnaudited ~~(the~~Consolidated ~~“Company”)~~Financial Statements

2.For ~~SUMMARY~~the OFsix-month ~~SIGNIFICANT~~ended ~~ACCOUNTING~~June ~~POLICIES~~30, 2013 and 2012

(a)Expressed ~~Basis~~in ~~of Presentation~~USD)

~~These~~A ~~accompanying~~GAP ~~consolidated~~certificate means that ~~financial~~the ~~statements~~planning, ~~have~~quality, ~~been~~and ~~prepared~~manufacturing inof ~~accordance~~DAR ~~with~~meet ~~generally~~a ~~accepted~~high ~~accounting~~and ~~principles~~certifiable standard. The GAP certificate is in the name ~~United~~of ~~States~~Sichuan and the company manages the processing and sales of ~~America~~DAR.

In 2011, Suining Yinfa DAR Industrial Co, Ltd. had invested 95,223 USD (b600,000 RMB) ~~Basis~~to establish an agricultural planting business entity called Suining Yinfa DAR Planting Co, Ltd. This Yinfa DAR Planting Company is in process of ~~Consolidation~~obtaining business approval and certificate from different government departments, and no business activity has occurred.

~~The~~CHRI ~~consolidated~~and ~~financial statements~~its ~~include~~wholly ~~the~~owned ~~financial~~subsidiaries, Suining ~~statements~~Yinfa ofDAR ~~the~~Industrial ~~Company~~Co, ~~and its subsidiaries~~Ltd. ~~All~~and ~~significant~~Suining ~~inter-company~~Yinfa ~~balances~~DAR ~~and~~Planting ~~transactions within~~Co, ~~the~~Ltd, ~~Company~~are ~~and~~hereafter ~~subsidiary~~referred ~~have~~to ~~been~~as ~~eliminated~~(the ~~upon consolidation.~~“Company”)

~~(c)~~2. ~~Management’s~~SUMMARY ~~Use~~OF ofSIGNIFICANT ~~Estimates~~ACCOUNTING POLICIES

~~The~~(a) ~~preparation~~Basis of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Presentation

~~(d)~~These ~~Revenue~~accompanying ~~Recognition~~consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.

~~Revenue~~(b) isBasis recognized at the time the product is delivered and title has passed to the customer. Cash discounts are recognized as an expense in the period in which it actually occurs. Sales allowances are recorded as a reduction of ~~revenue in the period in which they occur. Revenue is presented net of return.~~Consolidation

8The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.

~~China~~(c) ~~Health~~Management’s ~~Resource,~~Use ~~Inc.~~of ~~and Subsidiaries~~Estimates

~~Notes~~The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to ~~Unaudited~~make ~~Consolidated~~estimates ~~Financial~~and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets ~~Statements~~and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~For~~(d) ~~the~~Revenue ~~three months ended March 31, 2013 and 2012~~Recognition

~~(Expressed~~Revenue is recognized at the time the product is delivered and title has passed to the customer. Cash discounts are recognized as an expense in ~~USD)~~the period in which it actually occurs. Sales allowances are recorded as a reduction of revenue in the period in which they occur. Revenue is presented net of return.

~~(e) Comprehensive Income (Loss)~~9

~~The~~China ~~Company~~Health ~~adopted~~Resource, ~~Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No~~Inc. ~~130 (FASB ASC 220), “Reporting Comprehensive Income,” which establishes standards for the reporting~~ and ~~display of comprehensive income and its components in the consolidated financial statements.~~Subsidiary

~~(f)~~Notes ~~Foreign~~to ~~Currencies~~Unaudited Condensed Consolidated Financial Statements

~~Assets~~For ~~and liabilities denominated in respective functional currencies are translated into United States Dollars at~~ the ~~exchange~~Six ~~rate~~Months asEnded ofJune ~~the balance sheet date. The~~30, ~~share~~2013 ~~capital~~ and retained earnings are translated at exchange rates prevailing at the time of the transactions. Revenues, costs, and expenses denominated in respective functional currencies are translated into United States Dollars at the weighted average exchange rate for the period. The effects of foreign currencies translation adjustments are included as a separate component of accumulated other comprehensive income.2012

(g)Expressed ~~Company’s~~in ~~Future Operations Are Dependent on Foreign Operations~~USD)

~~The~~(e) ~~Company’s~~Comprehensive future operations and earnings will depend on the results of the Company’s operations in China. There can be no assurance that the Company will be able to successfully conduct such operations, and a failure to do so would have a material adverse effect on the Company’s financial position, results of operations, and cash flows.Income

~~Also,~~The ~~the~~Company ~~success~~adopted ~~of the Company’s~~Financial ~~operations~~Accounting ~~will~~Standards beBoard ~~subject~~Statement ~~to numerous contingencies, some~~ of ~~which~~Financial ~~are~~Accounting ~~beyond~~Standards ~~management’s~~(SFAS) ~~control~~No. ~~These~~130 ~~contingencies include~~(FASB ~~general~~ASC ~~and regional economic conditions~~220), ~~prices~~“Reporting ~~for the Company’s products, competition, and changes in regulation.~~Comprehensive ~~Since the Company is dependent on international operations~~Income,” ~~specifically~~which ~~those~~establishes instandards ~~China,~~for the ~~Company~~reporting ~~will be subject to various additional political, economic,~~ and ~~other~~display ~~uncertainties. Among other risks, the Company’s operations will be subject to the risks~~ of ~~restrictions~~comprehensive onincome ~~transfer of funds; export duties, quotas,~~ and ~~embargoes;~~its ~~domestic~~components ~~and~~in ~~international~~the ~~customs and tariffs;~~consolidated ~~changing~~financial ~~taxation policies; foreign exchange restrictions; and political conditions and governmental regulations~~statements.

(hf) ~~Cash~~Foreign ~~and Cash Equivalents~~Currencies

~~For~~Assets ~~purposes~~and liabilities denominated in respective functional currencies are translated into United States Dollars at the exchange rate as of the ~~Consolidated~~balance sheet date. The ~~Statement~~share capital and retained earnings are translated at exchange rates prevailing at the time of ~~Cash~~the ~~Flows~~transactions. Revenues, costs, and expenses denominated in respective functional currencies are translated into United States Dollars at the ~~Company~~weighted ~~considers~~average exchange ~~liquid~~rate ~~investments~~for ~~with~~the anperiod. ~~original~~The ~~maturity~~effects of ~~three~~foreign ~~months~~currencies ortranslation ~~less~~adjustments toare beincluded ~~cash~~as a separate component of ~~equivalents~~accumulated other comprehensive income.

9(g) Company’s Future Operations Are Dependent on Foreign Operations

The Company’s future operations and earnings will depend on the results of the Company’s operations in China. ~~Health~~There ~~Resource~~can be no assurance that the Company will be able to successfully conduct such operations, ~~Inc.~~and a failure to do so would have a material adverse effect on the Company’s financial position, results of operations, and ~~Subsidiaries~~cash flows.

~~Notes~~Also, the success of the Company’s operations will be subject to ~~Unaudited~~numerous ~~Consolidated~~contingencies, ~~Financial~~some of which are beyond management’s control. These contingencies ~~Statements~~include general and regional economic conditions, prices for the Company’s products, competition, and changes in regulation. Since the Company is dependent on international operations, specifically those in China, the Company will be subject to various additional political, economic, and other uncertainties. Among other risks, the Company’s operations will be subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

~~For~~(h) ~~the~~Cash ~~three~~and ~~months~~Cash ~~ended March 31, 2013 and 2012~~Equivalents

~~(Expressed~~For inpurposes ~~USD)~~of the Consolidated Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.

~~(i) Accounts Receivable~~10

~~Accounts~~China ~~receivable~~Health ~~are~~Resource, ~~stated at estimated net realizable value~~Inc. ~~Accounts~~ ~~receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining the collectability of the account, historical trends are evaluated~~ and specific customer issues are reviewed to arrive at appropriate allowance which is 90 days. Bad debt provision is made if fail to collect the balance after the allowance period. And the uncollectable amount last more than one year, it will automatically account for bad debt.Subsidiary

~~(j)~~Notes ~~Advances~~ to ~~Suppliers~~Unaudited Condensed Consolidated Financial Statements

~~Advances~~For ~~to suppliers represent~~ the ~~cash~~Six ~~paid~~Months inEnded ~~advance~~June ~~for~~30, 2013 ~~purchasing raw materials. The advances to suppliers are interest free~~ and ~~unsecured.~~2012

(k)Expressed ~~Inventory~~in USD)

~~Inventory~~(i) ~~includes~~Accounts raw material, package material, low-value consumables and merchandise. The Company adopts perpetual inventory system and inventories are recorded at actual cost. Raw material, package material and merchandise are priced at cost upon acquisition, and with the weighted average method upon issuance and shipment. Low-value consumables are amortized at 50% of the amount upon application and amortized an additional 50% upon obsolescence.Receivable

~~(l)~~Accounts ~~Property,~~receivable ~~Plant~~are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining the collectability of the account, historical trends are evaluated and ~~Equipment~~specific customer issues are reviewed to arrive at appropriate allowance which is 90 days. Bad debt provision is made if fail to collect the balance after the allowance period. And the uncollectable amount last more than one year, it will automatically account for bad debt.

~~Property,~~(j) ~~plant,~~Advances and equipment are recorded at cost, less accumulated depreciation and impairment. Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of property, plant, and equipment, are expensed as incurred. The cost and related accumulated depreciation, applicable to ~~sold or no longer in service property, plant, and equipment, are eliminated from the accounts and any gain or loss is included in the statement of operations.~~Suppliers

~~Depreciation~~Advances ~~is calculated~~ to ~~write-off~~suppliers represent the ~~cost~~cash orpaid ~~basis~~in ofadvance ~~the~~for ~~property,~~purchasing ~~plant,~~raw ~~and~~materials. ~~equipment~~The ~~over~~advances ~~their~~to ~~estimated~~suppliers ~~useful~~are ~~lives~~interest ~~for~~free ~~the date on which they become fully operational~~ and ~~after taking into account their estimated residual values (salvage value), using the straight-line method, at the following rates per year:~~unsecured.

	Equipment	Straight-line for 5 to 20 years with a 3% salvage value
	Building	Straight-line for 20 years with a 5% salvage value

(k)

Inventory

10Inventory includes raw material, package material, low-value consumables and merchandise. The Company adopts perpetual inventory system and inventories are recorded at actual cost. Raw material, package material and merchandise are priced at cost upon acquisition, and with the weighted average method upon issuance and shipment. Low-value consumables are amortized at 50% of the amount upon application and amortized an additional 50% upon obsolescence.

~~China~~(l) ~~Health~~Property, ~~Resource~~Plant, ~~Inc.~~ and ~~Subsidiaries~~Equipment

~~Notes~~Property, plant, and equipment are recorded at cost, less accumulated depreciation and impairment. Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of property, plant, and equipment, are expensed as incurred. The cost and related accumulated depreciation, applicable to ~~Unaudited~~sold ~~Consolidated~~or ~~Financial~~no longer in service property, plant, and equipment, are eliminated ~~Statements~~from the accounts and any gain or loss is included in the statement of operations.

~~For~~Depreciation is calculated to write-off the ~~three~~cost ~~months~~or ~~ended~~basis ~~March~~of 31the property, ~~2013~~plant, and equipment over their estimated useful lives for the date on which they ~~2012~~become fully operational and after taking into account their estimated residual values (salvage value), using the straight-line method, at the following rates per year:

(Expressed in USD)

Equipment	Straight-line for 5 to 20 years with a 3% salvage value
Building	Straight-line for 20 years with a 5% salvage value

The Company recognizes an ~~impairment~~ impairment loss on property, plant, and equipment when evidence, such as the sum of expected future cash flows (undiscounted and without interest charges), indicates that future operations will not produce sufficient revenue to cover the related future costs, including depreciation, and when the carrying amount of the asset cannot be realized through sale. Measurement of the impairment loss is based on the fair value of the assets.

~~(m) Income Taxes~~11

~~Income~~China ~~taxes~~Health ~~are provided in accordance with Statement of Financial Accounting Standards (SFAS) No. 109 (FASB ASC 740)~~Resource, ~~“Accounting for Income Taxes~~Inc.~~” A deferred~~ ~~tax asset or liability is recorded for all temporary differences between financial~~ and ~~tax reporting and net operating loss carry forwards.~~Subsidiary

~~Deferred~~Notes ~~tax~~to ~~assets~~Unaudited ~~are reduced~~Condensed byConsolidated aFinancial valuation allowance when, in the opinion of management, it is more likely than not that, and some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.Statements

~~(n)~~For ~~Earnings~~the ~~(Loss)~~Six ~~Per~~Months ~~Common~~Ended ~~Share~~June 30, 2013 and 2012

~~Basic earnings~~ (~~loss)~~Expressed ~~per share~~in ~~are computed by dividing the net income (loss~~USD) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period.

(om) ~~Fair~~Income ~~Value of Financial Instruments~~Taxes

~~The~~Income ~~carrying~~taxes ~~amounts~~are ~~reported~~ provided in accordance ~~the~~with ~~consolidated~~Statement ~~balance~~of ~~sheet~~Financial ~~for~~Accounting ~~cash,~~Standards ~~accounts~~(SFAS) ~~receivable,~~No. ~~accounts~~109 ~~payable,~~(FASB ~~and~~ASC ~~loans~~740), ~~payable~~“Accounting ~~approximate~~for ~~fair~~Income ~~value based on the short-term maturity of these instruments~~Taxes.” ~~The~~A deferred ~~carrying~~tax ~~value~~asset ofor ~~the~~liability ~~Company’s~~is ~~long-term~~recorded ~~debt~~for ~~approximated its~~all ~~fair~~temporary ~~value~~differences ~~based~~between onfinancial ~~the~~and ~~current~~tax ~~market~~reporting ~~conditions~~and ~~for~~net ~~similar~~operating loss ~~debt~~carry ~~instruments~~forwards.

~~(p)~~Deferred ~~Impairment~~tax assets are reduced by a valuation allowance when, in the opinion of ~~Long-Lived~~management, ~~Assets~~it is more likely than not that, and some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

~~The~~(n) ~~Company~~Earnings ~~evaluated the recoverability of its property and equipment, and other assets in accordance with Statements of Financial Accounting Standards~~ (~~SFAS~~Loss) ~~No.~~Per ~~121,~~Common “Accounting for the Impairment of Long-Lived Assets to be Disposed of,” which requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets or the business to which such intangible assets relate.Share

11Basic earnings (loss) per share are computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period.

~~China~~(o) ~~Health~~Fair ~~Resource,~~Value ~~Inc.~~of ~~and~~Financial ~~Subsidiaries~~Instruments

~~Notes~~The tocarrying ~~Unaudited~~amounts ~~Consolidated~~reported in ~~Financial~~the consolidated balance sheet for cash, accounts receivable, accounts payable, and loans payable approximate fair value based ~~Statements~~on the short-term maturity of these instruments. The carrying value of the Company’s long-term debt approximated its fair value based on the current market conditions for similar debt instruments.

~~For~~(p) ~~the~~Impairment ~~three~~of ~~months~~Long-Lived ~~ended March 31, 2013 and 2012~~Assets

~~(Expressed~~The Company evaluated the recoverability of its property and equipment, and other assets in ~~USD~~accordance with Statements of Financial Accounting Standards (SFAS) No. 121, “Accounting for the Impairment of Long-Lived Assets to be Disposed of,” which requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets or the business to which such intangible assets relate.

(q)

Stock-Based Compensation

Employee stock-based compensation is accounted for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and the FASB interpretations thereof. Pursuant to those accounting pronouncements, compensation is recorded for share options granted to employees at the date of grant based on the difference between the exercise price of the options ~~and~~ and the market value of the underlying shares at that date. Due to the terms of the grants, the fair value of the compensation in accordance with SFAS No. 123R, "Accounting for Stock-Based Compensation" approximates the values computed in accordance with APB No. 25. Stock-based compensation to non-employees is accounted for in accordance with SFAS No. 123R. Under both accounting pronouncements, as part of the necessary computations, management is required to estimate the fair value of the underlying shares. Fair value has generally been determined by management, as the price at which the Company's shares were issued at the most recent prior placement of the Company's Common Stock. Since the Company was approved for listing on the Over the Counter Bulletin Board - fair value is determined according to stock market price. The timing of the grant and measurement of stock-based awards will not have a material effect on the Company's results of operations and financial position. Since no stock-based awards exist.

~~(r) Subsequent Events~~12

~~SFAS~~China ~~No. 165~~Health ~~established general standards of accounting for and disclosure of events that occur after the balance sheet date~~Resource, ~~but before the financial statements are issued or available to be issued (“subsequent events”)~~Inc. ~~An entity is required to disclose the date through which subsequent events have been evaluated~~ and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements.Subsidiary

~~(s)~~Notes ~~Recently~~to ~~Issued~~Unaudited ~~Accounting~~Condensed Consolidated ~~Pronouncements~~Financial Statements

~~The~~For ~~Company~~the ~~has~~Six ~~reviewed~~Months ~~all recently~~Ended ~~issued,~~June ~~but not yet effective~~30, 2013 ~~accounting pronouncements~~ and ~~does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.~~2012

~~In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements~~ (~~Topic~~Expressed ~~820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements~~ in ~~U.S. GAAP and IFRSs” (“ASU 2011-04”~~USD). ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially expand its financial statement note disclosures.

12(r) Subsequent Events

~~China~~SFAS ~~Health~~No. 165 ~~Resource~~established general standards of accounting for and disclosure of events that occur after the balance sheet date, ~~Inc~~but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and ~~Subsidiaries~~the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements.

~~Notes~~(s) toRecently ~~Unaudited~~Issued ~~Consolidated~~Accounting ~~Financial Statements~~Pronouncements

~~For~~In ~~the~~January ~~three~~2013, ~~months~~the ~~ended~~FASB ~~March~~issued ASU 31No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-01”).The Update clarifies that ordinary trade receivables and receivables are not in the scope of Accounting Standards Update No. 2011-11, Balance ~~2012~~Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, Update 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification® or subject to a master netting arrangement or similar agreement. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

~~(Expressed~~In inFebruary ~~USD~~2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU 2013-02”).The amendments require an organization to:

In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted. The Company is reviewing ASU 2011-05 to ascertain its impact on the Company’s financial position, results of operations or cash flows as it only requires a change in the format of the current presentation.13

InChina ~~September~~Health ~~2011~~Resource, ~~the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment~~Inc. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.Subsidiary

InNotes ~~December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities”~~ to ~~enhance disclosure~~Unaudited ~~requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires~~Condensed ~~enhanced~~Consolidated ~~disclosures~~Financial regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.Statements

InFor ~~July 2012,~~ the ~~FASB~~Six ~~issued ASU~~Months ~~No. 2012-02,~~Ended ~~“Testing~~June ~~Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to~~30, ~~perform~~2013 aand ~~“qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.~~2012

~~ASU~~(Expressed 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in ~~any period.~~USD)

13a) Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income–but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

~~China~~b) ~~Health~~Cross-reference ~~Resource,~~to ~~Inc~~other disclosures currently required under U.S. ~~and~~GAAP ~~Subsidiaries~~for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

~~Notes~~The toamendments ~~Unaudited~~are ~~Consolidated~~effective ~~Financial~~for ~~Statements~~reporting periods beginning after December 15, 2012, for public companies. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

~~For~~In ~~the~~February ~~three~~2013, ~~months~~the ~~ended~~FASB ~~March~~issued ASU 31No. 2013-03, “Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities” (“ASU 2013-03”). The amendment clarifies that the requirement to disclose the level of the fair value hierarchy within which the fair value measurements are categorized in their entirety (as Level 1, Level 2, or Level 3) does not apply to private companies and nonpublic not-for-profits for items that are not measured at fair value in the statement of financial position, but for which ~~2012~~fair value is disclosed. The amendments are effective upon issuance. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

In March 2013, the FASB issued ASU No. 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date” (~~Expressed~~“ASU 2013-04”). The update provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in ~~USD)~~US GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in this ASU also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Management does not expect the adoption of this standard will have a significant effect on the Company’s consolidated financial position or results of operations.

ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is in the process of evaluating the guidance and the impact ASU 2012-02 will have on its consolidated financial statements.14

InChina ~~August~~Health ~~2012~~Resource, ~~the FASB issued ASU 2012-03, Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (“SAB”) No~~Inc. ~~114, Technical Amendments Pursuant to SEC Release No. 33-9250,~~ and Corrections Related to FASB Accounting Standards Update 2010 in ASU No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.Subsidiary

InNotes October 2012, FASB issued ASU 2012-04, Technical Corrections and Improvements in ASU No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to ~~the~~Unaudited ~~Accounting Standards~~Condensed ~~Codification~~Consolidated ~~and~~Financial conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.Statements

~~Certain~~For ~~accounting pronouncements have been issued by~~ the ~~FASB~~Six ~~and~~Months ~~other~~Ended ~~standard~~June ~~setting organizations which are not yet effective and have not yet been adopted~~30, by2013 ~~the Company. The impact on the Company’s financial position~~ and ~~results of operations from adoption of these standards is not expected to be material to the Company.~~2012

3.(Expressed ~~Supplemental~~in ~~Cash Flow Information~~USD)

~~Supplemental~~In ~~disclosures~~March of2013, the FASB issued ~~cash~~ASU ~~flow~~No. ~~information~~2013-05, “Parent’s Accounting for the ~~period~~Cumulative ~~ended~~Translation ~~March~~Adjustment 31upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). The ASU clarifies that when a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required to apply the guidance in Accounting Standards Codification 830-30 to release any related cumulative translation adjustment into net income. The ASU provides that the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The amendments take effect prospectively for public companies for fiscal years beginning after December 15, 2013, and ~~2012~~interim ~~are~~reporting ~~summarized~~periods aswithin ~~follows:~~those years. Management does not expect the adoption of this standard will have a significant effect on the Company’s consolidated financial position or results of operations.

~~Cash~~3. ~~paid~~ACCOUNTS ~~during the period ended March 31, 2013 and 2012 for interest and income taxes:~~RECEIVABLE

	March 31, 2013		March 31, 2012
Income Taxes	$	-	$	-
Interest	$	95,606	$	22,266

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. Accounts receivable as of June 30, 2013 and December 31, 2012 consist of the following:

	June 30, 2013 Unaudited			December 31, 2012
Accounts receivable, gross	$	6,360,873		$	6,036,252
Less: Allowance for doubtful accounts		(351,996	)		-
Account receivable, net	$	6,008,877		$	6,036,252

China Health Resource, Inc. and Subsidiaries

Allowance for doubtful accounts :	June 30, 2013 Unaudited			December 31, 2012
Beginning balance	$	-		$	-
Allowance provided		(348,416	)		-
Foreign currency effect		(3,580	)		-
Ending balance	$	(351,996	)	$	-

~~Notes~~4. toOTHER ~~Unaudited~~RECEIVABLES ~~Consolidated~~AND ~~Financial Statements~~ADVANCES TO SUPPLIERS

~~For~~Due to the ~~three~~high ~~months~~demand ~~ended~~of ~~March~~DAR 31product, ~~2013~~the company advances money to third party suppliers to secure more DAR supply. These advances bear no interest and will be applied as the payment when purchases are received. The balance of advances to suppliers as of June 30, 2013 and December 31, 2012 are $4,641,455 and $4,291,635, respectively.

~~(Expressed in USD)~~15

4China Health Resource, Inc. ~~ACCOUNTS~~and ~~RECEIVABLE~~Subsidiary

~~The~~Notes ~~majority~~to ofUnaudited ~~the Company’s~~Condensed ~~sales~~Consolidated ~~are~~Financial on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. Accounts receivable as of March 31, 2013 and December 31, 2012 consist of the following:Statements

	March 31, 2013		December 31 , 2012
Accounts receivable, gross	$	6,687,498	$	6,036,252
Less: allowance for doubtful accounts		-		-
Account receivable, net	$	6,687,498	$	6,036,252

For the Six Months Ended June 30, 2013 and 2012

~~All~~(Expressed ~~Accounts~~in ~~receivables are aging within 30 days. No provision of bad debt was accrued as of year-end.~~USD)

5. ~~ADVANCES~~PREPAYMENT TOFOR ~~SUPPLIERS~~LAND USAGE

~~Due~~In toNovember ~~the high demand of DAR product~~2011, the company entered ~~advances~~land ~~money~~usage toagreement ~~third~~with ~~party~~12 ~~suppliers~~local tovillage ~~secure~~unions ~~more~~for ~~DAR~~future ~~supply.~~raw ~~These~~material ~~advances~~DAR ~~bear~~production. noPrepayment ~~interest~~for ~~and~~land ~~will~~usage ~~be applied~~ as ~~the payment when purchases are received. The balance~~ of ~~advances~~June ~~to suppliers as of March 31~~30, 2013 and December 31, 2012 ~~are~~consist ~~$4,208,243~~of ~~and~~the ~~$4,291,635, respectively.~~following:

6. PREPAYMENT FOR LAND USAGE

	June 30, 2013 Unaudited		December 31, 2012
DAR production villages	$	5,580,462	$	3,520,020
Total	$	5,580,462	$	3,520,020

~~In November 2011, the company entered land usage agreement with 12 local village unions for future raw material DAR production~~6. ~~Prepayment~~DEFERRED ~~for~~INVENTORY ~~land usage as of March 31, 2013 and December 31, 2012 consist of the following:~~COSTS

	March 31, 2013		December 31 , 2012
DAR production villages	$	3,539,399	$	3,520,020
Total	$	3,539,399	$	3,520,020

The deferred inventory costs represented prepayment to suppliers for future inventory delivery. As of June 30, 2013 and December 31, 2012, the balances of deferred inventory costs are $6,420,046 and $8,253,292 respectively. These costs will be transferred to inventories at the time of inventory delivery.

7. ~~DEFERRED~~ INVENTORY ~~COSTS~~

~~The~~Inventories ~~deferred~~as ~~inventory costs represented prepayment to suppliers for future inventory delivery. As~~ of ~~March~~June 3130, 2013 and December 31, 2012, ~~the~~consist ~~balances~~ of ~~deferred~~ ~~inventory costs are $8,014,620 and $8,253,292 respectively. These costs will be transferred to inventories at~~ the ~~time of inventory delivery.~~following:

8. INVENTORY

	June 30, 2013 Unaudited		December 31, 2012
Raw Materials	$	1,775,266	$	1,648,759
	$	1,775,266	$	1,648,759

~~Inventories~~As as of ~~March~~June 3130, 2013 and December 31, 2012, ~~consist~~no provision for obsolete inventories was recorded by the Company. The large amount of raw material are due to more TCM business started, larger volume demand of DAR, and higher purchasing than previous year. The company has largely increased its inventory in current period to take advantage of the ~~following:~~increasing market demand. Low value consumables are the materials for the process of finished goods. Due to the different outsourcing process adopted for the same period in 2012, the processing party is having all the materials and processing cost in its total fees. The finished goods, Bailing Capsules, had been changed to process by order due to the upgrade of the sales strategy.

	March 31, 2013		December 31 , 2012
Raw Materials	$	1,759,099	$	1,648,759
Low Value Consumables		-		-
Finished Goods	$	1,759,099	$	1,648,759

15China Health Resource, Inc. and Subsidiary

~~China~~Notes ~~Health~~to ~~Resource,~~Unaudited ~~Inc.~~Condensed Consolidated ~~and~~Financial ~~Subsidiaries~~Statements

~~Notes~~For tothe ~~Unaudited~~Six ~~Consolidated~~Months ~~Financial~~Ended June 30, ~~Statements~~2013 and 2012

~~For~~(Expressed ~~the~~in ~~three months ended March 31, 2013 and 2012~~USD)

~~(Expressed~~8. inPROPERTY, ~~USD)~~PLANT AND EQUIPMENT, NET

~~As of March 31~~Property, ~~2013~~plant and ~~December 31~~equipment, ~~2012, no provision for obsolete inventories was recorded by the Company. The large amount of raw material are due to more~~ ~~TCM~~net ~~business~~as ~~started, larger volume demand~~ of ~~DAR,~~June and higher purchasing than previous year. The company has largely increased its inventory in current period to take advantage of the increasing market demand. Low value consumables are the materials for the process of finished goods. Due to the different outsourcing process adopted for the same period in 201230, ~~the~~2013 ~~processing party is having all the materials~~ and ~~processing~~December ~~cost in its total fees. The finished goods~~31, ~~Bailing~~2012 ~~Capsules,~~consists ~~had been changed to process by order due to the upgrade~~ of the ~~sales strategy.~~following:

9. PROPERTY, PLANT AND EQUIPMENT, NET

	June 30, 2013			December 31, 2012

Property, Plant and Equipment	$	1,077,272		$	1,039,950
Less: accumulated depreciation		(288,529	)		(253,853	)
Property, Plant and Equipment, net	$	788,743		$	786,097

~~Property,~~9. ~~plant~~ACCOUNTS ~~and~~PAYABLE ~~equipment, net~~AND asACCRUED ~~of March 31, 2013 and December 31, 2012 consists of the following:~~LIABILITIES

	March 31, 2013			December 31 , 2012
Property, Plant and Equipment	$	1,065,392		$	1,039,950
Less: accumulated depreciation		(269,837	)		(253,853	)
Property, Plant and Equipment, net	$	795,556		$	786,097

Accounts payable and accrued liabilities as of June 30, 2013 and December 31, 2012 consist of the following:

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	June 30, 2013		December 31, 2012
Accounts payable	$	3,008,824	$	2,984,811
Accrued liabilities		2,763,814		2,681,175
Total accounts payable and accrued liabilities	$	5,772,638	$	5,665,986

~~Accounts~~Accrued ~~payable~~liabilities ~~and accrued~~include ~~liabilities~~accrued aswage ofpayable, ~~March~~accrued 31welfare payable, ~~2013~~other ~~and~~taxes ~~December 31~~payable, ~~2012~~and ~~consist~~receipt ofin ~~the following:~~advance.

	March 31, 2013		December 31 , 2012
Accounts payable	$	3,041,273	$	2,984,811
Accrued liabilities		2,717,233		2,681,175
Total accounts payable and accrued liabilities	$	5,758,506	$	5,665,986

10.

OTHER PAYABLE

~~Accrued~~As ~~liabilities~~of ~~include accrued~~June ~~wage payable~~30, ~~accrued~~2013 ~~welfare~~and ~~payable~~December 31, 2012, other ~~taxes~~ payable, ~~and~~consist ~~receipt~~of inthe ~~advance.~~following:

	June 30, 2013		December 31, 2012
Labor Union Fee	$	12,917	$	10,907
Pension Fund		4,964		28,337
Social Insurance		91,961		90,175
Risk Fund		161		159
Other		402,331		197,203
Total	$	512,334	$	326,781

~~China~~11. ~~Health~~NOTES ~~Resource,~~PAYABLE ~~Inc.~~– ~~and Subsidiaries~~CURRENT

~~Notes~~As toof ~~Unaudited~~June ~~Consolidated~~30, ~~Financial~~2013 and December ~~Statements~~31, 2012, notes payable consist of the following:

For the three months ended March 31, 2013 and 2012

	June 30, 2013		December 31, 2012
Secured bank loan to an unrelated party. Bearing 6.475% interest Principal payments due 07/12/2012	$	-	$	-
Short-Term Loan (See Note 12)		5,502,776		5,395,883
Total	$	5,502,776	$	5,395,883

~~(Expressed in USD)~~17

11China Health Resource, Inc. ~~OTHER~~and ~~PAYABLE~~Subsidiary

AsNotes ofto ~~March~~Unaudited ~~31, 2013 and December~~Condensed ~~31,~~Consolidated ~~2012,~~Financial ~~other payable consist of the following:~~Statements

	March 31, 2013		December 31 , 2012
Labor Union Fee	$	11,851	$	10,907
Pension Fund		17,434		28,337
Social Insurance		90,671		90,175
Risk Fund		160		159
Other		301,063		197,203
Total	$	421,719	$	326,781

For the Six Months Ended June 30, 2013 and 2012

~~12.~~(Expressed ~~NOTES~~in ~~PAYABLE – CURRENT~~USD)

As12. ofSHORT ~~March~~TERM ~~31, 2013 and December 31, 2012, notes payable consist of the following:~~LOAN

	March 31, 2013		December 31, 2012
Short-Term Loan (See Note 13)		5,425,590		5,395,883
Total	$	5,425,590	$	5,395,883

As of June 30, 2013 and December 31, 2012, short term loan consist of the following:

13. SHORT TERM LOAN

Name	Due Date	Interest Rate			June 30, 2013		December 31, 2012
Wang Li	10/1/2013		24	%	$	323,693	$	317,405
Wang Lijun	05/13/2014		24	%		323,694		317,405
Shanghai Pudong Development Bank	07/12/2013		6.48	%		1,618,463		1,587,024
Shanghai Pudong Development Bank	09/18/2013		6.6	%		1,618,463		1,587,024
Shanghai Pudong Development Bank	08/16/2013		6.6	%		1,618,463		1,587,024
Total					$	5,502,776	$	5,395,883

As1) ofThe ~~March~~loan ~~31,~~provided ~~2013~~by ~~and~~Wang ~~December~~Li ~~31,~~was ~~2012,~~guaranteed ~~short term~~by ~~loan~~the ~~consist~~CEO ofMr. ~~the~~Jiayin’s ~~following:~~Wang’s and Mrs. Sulan Deng’s household assets.

Name	Due Date	Interest Rate			March 31, 2013		December 31, 2012
Wang Li	10/1/2013		24	%	$	319,152	$	317,405
Wang Lijun	05/13/2014		24	%		319,152		317,405
SPD Bank	07/12/2013		6.48	%		1,595,762		1,587,024
SPD Bank	09/18/2013		6.6	%		1,595,762		1,587,024
SPD Bank	08/16/2013		6.6	%		1,595,762		1,587,024
Total					$	5,425,590	$	5,395,883

The loan provided by Wang Lijun was guaranteed by the CEO Mr. Jiayin’s Wang’s and Mrs. Sulan Deng’s household assets.

~~1) The loan provided by Wang Li was guaranteed by the CEO Mr~~13. ~~Jiayin’s~~INCOME ~~Wang’s and Mrs. Sulan Deng’s household assets.~~TAXES

2)The Company conducts all its operating business through its subsidiaries in China. The ~~loan~~subsidiaries ~~provided~~are governed by ~~Wang~~the ~~Lijun~~income ~~was~~tax ~~guaranteed~~laws byof the ~~CEO~~PRC ~~Mr.~~and ~~Jiayin’s~~do ~~Wang’s~~not have any deferred tax assets or deferred tax liabilities under the income tax laws of the PRC because there are no temporary differences between financial statement carrying amounts and ~~Mrs.~~the ~~Sulan~~tax ~~Deng’s~~bases ~~household~~of existing assets and liabilities. The Company by itself does not have any business operating activities in the United States and is therefore not subject to United States income tax.

17The Company’s subsidiaries are governed by the Income Tax Law of the People’s Republic of China (PRC) concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (the Income Tax Laws). Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law has replaced the previous laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% has replaced the 33% rate previously applicable to both DEs and FIEs.

~~China~~Prior ~~Health~~to ~~Resource~~2008, ~~Inc~~under the Chinese Income Tax Laws, FIEs generally were subject to an income tax at an effective rate of 33% (30% state income taxes plus 3% local income taxes) on income as reported in their statutory financial statements after appropriate tax adjustments unless the enterprise was located in specially designated regions for which more favorable effective tax rates apply. Beginning January 1, 2008, China has unified the corporate income tax rate on foreign invested enterprises and ~~Subsidiaries~~domestic enterprises. The unified corporate income tax rate is 25%.

~~Notes to Unaudited Consolidated Financial Statements~~18

~~For~~China ~~the~~Health ~~three months ended March 31~~Resource, ~~2013~~Inc. and ~~2012~~ Subsidiary

~~(Expressed~~Notes into ~~USD)~~Unaudited Condensed Consolidated Financial Statements

~~14.~~For ~~INCOME~~the ~~TAXES~~Six Months Ended June 30, 2013 and 2012

~~The~~(Expressed ~~Company conducts all its operating business through its subsidiaries~~ in China. The subsidiaries are governed by the income tax laws of the PRC and do not have any deferred tax assets or deferred tax liabilities under the income tax laws of the PRC because there are no temporary differences between financial statement carrying amounts and the tax bases of existing assets and liabilities. The Company by itself does not have any business operating activities in the United States and is therefore not subject to United States income tax.USD)

The Company’s ~~subsidiaries~~generated substantially ~~are~~its ~~governed~~net byincome ~~the~~from ~~Income~~its ~~Tax Law of the People’s Republic of China (~~PRC) ~~concerning~~operation ~~Foreign Investment Enterprises~~ and ~~Foreign~~ ~~Enterprises~~has ~~and~~recorded ~~various local~~ income tax ~~laws~~provision (for the ~~Income~~year ~~Tax~~ended ~~Laws).~~June ~~Beginning January 1~~30, ~~2008,~~2013 ~~the new Enterprise Income Tax (“EIT”) law has replaced the previous laws for Domestic Enterprises (“DEs”)~~ and ~~Foreign~~December ~~Invested~~31, ~~Enterprises (“FIEs”)~~2012. ~~The new standard EIT rate of 25% has replaced the 33% rate previously applicable to both DEs and FIEs.~~

~~Prior~~The tocomponents ~~2008, under the Chinese Income Tax Laws, FIEs generally were subject to an income tax at an effective rate~~ of ~~33%~~ (~~30%~~loss) ~~state~~ income ~~taxes plus 3% local~~ before income taxes) onseparating income as reported in their statutory financial statements after appropriate tax adjustments unless the enterprise was located in specially designated regions for which more favorable effective tax rates applyU.S. ~~Beginning January 1, 2008, China has unified the corporate income tax rate on foreign invested enterprises~~ and ~~domestic~~PRC ~~enterprises.~~operations ~~The~~are ~~unified~~as ~~corporate income tax rate is 25%.~~follows:

The Company generated substantially its net income from its PRC operation and has recorded income tax provision for the year ended March 31, 2013 and December 31, 2012.

	June 30, 2013			June 30, 2012
Loss subject to U.S. operation	$	(16,000	)	$	(25,457	)
Income(Loss) subject to PRC operation		(268,750	)		2,899,799
Income(Loss) before income taxes	$	(284,750	)	$	2,874,342

~~The~~United ~~components~~States of ~~(loss) income before income taxes separating U.S. and PRC operations are as follows:~~America

	March 31, 2013			March 31, 2012
Loss subject to U.S. operation	$	(8,000	)	$	(17,458	)
Income (loss) subject to PRC operation		(56,028	)		1,778,675
Income (loss) before income taxes	$	(64,028	)	$	1,761,217

The Company is registered in the State of Delaware and is subject to United States of America tax law.

~~United~~For ~~States~~the six- month period ended June 30, 2013, the U.S. operation had $ 16,000 of ~~America~~net operating losses available for federal tax purposes, which are available to offset future taxable income. The net operating loss carry forwards begin to expire in 2030. The Company has provided for a full valuation allowance for any future tax benefits from the net operating loss carry forwards as the management believes it is more likely than not that these assets will not be realized in the future.

The ~~Company is registered in the State of Delaware and is subject to United States of America tax law.~~PRC

~~For~~The ~~the~~reconciliation ~~period ended March 31, 2013, the U.S. operation had $8,000~~ of ~~net operating losses available for federal~~ income tax ~~purposes,~~rate ~~which are available~~ to ~~offset future~~the ~~taxable~~effective income~~. The~~ ~~net~~tax ~~operating~~rate ~~loss~~based ~~carry~~on ~~forwards~~income ~~begin~~before toincome ~~expire~~taxes stated in ~~2030. The~~the ~~Company~~consolidated ~~has~~statement ~~provided~~of operations for aperiod ~~full~~ended ~~valuation~~June ~~allowance~~30, ~~for~~2013 ~~any~~and ~~future~~2012 ~~tax~~is ~~benefits from the net operating loss carry forwards~~ as ~~the management believes it is more likely than not that these assets will not be realized in the future.~~follows:

	June 30, 2013 (Unaudited)			June 30, 2012
Income (loss) before income taxes	$	(268,750	)	$	2,899,799
Statutory income tax rate		25	%		25	%
		-			724,950
Expenses not deductible for tax purposes:
- Provisions		-			18
Income tax	$	-		$	724,968

~~China Health Resource, Inc. and Subsidiaries~~19

~~Notes~~China toHealth ~~Unaudited~~Resource, ~~Consolidated~~Inc. ~~Financial Statements~~and Subsidiary

~~For~~Notes ~~the~~to ~~three~~Unaudited ~~months~~Condensed Consolidated ~~ended~~Financial ~~March 31, 2013 and 2012~~Statements

~~(Expressed~~For inthe ~~USD)~~Six Months Ended June 30, 2013 and 2012

~~The~~(Expressed ~~PRC~~in USD)

The ~~reconciliation~~following oftable ~~income~~reconciles the U.S. ~~tax~~statutory rate to the Company’s effective ~~income~~ tax rate ~~based on income before income taxes stated in the consolidated statement of operations for period ended March 31, 2013 and 2012 is as follows~~:

	March 31, 2013			March 31, 2012
	June 30, 2013 (Unaudited)			June 30, 2012
Income (loss) before income taxes		(56,028	)		1,778,675
U.S. Statutory rate		34	%		34	%
Non-taxable deductions
Foreign income not recognized in USA		(34	)%		(34	)%
Taxable income(Loss)	$	-		$	1,778,675
China income taxes		25	%		25	%
Statutory income tax rate		25	%		25	%
Total provision for income taxes		25	%		25	%
		-			444,669
Expenses not deductible for tax purposes:
- Provisions					18
Income tax expense	$	-		$	444,687

The ~~following~~Company ~~table~~applies ~~reconciles~~FASB ASC 740-10, “Accounting for Income Taxes”, which requires recognition of deferred income tax liabilities and assets for the ~~U.S.~~expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets ~~statutory~~and ~~rate~~liabilities. toProvision for income taxes consist of taxes currently due plus deferred taxes. Because the Company’s ~~effective~~has no operations within the United States, there is no provision for US income taxes and there are no deferred tax ~~rate:~~amounts as of the six-month period ended June 30, 2013 and June 30, 2012.

	March 31, 2013			March 31, 2012
U.S. Statutory rate		34	%		34	%
Foreign income not recognized in USA		(34	)		(34	)
China income taxes		25			25
Total provision for income taxes		25	%		25	%

The charge for taxation is based on the results for the period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxes are accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

19Deferred taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred taxes are charged or credited in the income statement, except when they relate to items credited or charged directly to equity, in which case the deferred taxes are also recorded in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. The Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption of FIN 48 had no effect on the Company’s financial statements.

~~China Health Resource, Inc. and Subsidiaries~~20

~~Notes~~China toHealth ~~Unaudited~~Resource, ~~Consolidated~~Inc. ~~Financial Statements~~and Subsidiary

~~For~~Notes ~~the~~to ~~three~~Unaudited ~~months~~Condensed Consolidated ~~ended~~Financial ~~March 31, 2013 and 2012~~Statements

~~(Expressed~~For inthe ~~USD)~~Six Months Ended June 30, 2013 and 2012

~~The~~(Expressed ~~Company~~in applies FASB ASC 740-10, “Accounting for Income Taxes”, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consist of taxes currently due plus deferred taxes. Because the Company has no operations within the United States, there is no provision for US income taxes and there are no deferred tax amounts as of the period ended March 31, 2013 and December 31, 2012.USD)

~~The charge for taxation is based on the results for the period as adjusted for items that are non-assessable or disallowed~~14. ItMAJOR isCUSTOMER/VENDOR ~~calculated~~AND using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred taxes are accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.CONCENTRATION

Deferred taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred taxes are charged or credited in the income statement, except when they relate to items credited or charged directly to equity, in which case the deferred taxes are also recorded in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. The Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (~~“FIN 48”~~a)~~, as~~ ofSale January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption of FIN 48 had no effect on the Company’s financial statements.breakdown

~~15.~~For ~~MAJOR~~the ~~CUSTOMER/VENDOR~~six-month ~~AND~~period ~~CONCENTRATION~~ended June 30, 2013, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from customers located in the PRC.

~~(a)~~All ~~Sale~~customers ~~breakdown~~are all non-related parties, mostly located in Sichuan province or southern China. The sole business relationship with Yinfa is to purchase raw DAR, other TCM, or Yishen Capsule. For the six-month period ended June 30, 86% of the total revenue is contributed by DAR, 14% of the total revenue is contributed by other TCM, and none of total revenue is contributed by Yishen Capsule.

~~For~~(b) ~~the~~Credit ~~year period ended March 31, 2012, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from customers located in the PRC.~~risk

~~All~~Financial ~~customers~~instruments ~~are~~that ~~all non-related~~potentially ~~parties,~~subject ~~mostly~~the ~~located~~Company into ~~Sichuan~~significant ~~province~~concentrations orof ~~southern~~credit ~~China.~~risk ~~The~~consist ~~sole~~principally ~~business~~of ~~relationship~~cash ~~with~~and ~~Yinfa~~trade isaccounts toreceivable. ~~purchase raw DAR,~~The ~~other~~Company ~~TCM,~~performs orongoing ~~Yishen~~credit ~~Capsule.~~evaluations ~~For the year period ended March 31, 80%~~ of ~~the~~its ~~total~~customers' ~~revenue~~financial ~~is contributed by DAR~~condition, ~~20%~~but ofdoes ~~the~~not ~~total revenue~~require iscollateral ~~contributed~~to bysupport ~~other TCM, and none of total revenue is contributed by Yishen Capsule~~such receivables.

2015. Stockholders’ equity

~~China~~Effective ~~Health~~August ~~Resource~~20, ~~Inc~~2010, the Company’s Board of Directors appointed Mr. ~~and~~Jiayin ~~Subsidiaries~~Wang Chief Executive Officer of the Company. The Board of Directors has approved the following compensation for Mr. Wang in his capacity as the Company’s Chief Executive Officer:

~~Notes~~(a) toNo ~~Unaudited~~annual ~~Consolidated~~base ~~Financial Statements~~salary will be paid until such time as the Company achieves $1,000,000 in annual net income, whereupon Mr. Wang will receive an annual base salary of based upon the Company’s market capitalization and fair market rate of a public company chief executive officer;

~~For~~(b) A signing bonus totaling $50,000, payable on August 20, 2010 in shares of the ~~three~~Company's ~~months~~Class ~~ended~~A ~~March~~common 31stock (the "Common Stock") based on a price per share of $0.00782, ~~2013~~the ~~and 2012~~average of the closing prices of the Common Stock as quoted on the OTC Bulletin Board for the five (5) trading days ending on such date. Mr. Wang received 6,393,862 shares of Common Stock as a signing bonus which shares are not registered under the U.S. Securities Act of 1933, as amended (the "1933 Act");

(~~Expressed~~c) A grant of stock options to purchase 6,000,000 shares of Common Stock at an exercise price of $0.02 per share, vesting over 18 months in ~~USD)~~equal monthly installments. The stock options were granted pursuant to the Company’s 2009 Omnibus Incentive Plan and have a grant date of August 20, 2010; and

(bd) ~~Credit~~Performance ~~risk~~bonuses payable in shares of the Common Stock (which shares will not registered under the 1933 Act) based upon milestones and terms as follows:

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.21

16China Health Resource, Inc. ~~Stockholders’~~and ~~equity~~Subsidiary

~~Effective~~Notes ~~August~~to ~~20,~~Unaudited ~~2010,~~Condensed ~~the~~Consolidated ~~Company’s~~Financial Board of Directors appointed Mr. Jiayin Wang Chief Executive Officer of the Company. The Board of Directors has approved the following compensation for Mr. Wang in his capacity as the Company’s Chief Executive Officer: Statements

~~(a)~~For ~~No annual base salary will be paid until such time as~~ the ~~Company~~Six ~~achieves~~Months ~~$1,000,000~~Ended inJune ~~annual net income~~30, 2013 ~~whereupon Mr. Wang will receive an annual base salary of based upon the Company’s market capitalization~~ and ~~fair market rate of a public company chief executive officer;~~2012

(b)Expressed ~~A signing bonus totaling $50,000, payable on August 20, 2010~~ in ~~shares of the Company's Class A common stock (the "Common Stock"~~USD) based on a price per share of $0.00782, the average of the closing prices of the Common Stock as quoted on the OTC Bulletin Board for the five (5) trading days ending on such date. Mr. Wang received 6,393,862 shares of Common Stock as a signing bonus which shares are not registered under the U.S. Securities Act of 1933, as amended (the "1933 Act");

~~(c)~~i. AIf ~~grant~~the ofCompany ~~stock~~achieves ~~options~~$500,000 toin ~~purchase~~net ~~6,000,000~~income ~~shares~~for ofthe ~~Common~~three-month ~~Stock~~period atended anSeptember ~~exercise~~30, ~~price~~2010 ofas ~~$0.02~~shown ~~per~~in ~~share,~~the ~~vesting~~Company's ~~over~~financial 18statements ~~months~~contained in ~~equal~~the ~~monthly~~Quarterly ~~installments.~~Report ~~The~~on ~~stock~~Form ~~options~~10-Q ~~were~~for ~~granted~~such ~~pursuant~~period, toMr. ~~the~~Wang ~~Company’s~~will ~~2009~~receive ~~Omnibus~~a ~~Incentive~~bonus ~~Plan~~of ~~and~~$40,000 ~~have~~payable ain ~~grant~~shares ~~date~~ of ~~August~~Common ~~20,~~Stock ~~2010;~~valued ~~and~~at $0.02 per share.

~~(d)~~ii. ~~Performance~~If ~~bonuses~~the ~~payable~~Company achieves $1,000,000 in ~~shares~~net ofincome for the ~~Common~~six-month ~~Stock~~period ~~(which~~ended ~~shares~~December 31, 2010, Mr. Wang will ~~not~~receive ~~registered~~a ~~under~~bonus ~~the~~of ~~1933~~$100,000 ~~Act)~~payable ~~based~~in ~~upon~~shares ~~milestones~~of ~~and~~Common ~~terms~~Stock asvalued ~~follows:~~at $0.05 per share.

iiii. If the Company achieves $1,500,000 in net income for the ~~three~~nine-month period ended ~~September~~March 3031, ~~2010 as shown in the Company's financial statements contained in the Quarterly Report on Form 10-Q for such period~~2011, Mr. Wang will receive a bonus of $40160,000 payable in shares of Common Stock valued at $0.0208 per share.

iiMr. IfWang ~~the~~will ~~Company~~also ~~achieves~~be ~~$1,000,000~~eligible to inreceive ~~net~~periodic ~~income~~stock ~~for~~grants ~~the~~and ~~six-month~~participate ~~period~~in ~~ended~~the ~~December~~Company's ~~31,~~incentive ~~2010,~~plans ~~Mr.~~and ~~Wang~~benefit ~~will~~plans ~~receive~~for awhich ~~bonus~~he ofis ~~$100,000 payable in shares of Common Stock valued at $0~~eligible.~~05 per share.~~

~~iii~~In recognition of Mr. IfWang's contributions to the Company's ~~achieves~~achievement $1of various corporate and financial milestones,~~500,000~~ ineffective ~~net~~August ~~income~~20, ~~for~~2010, the ~~nine-month~~Board of ~~period~~Directors ~~ended~~approved ~~March~~a ~~31,~~bonus ~~2011,~~for Mr. Wang ~~will~~in ~~receive~~the aamount ~~bonus~~ of $~~160~~88,000 payable in shares of Common Stock ~~valued~~based aton a price per share of $0.0800782, ~~per~~the ~~share~~average of the closing prices of the Common Stock as quoted on the OTC Bulletin Board for the five (5) trading days ending on such date. Mr. Wang received 11,253,197 shares of Common Stock that are not registered under the 1933 Act under this bonus.

21For the year ended December 31, 2010, total 17,647,059 shares of Common Stock in amount of $138,000 was issued and recognized as share-based compensation. $7,958 was recognized as option expenses for vested option as of December 31, 2010. The company has also accrued $140,000 expenses relating to CEO’s performance bonus as of December 31, 2010.

~~China~~On ~~Health~~July ~~Resource~~15, ~~Inc~~2011, the Company issued 6,000,000 shares of common stock to Jiayin Wang to settle his performance bonuses payable accrued pursuant to his employment offer letter signed August 20, 2010 (see above (d) i, ii, and iii). Jiayin Wang has achieved the milestones pursuant to the employment offer letter and ~~Subsidiaries~~therefore was awarded accordingly.

~~Notes~~On toOctober ~~Unaudited~~30, ~~Consolidated~~2011, ~~Financial~~the Company ~~Statements~~entered an investment banking service agreement with a third party and issued 1,500,000 shares of comment stock for the service rendered. These common stocks were valued and recorded at market price ($0.02 per share) at the issuance.

~~For the three months ended March 31, 2013 and 2012~~22

~~(Expressed~~China inHealth ~~USD)~~Resource, Inc. and Subsidiary

~~Mr.~~Notes ~~Wang~~to ~~will~~Unaudited ~~also be eligible~~Condensed toConsolidated ~~receive~~Financial ~~periodic stock grants and participate in the Company's incentive plans and benefit plans for which he is eligible.~~Statements

InFor ~~recognition of Mr. Wang's contributions to~~ the ~~Company's~~Six ~~achievement~~Months ofEnded ~~various~~June ~~corporate and financial milestones~~30, ~~effective August 20, 2010, the Board~~ of2013 ~~Directors~~and approved a bonus for Mr. Wang in the amount of $88,000 payable in shares of Common Stock based on a price per share of $0.00782, the average of the closing prices of the Common Stock as quoted on the OTC Bulletin Board for the five (5) trading days ending on such date. Mr. Wang received 11,253,197 shares of Common Stock that are not registered under the 1933 Act under this bonus.2012

~~For~~(Expressed ~~the year ended December 31, 2010, total 17,647,059 shares of Common Stock~~ in amount of $138,000 was issued and recognized as share-based compensation. $7,958 was recognized as option expenses for vested option as of December 31, 2010. The company has also accrued $140,000 expenses relating to CEO’s performance bonus as of December 31, 2010.USD)

OnFor ~~July~~the 15year ended December 31, 2011, the ~~Company issued~~company 6recognized $31,~~000,000~~831 ~~shares~~as ofoption ~~common~~expenses ~~stock~~for tovested ~~Jiayin~~option ~~Wang to settle his performance bonuses payable accrued pursuant to his employment offer letter signed August 20, 2010~~ (see above (dc) ~~i, ii, and iii~~). ~~Jiayin Wang has achieved the milestones pursuant to the employment offer letter and therefore was awarded accordingly.~~

OnFor ~~October~~the 30year ended December 31, 2011, the ~~Company entered~~company anrecognized ~~investment~~$30,063 ~~banking~~imputed ~~service~~interest ~~agreement~~expense ~~with~~from anon-interest ~~third~~bearing ~~party~~shareholder’s ~~and~~loan ~~issued~~as ~~1,500,000 shares of comment stock for the service~~additional ~~rendered.~~paid-in ~~These~~capital ~~common~~from ~~stocks were valued and recorded at market price ($0~~shareholder.~~02 per share) at the issuance.~~

For the year ended December 31, ~~2011~~2012, the company recognized $317,~~831~~985 as option expenses for vested option (see above (c)).

For the year ended December 31, 2011, the company recognized $30,063 imputed interest expense from non-interest bearing shareholder’s loan (see note 10) as additional paid-in capital from shareholder.23

~~For~~Item ~~the~~2. ~~year~~Management’s ~~ended~~Discussion ~~December 31,~~and ~~2012,~~Analysis ~~the~~of ~~company~~Financial ~~recognized~~Condition ~~$7,985~~and asResults ~~option~~of ~~expenses for vested option (see above (c)).~~Operations

17The following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. ~~COMMITMENT~~This ~~AND~~discussion should ~~CONTINGENCIES~~not be construed to imply that the results discussed herein will necessarily continue into the future or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

OnForward ~~November~~Looking 3, 2011, the Company’s wholly owned subsidiary Suining Yinfa DAR Industrial Co, Ltd. received 7 separated purchasing letters of intent totaling of over 7.5 million USD with the time period from November 4, 2011 to November 3, 2012Statements

22Certain statements in this report, including statements of our expectations, intentions, plans and beliefs, including those contained in or implied by “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to Consolidated Financial Statements, are “forward-looking statements”, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are subject to certain events, risks and uncertainties that may be outside our control.

~~China~~The ~~Health~~words ~~Resource~~“believe”, ~~Inc~~“expect”, “anticipate”, “optimistic”, “intend”, “will”, and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. These forward-looking statements include statements of management's plans and ~~Subsidiaries~~objectives for our future operations and statements of future economic performance, information regarding our expansion and possible results from expansion, our expected growth, our capital budget and future capital requirements, the availability of funds and our ability to meet future capital needs, and the assumptions described in this report underlying such forward-looking statements. Actual results and developments could differ materially from those expressed in or implied by such statements due to a number of factors, including, without limitation, those described in the context of such forward-looking statements, our expansion and acquisition strategy, our ability to achieve operating efficiencies, our ability to successfully develop, manufacture and deliver Dahurian Angelica Root and related products on a timely basis and in the prescribed condition, evolving standards in the Traditional Chinese Medicine industry, domestic and international regulatory matters, general economic and business conditions, the strength and financial resources of our competitors, our ability to raise sufficient capital in order to effectuate our business plan, our ability to find and retain skilled personnel and key executives, the political and economic climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed with the Securities and Exchange Commission (the “Commission”).

~~Notes~~COMPANY ~~to Unaudited Consolidated Financial Statements~~OVERVIEW

~~For the three months ended March 31, 2013 and 2012~~General

We were incorporated in the State of Delaware on February 26, 2002. In June and July 2002, we acquired approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation (~~Expressed~~“VDL”), through an exchange of shares of the Company with shareholders of VDL. On June 13, 2006, we, as the acquirer, executed a Plan of Exchange with Yinfa (acquiree), the shareholders of Yinfa and the Company’s then majority shareholders, pursuant to which we issued 30,000,000 (pre-forward split) new shares of our Class A Common Stock to the Yinfa shareholders in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, in reliance upon Regulation S thereunder, in exchange for all of their shares of registered capital of Yinfa. As a result, Yinfa became our wholly-owned subsidiary. Yinfa was founded on April 24, 2001, with registered capital of US $125,500 (RMB 1,000,000) and total assets of US $1,475,795. Yinfa’s business incorporates a self-owned production base and a network of DAR (as defined below) associates, farmers and research and development affiliates. The transaction was treated for accounting purposes as a capital transaction and recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree. We disposed of VDL on August 22, 2006 pursuant to the agreement between the Company, VDL and Arie Hinkis, our former president. On May 21, 2007, we changed our name to China Health Resource, Inc. to more accurately reflect our business operations. In 2011, Yinfa had invested 95,223 USD (600,000 RMB) to establish an agricultural planting business entity called Suining Yinfa DAR Planting Co, Ltd. (“Yinfa DAR Planting”). Yinfa DAR Planting is in process of obtaining business approval and certificate from different government departments, and no business activity has occurred.

The Company rented land (note 6) and warehouse space under a non-cancelable operating lease agreement. Based on the current rental lease agreement, the future five years minimum rental payments required as of December 31 are as follows:24

Year ended December 31	Lease payment
2013		1,765,346
2014		1,770,642
2015		1,775,954
2016		1,781,282
2017		1,786,626
Total		8,879,850

We are engaged in the production, manufacturing and distribution in China of herbal pharmaceuticals based on traditional Chinese medicine, which we refer to herein as Traditional Chinese Medicine, or TCM. We are based in the city of Suining, Sichuan Province, China and our operations are exclusively in China. Our subsidiary Yinfa is a Chinese pharmaceutical company focused on producing, processing and commercializing TCM products to pharmaceutical manufacturers and wholesale markets.

23Our products include Dahurian Angelica Root (“DAR”) which is a popular herb employed extensively as an ingredient in food, medicine and cosmetics for the treatment of pain, swelling and pustule. Our products are developed through extensive research and development efforts to determine effective uses for the plants grown under our control and cultivated in areas where unique local climates and soil properties result in the finest quality.

~~Item~~We 2.obtained ~~Management’s~~Good ~~Discussion~~Agricultural ~~and~~Practice (“GAP”) ~~Analysis~~certification offor ~~Financial~~our ~~Condition~~DAR products and ~~Results~~received the exclusive rights to the “Sichuan Angelica” certified trademark from the Chinese State Administration of ~~Operations~~Industry and Commerce through December 13, 2016.

~~The~~Our following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.Business

~~Forward~~Our ~~Looking~~core ~~Statements~~business is herbal pharmaceuticals and supplements based upon TCM. Our subsidiary Yinfa is a Chinese pharmaceutical company focused on producing, processing and commercializing TCM products to pharmaceutical manufacturers and wholesale markets. Our products include DAR, which is a popular herb employed extensively as an ingredient in food, medicine and cosmetics for the treatment of pain, swelling and pustule. Our products are developed through extensive research and development efforts to determine effective uses for the plants grown under our control and cultivated in areas where unique local climates and soil properties result in the finest quality.

~~Certain~~In ~~statements~~year ~~in this report~~2006, ~~including statements~~we ofobtained ~~our~~GAP ~~expectations,~~certification for ~~intentions~~DAR, ~~plans~~in ~~and~~partnership ~~beliefs,~~with ~~including~~Sichuan ~~those~~Yinfa ~~contained~~Resource inDevelopment orGroup ~~implied~~Co. byLtd., (“~~Management's~~Yinfa Resource”). The standards ~~Discussion~~which ~~and~~must ~~Analysis~~be met to obtain GAP certification include the study of ~~Financial~~our ~~Condition~~environment quality including water, and ~~Results~~soil samples, seed quality, use of ~~Operations”~~pesticides and use of fertilizers. These standards were approved by the ~~Notes~~Chinese toState ~~Consolidated~~Food ~~Financial~~and ~~Statements,~~Drug Administration ~~are~~(the “~~forward-looking statements~~SFDA”,). Our ~~within~~GAP ~~the~~farm ~~meaning~~production ofbase ~~Section~~includes ~~21E~~approximately 133,334 square meters of ~~the~~experimental planting ~~Securities~~fields, ~~Exchange~~and ~~Act~~1,333,340 square meters of ~~1934~~contracted farm production bases, asall ~~amended (~~of which passed inspection by the ~~“Exchange~~SFDA ~~Act”)~~on February 26, ~~that~~2006. The GAP standards are ~~subject~~inspected toannually. ~~certain~~The ~~events,~~GAP ~~risks~~certificate ~~and~~has ~~uncertainties~~been ~~that~~issued ~~may~~in bename ~~outside~~of our ~~control~~partner, Yinfa Resource. Our exclusive GAP certification for DAR demonstrates the high quality standards of our DAR and DAR-related products.

~~The~~In ~~words “believe”~~2007, ~~“expect”, “anticipate”,~~the ~~“optimistic”,~~Company ~~“intend”,~~achieved ~~“will”, and similar expressions identify~~cooperation ~~forward-looking~~with ~~statements.~~the ~~Readers~~Sichuan ~~are~~Province ~~cautioned~~Suining ~~not~~City toDAR ~~place~~Association ~~undue~~(“Association”) ~~reliance~~and onreceived ~~these~~the ~~forward-looking~~exclusive ~~statements,~~rights ~~which~~to ~~speak only as of~~ the ~~date~~“Sichuan Angelica” oncertified ~~which~~trademark ~~they~~from ~~are~~the ~~made.~~Chinese WeState ~~undertake~~Administration noof ~~obligation~~Industry toand ~~update~~Commerce orthrough ~~revise~~December ~~any~~13, ~~forward-looking statements~~2016. ~~These~~As ~~forward-looking~~holder ~~statements~~of ~~include~~the ~~statements~~rights ofto ~~management's~~the ~~plans~~trademark, ~~and~~the ~~objectives~~Company ~~for~~is ~~our~~receives ~~future~~a ~~operations~~management ~~and~~fee ~~statements~~ of ~~future~~ ~~economic~~1RMB ~~performance,~~(or ~~information~~approximately ~~regarding~~US ~~our~~$0.14) ~~expansion~~per ~~and possible results from expansion, our expected growth, our~~kilogram ~~capital~~of ~~budget~~DAR ~~and~~(including ~~future~~packaging ~~capital~~fees) ~~requirements,~~from ~~the~~any ~~availability~~user of ~~funds~~the ~~and our ability to meet future capital needs~~trademark, ~~and~~of ~~the assumptions~~which ~~described~~60% inmay ~~this~~be ~~report~~used ~~underlying~~by ~~such~~Yinfa ~~forward-looking~~for ~~statements.~~further ~~Actual~~development ~~results~~ and ~~developments could differ~~ ~~materially~~investment ~~from~~of ~~those~~its ~~expressed~~DAR inbusiness orand ~~implied~~the byremaining ~~such~~40% ~~statements~~is ~~due~~paid tofor arelated ~~number~~expenses. In ~~of factors~~addition, ~~including,~~the ~~without~~Company ~~limitation, those~~receives ~~described~~100% inof the ~~context~~revenue ofstream ~~such~~from ~~forward-looking~~the ~~statements,~~use ~~our~~of ~~expansion~~the ~~and~~DAR ~~acquisition~~trademark ~~strategy,~~through ~~our~~December ~~ability to achieve operating efficiencies~~13, ~~our~~2016 ~~ability to successfully develop, manufacture~~ and ~~deliver~~95% ~~Dahurian~~of ~~Angelica~~the ~~Root~~revenue ~~and~~stream ~~related products on a timely~~thereafter. ~~basis~~There ~~and~~are inapproximately ~~the~~235 ~~prescribed~~regional ~~condition,~~certification ~~evolving~~trademarks ~~standards~~ in ~~the Traditional Chinese Medicine industry~~China, ~~domestic~~including ~~and~~65 ~~international regulatory~~for ~~matters~~natural resources, ~~general~~of ~~economic~~which ~~and~~over ~~business~~20 ~~conditions,~~are for ~~the~~natural ~~strength~~herb ~~and financial~~ resources. ofIn ~~our~~addition ~~competitors, our ability~~ to ~~raise~~the ~~sufficient~~DAR ~~capital~~Association, in ~~order~~2010, toYinfa ~~effectuate~~received ~~our~~the ~~business~~exclusive ~~plan,~~license ~~our ability~~ to ~~find~~use and ~~retain skilled personnel and key~~manage ~~executives,~~ the ~~political~~“Sichuan ~~and~~Angelica” ~~economic~~trademark ~~climate~~by ~~in which we conduct operations and~~ the ~~risk~~General ~~factors~~Administration ~~described~~of ~~from~~Quality ~~time~~Supervision, toInspection ~~time in our other documents~~ and ~~reports~~Quarantine ~~filed~~of People’s ~~with~~Republic ~~the~~of ~~Securities and Exchange Commission (the “Commission”)~~China.

~~COMPANY~~Currently, ~~OVERVIEW~~raw DAR in both its original root form and processed form (both sliced and powder) is one of our major products and it is sold to pharmaceutical manufacturers (80%) or wholesalers (20%). Our DAR-related product offerings also include Yisheng Capsule, which has been certified by the SFDA and sold to regional distributors throughout China to treat fatigue by improving blood circulation. It increases oxygen levels in regions of the body that do not get an adequate supply. Fatigue in the workplace costs $136B per year in health-related lost productivity according to a report in the Journal of Occupational and Environmental Medicine. (February 2012 - Volume 54 - Issue 2 - P231 - 258)

~~General~~In addition, in 2011 the Company has added Rhizoma Gastrodia (“Gastrodia”) along with various other raw TCM products to the Company’s product offering. Gastrodia, along with various other raw TCM products are sold to pharmaceutical manufacturers (80%) or wholesalers (20%). With the expansion of TCM to markets in the United States and other countries, we expect to continue to identify unique TCM products of the highest quality to add to our markets.

We were incorporated in the State of Delaware on February 26, 2002. In June and July 2002, we acquired approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation (“VDL”), through an exchange of shares of the Company with shareholders of VDL. On June 13, 2006, we, as the acquirer, executed a Plan of Exchange with Yinfa (acquiree), the shareholders of Yinfa and the Company’s then majority shareholders, pursuant to which we issued 30,000,000 (pre-forward split) new shares of our Class A Common Stock to the Yinfa shareholders in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, in reliance upon Regulation S thereunder, in exchange for all of their shares of registered capital of Yinfa. As a result, Yinfa became our wholly-owned subsidiary. Yinfa was founded on April 24, 2001, with registered capital of US $125,500 (RMB 1,000,000) and total assets of US $1,475,795. Yinfa’s business incorporates a self-owned production base and a network of DAR (as defined below) associates, farmers and research and development affiliates. The transaction was treated for accounting purposes as a capital transaction and recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree. We disposed of VDL on August 22, 2006 pursuant to the agreement between the Company, VDL and Arie Hinkis, our former president. On May 21, 2007, we changed our name to China Health Resource, Inc. to more accurately reflect our business operations. In 2011, Yinfa had invested 95,223 USD (600,000 RMB) to establish an agricultural planting business entity called Suining Yinfa DAR Planting Co, Ltd. (“Yinfa DAR Planting”). Yinfa DAR Planting is in process of obtaining business approval and certificate from different government departments, and no business activity has occurred.25

24The company’s TCM migraine medication called Toufeng Migraine tablet. Results released in 2012 demonstrated an effective rate of 96.5% in clinical observations. The new product was developed utilizing the company's proprietary DAR as one the key ingredients and, unlike most current treatments, it is not merely a pain killer and thus avoids the serious side effects and risk of dependency or addiction. The company is now moving forward with the approval process world-wide and is working to develop and expand commercialization through strategic partnerships.

We ~~are~~believe ~~engaged~~our inbusiness ~~the~~model ~~production,~~will ~~manufacturing~~help ~~and~~facilitate ~~distribution~~the inprocess ~~China~~ of ~~herbal~~growing ~~pharmaceuticals~~and ~~based~~commercializing onall ~~traditional~~of ~~Chinese~~our ~~medicine,~~products ~~which~~with wethrough ~~refer~~research toand ~~herein~~development asof ~~Traditional Chinese~~added ~~Medicine,~~uses orof our ~~TCM.~~products ~~We are based~~ in ~~the~~a ~~city~~range of ~~Suining~~foods, ~~Sichuan~~medicines ~~Province,~~and ~~China~~cosmetics ~~and~~to increase our ~~operations~~revenues ~~are~~and ~~exclusively~~enhance inshareholder ~~China~~value. ~~Our~~ ~~subsidiary~~These ~~Yinfa~~opportunities may isinclude, abut ~~Chinese~~are ~~pharmaceutical~~not ~~company~~limited ~~focused on producing~~to, ~~processing~~acquisitions ~~and~~or ~~commercializing~~licensing ~~TCM~~of additional products ~~to pharmaceutical~~in ~~manufacturers~~synergistic ~~and~~or ~~wholesale~~complementary ~~markets~~industries.

Our products include Dahurian Angelica Root (“DAR”) which is a popular herb employed extensively as an ingredient in food, medicine and cosmetics for the treatment of pain, swelling and pustule. Our products are developed through extensive research and development efforts to determine effective uses for the plants grown under our control and cultivated in areas where unique local climates and soil properties result in the finest quality.Seasonality

WeThe ~~obtained~~planting of ~~Good~~DAR ~~Agricultural~~is ~~Practice (“GAP”)~~subject ~~certification~~to ~~for~~seasonal ~~our~~fluctuations. DAR ~~products~~is planted during the winter months and ~~received~~is suitable for harvest in the ~~exclusive~~summer. The ~~rights~~prime season for harvest is typically from July through November, subject to ~~the~~climate ~~“Sichuan~~conditions. ~~Angelica”~~As a result, we typically ~~certified~~enter ~~trademark~~into ~~from~~contracts with farmers during the ~~Chinese~~first ~~State~~quarter ~~Administration~~of the fiscal year for the purchase of ~~Industry~~raw DAR, and ~~Commerce~~purchase ~~through~~raw ~~December~~DAR from 13farmers during the Third and Forth quarters. We then process the harvested DAR and sell products to our customers throughout the year. Therefore, ~~2016~~our revenues occur throughout the year.

~~Our~~Revenue ~~Business~~recognition

Our ~~core~~revenue ~~business~~recognition ispolicies ~~herbal~~are ~~pharmaceuticals~~in ~~and~~accordance ~~supplements~~with ~~based~~Staff ~~upon~~Accounting ~~TCM~~Bulletin No. ~~Our~~104. ~~subsidiary~~Sales ~~Yinfa~~revenue is arecognized ~~Chinese~~when ~~pharmaceutical~~all ~~company~~of ~~focused~~the onfollowing ~~producing,~~have ~~processing~~occurred: ~~and~~(i) persuasive ~~commercializing~~evidence ~~TCM~~of ~~products~~an toarrangement ~~pharmaceutical~~exists, ~~manufacturers~~(ii) ~~and~~delivery ~~wholesale~~has ~~markets. Our~~occurred ~~products~~or ~~include~~services ~~DAR,~~have ~~which~~been isrendered, ~~a popular~~(iii) ~~herb~~the ~~employed~~price ~~extensively~~is asfixed anor ~~ingredient in food~~determinable, ~~medicine~~ and ~~cosmetics~~(iv) ~~for~~ the ~~treatment~~ability ofto ~~pain,~~collect ~~swelling~~is ~~and~~reasonably ~~pustule~~assured. ~~Our~~ ~~products~~These criteria are ~~developed~~generally ~~through~~satisfied ~~extensive~~at ~~research~~the ~~and~~time ~~development~~of ~~efforts~~shipment towhen ~~determine effective uses for the plants grown~~risk ~~under~~of ~~our~~loss ~~control~~ and ~~cultivated~~title inpasses ~~areas~~to ~~where unique local climates and soil properties result in~~ the ~~finest quality~~customer.

InWe ~~year~~recognize ~~2006,~~revenue wewhen ~~obtained~~the ~~GAP~~goods ~~certification~~are ~~for~~delivered ~~DAR,~~and intitle ~~partnership~~has ~~with Sichuan Yinfa Resource Development Group Co~~passed. ~~Ltd.,~~Sales ~~(“Yinfa~~revenue ~~Resource”). The~~represents ~~standards which must be met to obtain GAP certification include~~ the ~~study~~invoiced value of ~~our environment quality including water~~goods, ~~and~~net ~~soil samples, seed quality, use~~ of ~~pesticides~~a ~~and~~value-added ~~use~~tax ~~of fertilizers~~(“VAT”). All ~~These~~of ~~standards~~our ~~were~~products ~~approved~~that byare ~~the~~sold ~~Chinese~~in ~~State Food and Drug Administration (~~the ~~“SFDA”). Our~~PRC ~~GAP~~are ~~farm~~subject ~~production~~to ~~base~~a ~~includes~~Chinese ~~approximately~~value-added ~~133,334~~tax ~~square~~at ~~meters~~a rate of ~~experimental planting~~17% ~~fields, and 1,333,340 square meters~~ of ~~contracted~~the ~~farm~~gross ~~production~~sales ~~bases,~~price or ~~all~~at ofa ~~which~~rate ~~passed~~approved ~~inspection~~ by the ~~SFDA~~Chinese ~~on February~~local ~~26, 2006~~government. ~~The~~ ~~GAP~~This ~~standards~~VAT ~~are~~may ~~inspected~~be ~~annually.~~offset ~~The~~by ~~GAP~~the ~~certificate~~VAT ~~has~~paid ~~been~~by ~~issued~~us inon ~~name~~raw ofmaterials ~~our~~and ~~partner,~~other ~~Yinfa~~materials ~~Resource. Our~~included ~~exclusive~~in ~~GAP certification for DAR demonstrates~~ the ~~high~~cost ~~quality standards~~ of ~~our~~producing ~~DAR~~their ~~and~~finished ~~DAR-related products~~product.

InAccounts 2007, the Company achieved cooperation with the Sichuan Province Suining City DAR Association (“Association”) and received the exclusive rights to the “Sichuan Angelica” certified trademark from the Chinese State Administration of Industry and Commerce through December 13, 2016. As holder of the rights to the trademark, the Company is receives a management fee of 1RMB (or approximately US $0.14) per kilogram of DAR (including packaging fees) from any user of the trademark, of which 60% may be used by Yinfa for further development and investment of its DAR business and the remaining 40% is paid for related expenses. In addition, the Company receives 100% of the revenue stream from the use of the DAR trademark through December 13, 2016 and 95% of the revenue stream thereafter. There are approximately 235 regional certification trademarks in China, including 65 for natural resources, of which over 20 are for natural herb resources. In addition to the DAR Association, in 2010, Yinfa received the exclusive license to use and manage the “Sichuan Angelica” trademark by the General Administration of Quality Supervision, Inspection and Quarantine of People’s Republic of China.Receivable

~~Currently,~~Accounts ~~raw~~receivable ~~DAR~~are inrecorded ~~both~~at ~~its original~~the ~~root~~invoiced ~~form~~amount and ~~processed~~do ~~form~~not ~~(both~~bear ~~sliced~~interest. ~~and~~We ~~powder)~~generally isextend ~~one~~unsecured ofcredit ~~our~~up ~~major~~to ~~products~~three ~~and~~months itto isour ~~sold~~customers toin ~~pharmaceutical~~the ~~manufacturers~~ordinary ~~(80%)~~course orof ~~wholesalers~~business ~~(20%).~~and ~~Our~~mitigates ~~DAR-related~~the ~~product~~associated ~~offerings~~risks ~~also~~by ~~include~~performing ~~Yisheng~~credit ~~Capsule,~~checks ~~which~~and ~~has~~actively ~~been~~pursuing ~~certified~~past bydue ~~the~~accounts. ~~SFDA~~An allowance ~~and~~for ~~sold~~doubtful toaccounts ~~regional~~is ~~distributors~~established ~~throughout~~and ~~China~~determined tobased ~~treat~~on ~~fatigue~~management’s byassessment ~~improving~~of ~~blood~~known ~~circulation.~~requirements, Itsuch ~~increases~~as ~~oxygen levels~~aging inof ~~regions~~receivables, ofpayment history, the ~~body~~customer's ~~that~~current docreditworthiness, ~~not~~and ~~get~~the aneconomic ~~adequate supply~~environment. ~~Fatigue~~When ina ~~the~~specific ~~workplace~~account receivable ~~costs~~balance ~~$136B~~is ~~per~~deemed ~~year~~uncollectible, ina ~~health-related~~charge ~~lost productivity~~is ~~according~~taken to ~~a report in~~ the ~~Journal~~statement of ~~Occupational~~income. ~~and~~Recoveries ~~Environmental~~of ~~Medicine.~~balances ~~(February~~previously ~~2012~~written off -are ~~Volume~~reflected 54as -income ~~Issue 2~~in -the ~~P231~~statement -of ~~258)~~income.

In addition, in 2011 the Company has added Rhizoma Gastrodia (“Gastrodia”) along with various other raw TCM products to the Company’s product offering. Gastrodia, along with various other raw TCM products are sold to pharmaceutical manufacturers (80%) or wholesalers (20%). With the expansion of TCM to markets in the United States and other countries, we expect to continue to identify unique TCM products of the highest quality to add to our markets.Inventory

25Inventory includes raw material, package material, low-value consumables and merchandise. We have adopted a perpetual inventory system and inventories are recorded at actual cost. Raw material, package material and merchandise are priced at cost upon acquisition, and with the weighted average method upon issuance and shipment. Low-value consumables are amortized at 50% of the amount upon application and amortized an additional 50% upon obsolescence.

The company’s TCM migraine medication called Toufeng Migraine tablet. Results released in 2012 demonstrated an effective rate of 96.5% in clinical observations. The new product was developed utilizing the company's proprietary DAR as one the key ingredients and, unlike most current treatments, it is not merely a pain killer and thus avoids the serious side effects and risk of dependency or addiction. The company is now moving forward with the approval process world-wide and is working to develop and expand commercialization through strategic partnerships.26

WeProperty, ~~believe our business model will help facilitate the process of growing and commercializing all of our products with through research and development of added uses of our products in a range of foods~~Plant, ~~medicines~~ and cosmetics to increase our revenues and enhance shareholder value. These opportunities may include, but are not limited to, acquisitions or licensing of additional products in synergistic or complementary industries.Equipment

~~Seasonality~~Property, plant, and equipment are recorded at cost, less accumulated depreciation and impairment. Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of property, plant, and equipment, are expensed as incurred. The cost and related accumulated depreciation, applicable to sold or no longer in service property, plant, and equipment, are eliminated from the accounts and any gain or loss is included in the statement of operations.

~~The~~Depreciation ~~planting of DAR~~ is ~~subject~~calculated to ~~seasonal~~write-off ~~fluctuations. DAR is planted during~~ the ~~winter~~cost ~~months~~or ~~and~~basis isof ~~suitable for harvest in~~ the ~~summer. The prime season for harvest is typically from July through November~~property, ~~subject to climate conditions. As a result~~plant, weand ~~typically~~equipment ~~enter~~over ~~into~~their ~~contracts~~estimated ~~with~~useful ~~farmers during~~lives ~~the first quarter of the fiscal year~~ for the ~~purchase~~date ofon ~~raw~~which ~~DAR,~~they ~~and~~become ~~purchase~~fully operational ~~raw DAR from farmers during the third~~ and ~~forth~~ ~~quarters.~~after Wetaking ~~then~~into ~~process~~account ~~the~~their ~~harvested~~estimated ~~DAR~~residual ~~and~~values ~~sell~~(salvage ~~products~~value), tousing ~~our customers throughout~~ the ~~year.~~straight-line ~~Therefore~~method, ~~our~~at ~~revenues~~the ~~occur~~following ~~throughout~~rates ~~the~~per year. :

Revenue recognition

Equipment:	Straight-line for 5 to 20 years with a 0% salvage value
Building:	Straight-line for 20 years with a 5% salvage value
Useful life of land	Straight-line for 15 years with a 5% salvage value

~~Our~~We ~~revenue~~recognize ~~recognition~~an ~~policies~~impairment ~~are~~loss inon property, ~~accordance~~plant, ~~with~~and ~~Staff~~equipment ~~Accounting~~when ~~Bulletin~~evidence, ~~No.~~such ~~104.~~as ~~Sales~~the ~~revenue~~sum ~~is recognized when all~~ of ~~the~~expected ~~following~~future ~~have~~cash ~~occurred:~~flows (i)undiscounted ~~persuasive evidence~~and ofwithout aninterest ~~arrangement exists~~charges), indicates ~~(ii)~~that ~~delivery~~future ~~has~~operations ~~occurred~~will ornot ~~services~~produce ~~have~~sufficient ~~been~~revenue ~~rendered,~~to ~~(iii)~~cover the ~~price~~related isfuture ~~fixed~~costs, orincluding ~~determinable~~depreciation, and ~~(iv)~~when the ~~ability~~carrying toamount ~~collect~~of isthe ~~reasonably~~asset ~~assured.~~cannot ~~These~~be ~~criteria~~realized ~~are~~through ~~generally~~sale. ~~satisfied~~Measurement atof the ~~time~~impairment ofloss ~~shipment~~is ~~when~~based ~~risk of~~on ~~loss~~the ~~and~~fair value ~~title~~of ~~passes to~~ the ~~customer~~assets.

WeUse ~~recognize revenue when the goods are delivered and title has passed. Sales revenue represents the invoiced value~~ of goods, net of a value-added tax (“VAT”). All of our products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price or at a rate approved by the Chinese local government. This VAT may be offset by the VAT paid by us on raw materials and other materials included in the cost of producing their finished product.Estimates

~~Accounts~~The ~~Receivable~~preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

~~Accounts~~Foreign ~~receivable~~Currency are recorded at the invoiced amount and do not bear interest. We generally extend unsecured credit up to three months to our customers in the ordinary course of business and mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on management’s assessment of known requirements, such as aging of receivables, payment history, the customer's current creditworthiness, and the economic environment. When a specific account receivable balance is deemed uncollectible, a charge is taken to the statement of income. Recoveries of balances previously written off are reflected as income in the statement of income.Transaction

~~Inventory~~We maintain our books and accounting records in RMB, which is determined as the functional currency. Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (“PBOC”) prevailing at the date of the transactions. Monetary assets and liabilities denominated in currencies other than RMB are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. Gain and losses resulting from foreign currency transactions are included in operations.

~~Inventory~~Our ~~includes~~financial ~~raw~~statements ~~material,~~are ~~package~~translated ~~material~~into USD, ~~low-value~~which ~~consumables~~is ~~and~~our ~~merchandise~~reporting currency. WeAssets ~~have~~and ~~adopted~~liabilities aare ~~perpetual~~translated ~~inventory~~at ~~system~~the ~~and~~prevailing ~~inventories~~exchange ~~are~~rate ~~recorded~~ at each reporting ~~actual~~period ~~cost~~end. ~~Raw~~Contributed ~~material,~~capital ~~package~~accounts ~~material~~are translated using the historical rate of exchange when capital is injected. Income and ~~merchandise~~expense accounts are ~~priced~~translated at ~~cost~~the ~~upon~~average ~~acquisition,~~rate ~~and~~of ~~with~~exchange during the ~~weighted~~reporting ~~average method~~period. ~~upon~~Translation ~~issuance~~adjustments ~~and~~resulting from ~~shipment.~~translation ~~Low-value~~of ~~consumables~~these financial statements are ~~amortized~~reflected atas ~~50%~~other ofcomprehensive income in the ~~amount~~statements ~~upon~~of ~~application~~operations and accumulated ~~amortized~~other ~~an additional~~comprehensive ~~50%~~income ~~upon~~in ~~obsolescence~~the statements of changes in shareholders' equity.

~~Property,~~The ~~Plant,~~translation ~~and~~rates ~~Equipment~~are as follows:

Property, plant, and equipment are recorded at cost, less accumulated depreciation and impairment. Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of property, plant, and equipment, are expensed as incurred. The cost and related accumulated depreciation, applicable to sold or no longer in service property, plant, and equipment, are eliminated from the accounts and any gain or loss is included in the statement of operations.

	06/30/2013		03/31/2013		12/31/2012		06/30/2012		03/31/2012
Year/quarter end RMB : US$ exchange rate		6.1787		6.2666		6.3011		6.3249		6.2943
Average yearly/quarterly RMB : US$ exchange rate		6.2422		6.2771		6.3057		6.3069		6.3083

2627

~~Depreciation~~Recently isAccounting calculated to write-off the cost or basis of the property, plant, and equipment over their estimated useful lives for the date on which they become fully operational and after taking into account their estimated residual values (salvage value), using the straight-line method, at the following rates per year:Pronouncements

Equipment:	Straight-line for 5 to 20 years with a 0% salvage value
Building:	Straight-line for 20 years with a 5% salvage value
Useful life of land	Straight-line for 15 years with a 5% salvage value

In January 2013, the FASB issued ASU No. 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-01”).The Update clarifies that ordinary trade receivables and receivables are not in the scope of Accounting Standards Update No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. Specifically, Update 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification® or subject to a master netting arrangement or similar agreement. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

WeIn ~~recognize~~February ~~an impairment loss on property~~2013, ~~plant,~~ ~~and equipment when evidence, such as~~ the ~~sum~~FASB ofissued ~~expected~~ASU ~~future cash flows (undiscounted and without interest charges),~~No. ~~indicates that future operations will not produce sufficient revenue to cover the related future costs~~2013-02, ~~including~~“Reporting ~~depreciation, and when the carrying amount~~ of ~~the~~Amounts ~~asset~~Reclassified ~~cannot~~Out ~~be realized through sale. Measurement~~ of ~~the~~Accumulated ~~impairment~~Other ~~loss~~Comprehensive isIncome” ~~based~~(“ASU ~~on the~~2013-02”).The ~~fair~~amendments ~~value~~require ofan ~~the~~organization ~~assets.~~to:

~~Use~~a) Present (either on the face of ~~Estimates~~the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income–but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.

~~The~~b) ~~preparation~~Cross-reference ofto ~~financial~~other ~~statements in~~disclosures ~~conformity~~currently ~~with~~required USunder U.S. GAAP ~~requires~~for ~~management~~other toreclassification ~~make~~items ~~estimates~~(that ~~and~~are ~~assumptions~~not ~~that~~required ~~affect~~under ~~the~~U.S. ~~reported~~GAAP) ~~amounts~~to ofbe ~~assets~~reclassified ~~and liabilities~~directly ~~and~~to ~~disclosure~~net ofincome ~~contingent~~in ~~assets~~their ~~and~~entirety ~~liabilities~~in at the ~~date~~same ofreporting period. This would be the ~~financial~~case ~~statements~~when ~~and~~a portion of the ~~reported~~amount ~~amounts~~ reclassified out of ~~revenues~~accumulated ~~and~~other ~~expenses~~comprehensive ~~during~~income ~~the~~is ~~reporting~~initially ~~period~~transferred to a balance sheet account (e.g., ~~Actual~~inventory ~~results~~for ~~may~~pension-related ~~differ~~amounts) ~~from~~instead ~~those~~of ~~estimates~~directly to income or expense.

~~Foreign~~The ~~Currency~~amendments ~~Transaction~~are effective for reporting periods beginning after December 15, 2012, for public companies. Management does not expect the adoption of this standard has a significant effect on the Company’s consolidated financial position or results of operations.

WeIn ~~maintain~~February ~~our~~2013, ~~books~~the ~~and~~FASB ~~accounting~~issued ~~records in~~ASU ~~RMB~~No. 2013-03, ~~which~~“Clarifying isthe ~~determined~~Scope asand ~~the~~Applicability ~~functional~~of ~~currency.~~a ~~Transactions~~Particular ~~denominated~~Disclosure into ~~currencies~~Nonpublic ~~other~~Entities” ~~than~~(“ASU ~~RMB~~2013-03”). The ~~are~~amendment ~~translated~~clarifies ~~into RMB~~that atthe requirement to disclose the ~~exchange~~level ~~rates~~of ~~quoted~~the byfair value hierarchy within which the ~~People’s~~fair ~~Bank~~value ofmeasurements are ~~China~~categorized in their entirety (~~“PBOC”~~as Level 1, Level 2, or Level 3) ~~prevailing~~does atnot ~~the~~apply ~~date~~to ofprivate ~~the~~companies ~~transactions.~~and nonpublic not-for-profits ~~Monetary~~for ~~assets~~items ~~and~~that ~~liabilities~~are ~~denominated~~not measured at fair value in ~~currencies~~the ~~other~~statement ~~than~~of ~~RMB~~financial ~~are~~position, ~~translated~~but ~~into~~for ~~RMB~~which ~~using~~fair ~~the~~value ~~applicable~~is ~~exchange~~disclosed. The ~~rates~~amendments ~~quoted~~are byeffective ~~the~~upon ~~PBOC~~issuance. atManagement ~~the~~does ~~balance~~not ~~sheet~~expect ~~dates.~~the ~~Gain~~adoption ~~and~~of ~~losses~~this ~~resulting~~standard ~~from~~has ~~foreign~~a ~~currency~~significant ~~transactions~~effect ~~are~~on ~~included~~the inCompany’s consolidated financial position or results of operations.

~~Our~~In ~~financial~~March ~~statements~~2013, ~~are~~the ~~translated into~~FASB ~~USD,~~issued ~~which~~ASU isNo. 2013-04, ~~our~~“Obligations ~~reporting~~Resulting ~~currency.~~from ~~Assets~~Joint and ~~liabilities~~Several ~~are~~Liability ~~translated~~Arrangements atfor Which the ~~prevailing~~Total ~~exchange~~Amount ~~rate~~of the Obligation Is Fixed at ~~each~~the ~~reporting period~~Reporting ~~end.~~Date” ~~Contributed~~(“ASU ~~capital~~2013-04”). ~~accounts~~The ~~are~~update ~~translated~~provides ~~using~~guidance for the ~~historical~~recognition, ~~rate~~measurement, and disclosure of ~~exchange~~obligations ~~when~~resulting ~~capital~~from isjoint ~~injected.~~and ~~Income~~several liability arrangements for which the total amount of the obligation ~~and~~within ~~expense~~the ~~accounts~~scope ~~are~~of ~~translated~~this ASU is fixed at the ~~average~~reporting ~~rate~~date, except for obligations addressed within existing guidance in US GAAP. The guidance requires an entity to measure those obligations as the sum of ~~exchange~~the ~~during~~amount the reporting ~~period.~~entity ~~Translation~~agreed ~~adjustments~~to ~~resulting~~pay on the ~~from~~basis ~~translation~~of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of ~~these~~its ~~financial~~co-obligors. The ~~statements~~guidance ~~are~~in ~~reflected~~this ASU also requires an entity to disclose the nature and amount of the obligation as well as other ~~comprehensive~~information about ~~income~~those obligations. The amendments in ~~the~~this ~~statements~~ASU ofare ~~operations~~effective for fiscal years, and interim periods within those years, beginning ~~accumulated~~after ~~other~~December ~~comprehensive~~15, ~~income~~2013. inManagement does not expect the ~~statements~~adoption of ~~changes~~this instandard ~~shareholders'~~will ~~equity~~have a significant effect on the Company’s consolidated financial position or results of operations.

~~The translation rates are as follows:~~28

	March 31 2013	March 31 2012
Items in statements of income and cash flows	6.2771RMB = $1	6.3083RMB = $1
for the three months ended	6.2666RMB = $1	6.2943RMB = $1

In March 2013, the FASB issued ASU No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). The ASU clarifies that when a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required to apply the guidance in Accounting Standards Codification 830-30 to release any related cumulative translation adjustment into net income. The ASU provides that the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The amendments take effect prospectively for public companies for fiscal years beginning after December 15, 2013, and interim reporting periods within those years. Management does not expect the adoption of this standard will have a significant effect on the Company’s consolidated financial position or results of operations.

~~Recently~~Significant ~~Accounting~~Factors ~~Pronouncements~~Affecting Our Results of Operation

InWe ~~February~~believe 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the ~~guidance~~following isfactors ~~effective~~will ~~prospectively~~continue for reporting periods beginning after December 15, 2012. For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted. The adoption of this standard is not expected to ~~have~~affect aour ~~material impact on the Company’s consolidated~~ financial ~~position and results of operations.~~performance:

27Price Control of Drugs by PRC Government and SDRC

~~Significant~~The ~~Factors~~State ~~Affecting~~Development ~~Our~~and Reform Commission ~~Results~~of the PRC (“SDRC”) and the price administration bureaus of ~~Operation~~the relevant provinces of the PRC in which the pharmaceutical products are manufactured are responsible for the retail price control over our pharmaceutical products. The SDRC sets the price ceilings for certain pharmaceutical products in the PRC. All of our products except those under the protection periods are subject to such price controls and could affect our future revenue growth. However, due to the direct support of TCM by the Chinese government, China’s immense market, and our protected drugs, we are optimistic regarding our continuous growth potential for TCM in China.

WePrincipal ~~believe~~Components ~~that~~of ~~the~~Our ~~following factors~~Income ~~will continue to affect our financial performance:~~Statement

~~Price Control of Drugs by PRC Government and SDRC~~Sales

~~The~~Our ~~State~~sales ~~Development~~are ~~and~~derived ~~Reform~~from ~~Commission of~~sales ~~the PRC (“SDRC”) and the price administration bureaus~~ of ~~the relevant provinces of the PRC in which the pharmaceutical~~our products ~~are~~net ~~manufactured~~of ~~are~~value-added ~~responsible~~taxes. The ~~for~~most ~~the~~significant ~~retail~~factors ~~price~~that ~~control~~affect ~~over~~ our ~~pharmaceutical~~sales ~~products.~~are ~~The~~shipment ~~SDRC~~volume ~~sets~~and ~~the price~~average ~~ceilings~~selling ~~for~~prices. Our ~~certain~~collection ~~pharmaceutical~~practices ~~products~~vary infrom ~~the~~customer ~~PRC.~~to ~~All~~customer, ofthey ~~our~~consist ~~products~~of ~~except~~(i) ~~those~~cash ~~under~~payment ~~the~~on ~~protection periods are subject~~delivery tofor ~~such~~small ~~price~~orders ~~controls~~ and ~~could~~new ~~affect~~customer ~~our~~and ~~future~~(ii) ~~revenue~~credit ~~growth.~~for ~~However,~~30 ~~due~~days to ~~the~~90 ~~direct~~days ~~support~~to ~~of TCM by the Chinese government, China’s immense market, and~~ our ~~protected~~established ~~drugs,~~regular wecustomers ~~are~~who ~~optimistic~~have ~~regarding~~long ~~our continuous growth potential for TCM in~~term ~~China~~cooperative relationship.

~~Principal~~Cost ~~Components~~ of ~~Our Income Statement~~sales

~~Sales~~Our cost of sales primarily consists of direct material costs, and direct labor costs and manufacturing overhead costs. Direct material costs generally accounted for the majority of our cost of sales.

~~Our~~Gross sales are derived from sales of our products net of value-added taxes. The most significant factors that affect our sales are shipment volume and average selling prices. Our collection practices vary from customer to customer, they consist of (i) cash payment on delivery for small orders and new customer and (ii) credit for 30 days to 90 days to our established regular customers who have long term cooperative relationship.Profit

~~Cost~~Our gross profit of ~~sales~~our TCM products is affected primarily by the cost of raw materials, which is defined with reference to the cost of DAR. We are also able to price our TCM products based on the market price for materials plus mark-up, which is essentially our gross profit.

~~Our~~Operating ~~cost of sales primarily consists of direct material costs, and direct labor costs and manufacturing overhead costs. Direct material costs generally accounted for the majority of our cost of sales.~~expenses

~~Gross~~Our ~~Profit~~operating expenses consist of selling, general and administrative expenses including research and development expenses.

~~Our~~Selling, ~~gross profit of our TCM products is affected primarily by the cost of raw materials~~General, ~~which~~and ~~is defined with reference to the cost of DAR. We are also able~~Administrative, toInterest ~~price~~and ~~our~~other ~~TCM products based on the market price for materials plus mark-up, which is essentially our gross profit.~~expenses

~~Operating~~Our selling expenses include shipping expenses, salaries and traveling expenses for our sales personnel. Our general and administrative expenses include administrative staff costs and other benefits, depreciation of office equipment, professional service fees, research and development expenditures and other miscellaneous expenses related to our administrative activities.

~~Our operating expenses consist of selling, general and administrative expenses including research and development expenses.~~29

~~Selling,~~Our ~~General,~~sales activities are conducted through direct selling by our internal sales staff. Because of the strong demand for our products and ~~Administrative~~continuing improvement on efficiency, ~~Interest~~it is not necessary for us to add sales forces to start to aggressively market and ~~other~~distribute our products. Our selling expenses have been relatively small as a percentage of our revenues.

~~Our~~With ~~selling~~the ~~expenses~~anticipated ~~include~~expansion ~~shipping expenses~~of business, we ~~salaries~~anticipate ~~and~~the ~~traveling~~absolute ~~expenses~~dollars ~~for~~of ~~our~~selling, ~~sales personnel. Our general~~ and administrative expenses ~~include administrative~~will ~~staff~~increase. ~~costs~~But ~~and~~comparing ~~other~~to ~~benefits,~~the ~~depreciation~~stronger growth of ~~office equipment~~business, ~~professional~~we ~~service~~estimate ~~fees,~~they ~~research~~will ~~and~~still ~~development expenditures~~account ~~and~~for ~~other~~a ~~miscellaneous~~similar ~~expenses~~percentage ~~related~~against revenues to ~~our~~the ~~administrative activities~~present.

~~Our~~Other ~~sales~~comprehensive activities are conducted through direct selling by our internal sales staff. Because of the strong demand for our products and continuing improvement on efficiency, it is not necessary for us to add sales forces to start to aggressively market and distribute our products. Our selling expenses have been relatively small as a percentage of our revenues.income

28Other comprehensive income reflects foreign currency translation adjustment according to our accounting policies.

~~With~~Three ~~the~~Months ~~anticipated~~Ended ~~expansion~~June ~~of business~~30, we ~~anticipate~~2013 ~~the~~Compared ~~absolute dollars of selling, and administrative expenses will increase. But comparing~~ to the ~~stronger~~Three ~~growth~~Months ofEnded ~~business~~June 30, ~~we estimate they will still account for a similar percentage against revenues to the present.~~2012

~~Other~~Balance ~~comprehensive income~~Sheet

~~Other~~Our ~~comprehensive~~total ~~income~~assets ~~reflects~~increased ~~foreign~~by US $224,038 ~~currency~~for ~~translation~~the ~~adjustment~~three ~~according~~months month ending June 30, 2013 to ~~our~~US ~~accounting~~$26,271,757 ~~policies~~from March 31, 2013 which were US $26,047,719. Total liabilities increased by US 244,779 to US $12,897,089 for the three months period ended June 30, 2013 from US $12,652,310 as of March 31, 2013. Those changes are principally due to an increase of prepaid expenses, inventory, accounts payable, other payable, short term loan payable and taxes payable.

Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012

Balance Sheet	June 30, 2013 (USD)		March 31, 2013 (USD)
Total Assets	$	26,271,757	$	26,047,719
Total Liabilities	$	12,897,089	$	12,652,310
Net Assets	$	13,374,668	$	13,395,409

~~Balance~~Results ~~Sheet~~of Operations

~~Our~~The ~~total~~following ~~assets~~table ~~increased~~presents ~~by US $216,515 for~~ the ~~three~~unaudited ~~months~~consolidated ~~month ending March 31, 2013 to US $26,047,719 from December 31, 2012 which were US $25,831,204. Total liabilities~~results ~~increased~~of byoperations USof ~~202,644~~the toCompany ~~US $12,652,310~~ for the three months ~~period~~ ended ~~March~~June 3130, 2013 ~~from US $ 12,449,666~~ as ofcompared ~~December 31, 2012. Those changes are principally due~~ to anthe ~~increase~~results of ~~cash~~operations ~~and~~for ~~cash~~the ~~equivalents,~~three ~~accounts receivable, prepaid expenses,~~months ~~inventory,~~ended ~~accounts~~June ~~payable~~30, ~~short term loan payable, taxes payable~~2012.

	March 31, 2013 (USD)			December 31, 2012 (Audited) (USD)
	For the Three Months Ended June 30 (USD)
Balance Sheet
	2013			2012
Total Assets	$	26,047,719		$	25,831,204
Revenue	$	1,934,290		$	6,305,200
Total Liabilities		12,652,310			12,449,666
Cost of Sales		1,544,651			4,891,526
Net Assets	$	13,395,409		$	13,381,538
Gross Profit		389,639			1,413,674
Selling, General, and Administrative		503,159			293,054
Interest Expenses		107,207			7,495
Total Operating Expenses		610,366			300,549
Operating Income(Loss)		(220,727	)		1,113,125
Other Income		5			-
Provision Income Tax		-			280,281
Net Income (Loss)		(220,722	)		832,844
Other Comprehensive Income (Loss)		199,982			(88,483	)
Total comprehensive income (Loss)	$	(20,740	)	$	744,631

~~Results of Operations~~30

The following table presents the unaudited consolidated results of operations of the Company for the three months ended March 31, 2013 as compared to the results of operations for the three months ended March 31, 2012.Revenues

	For the Three Months Ended March 31 (USD)
	2013			2012
Revenue	$	1,230,066		$	8,955,361
Cost of Sales		968,276			6,972,090
Gross Profit		261,790			1,983,271
Selling, General, and Administrative		230,207			199,805
Interest Expenses		95,606			22,248
Total Operating Expenses		325,813			222,053
Operating Income(Loss)		(64,023	)		1,761,218
Other Income(expenses)		(5	)		(1	)
Provision(Credit) Income Tax		-			444,687
Net Income (Loss)		(64,028	)		1,316,53
Other Comprehensive Income		77,898			15,988
Total comprehensive income (Loss)	$	13,870		$	1,332,518

Our revenues for the three months ended June 30, 2013 were US $ 1,934,290, a decrease of 69% over revenues of US $6,305,200 for the three months ended June 30, 2012. The decrease in sales revenues was due primarily to the decrease in demand for non-branded raw products and the Yishen capsule. This reduction in sales quantities and unit price is within a broader slowdown in demand for China’s TCM market. Management considers the long term trend remains intact but the softening of China’s market has had an effect in our sales. This softening in demand contributed to a significant reduction in the volume of sales in raw TCM herbs and Yinshen capsules. The company also faced in period an increase in competition of non-branded products and in particular for raw non-branded products. Our sales arrangements are not subject to any warranties. In this period, TCM prices including DAR retail prices decreased due to the macro TCM market condition.

~~Revenues~~Cost of Sales; Gross Profit

~~Our~~Cost ~~revenues~~of ~~for~~sales ~~the~~are ~~three~~expenses ~~months~~directly ~~ended~~related ~~March~~to ~~31,~~manufacturing ~~2013~~and ~~were~~selling USour ~~$ 1~~products,~~230,066,~~ aincluding ~~decrease~~costs of ~~86%~~raw ~~over~~materials ~~revenues~~purchased offrom ~~US $8~~farmers,~~955,361~~ ~~for~~product ~~the~~delivery ~~three~~and ~~months~~direct labor ~~ended March 31, 2012~~cost. The ~~decrease~~cost inof sales ~~revenues~~for ~~was due primarily to~~ the ~~decrease~~three inmonths ~~demand~~ended ~~for~~June ~~non-branded~~30, ~~raw~~2013 ~~products~~were ~~and~~US ~~the~~$ ~~Yishen~~1,544,651, ~~capsule. This~~representing ~~reduction in sales is within~~ a ~~broader~~decrease ~~slowdown~~of in68% ~~demand for China’s TCM market. Management considers the long term~~over ~~trend remains intact but~~ the ~~softening~~cost of ~~China’s market has had an effect in our~~ sales. ~~This~~of ~~softening~~US in$4,891,526 ~~demand~~for ~~contributed to a significant reduction in~~ the ~~volume~~three ofmonths ~~sales~~ended inJune ~~raw~~30, ~~TCM herbs and Yinshen capsules~~2012. The ~~company also~~decreased ~~faced~~costs ~~in period an increase in competition~~ of ~~non-branded~~sales ~~products~~ and incomparatively ~~particular~~lower gross ~~for~~profit ~~raw~~rate ~~non-branded~~were ~~products.~~principally ~~Our~~due ~~sales arrangements are not subject~~ to ~~any~~the ~~warranties.~~decline Inin ~~this~~demand ~~period,~~of ~~TCM~~products ~~prices~~and ~~including~~increase ~~DAR~~in ~~retail~~the ~~prices~~price ~~decreased~~of ~~due~~other toraw ~~the macro TCM market condition~~materials.

29Gross profit for the three months ended June 30, 2013 decreased by approximately 72% to US $ 389,639 from US $1,413,674 for the three months ended June 30, 2012. Gross profit margin for the three months ended June 30, 2013 was 20% compared to 22% for the three months ended June 30, 2012. The decrease in profit margin was mainly attributed to the reduction in the gross margin derived from the decline in demand of products and the increase in relative mix of sales of lower profit margin products.

~~Cost~~Operating ~~of Sales; Gross Profit~~Expenses

~~Cost~~The ofoperating ~~sales~~expenses ~~are~~for ~~expenses~~the ~~directly~~three ~~related~~months toended ~~manufacturing~~June ~~and~~30, ~~selling~~2013 ~~our~~were ~~products~~US $610,366, ~~including~~representing ~~costs~~an increase of ~~raw~~103% ~~materials~~over ~~purchased~~operating ~~from~~expenses ~~farmers~~of US $300,549 ~~product~~for ~~delivery~~the ~~and~~three ~~direct~~months ~~labor~~ended ~~cost.~~June 30, 2012. The ~~cost~~largest component of ~~sales~~operating expenses is attributable to selling, general and administrative (“SG&A”) expense consisting primarily of administrative expenses. The SG&A expenses for the three months ended ~~March~~June 3130, 2013 were US $ ~~968~~503,~~276~~159, representing ~~a decrease~~ increase of 8672% over ~~the~~ ~~cost~~SG&A ofexpenses ~~sales~~ of US $ 6293,~~972,090~~054 for the three months ended ~~March~~June 3130, 2012. The increase ~~decreased~~is ~~costs~~primarily ofdue ~~sales~~to ~~and~~increase ~~comparatively lower~~in ~~gross~~provision ~~profit~~of ~~rate~~bad ~~were~~debt ~~principally~~in ~~due to~~ the ~~decline~~second quarter in ~~demand~~2013, ofcomparing ~~products~~to ~~and increase in~~ the ~~price~~same ofperiod ~~other~~in ~~raw materials~~2012.

~~Gross~~Other profit for the three months ended March 31, 2013 decreased by approximately 86.8% to US $ 261,790 from US $1,983,271 for the three months ended March 31, 2012. Gross profit margin for the three months ended March 31, 2013 was 21.3% compared to 22.1% for the three months ended March 31, 201. The decrease in profit margin was mainly attributed to the reduction in the gross margin derived from the decline in demand of products and the increase in relative mix of sales of lower profit margin products.Income/Expense

~~Operating~~We ~~Expenses~~recorded other expenses of US $5 attributable to the refund of rental of store. The interest costs for the three months ended June 30, 2013 were US $ 107,207, representing an increase of 14 times over interest costs of US $7,495 for the three months ended June 30, 2012 because the company had more loan that it had in June 30, 2012.

~~The~~Other ~~operating~~Comprehensive expenses for the three months ended March 31, 2013 were US $325,813, representing an increase of 46.7% over operating expenses of US $222,053 for the three months ended March 31, 2012. The largest component of operating expenses is attributable to selling, general and administrative (“SG&A”) expense consisting primarily of administrative expenses. The SG&A expenses for the three months ended March 31, 2013 were US $ 230,207, representing an increase of 15% over SG&A expenses of US $199,805 for the three months ended March 31, 2012. The increase is primarily due to an increase in wages, welfares and consulting fees in first quarter in 2013, comparing to the same period in 2012.Income/Loss

~~Other~~For ~~Income/Expense~~the three months ended June 30, 2013, we had a total other comprehensive income of US $ 199,982, compared to other comprehensive loss of US $88,483 for the three months ended June 30, 2012. The change in total other comprehensive income (loss) was due primarily related to foreign currency translation between RMB and USD.

WeImpact ~~recorded other expenses~~ of US $5 attributable to the refund of rental of store. The interest costs for the three months ended March 31, 2013 were US $ 95,606, representing an increase of 3.3times over interest costs of US $ 22,248 for the three months ended March 31, 2012, because the company had more loans than it had in March 31, 2012.Inflation

~~Other~~We ~~Comprehensive~~believe ~~Income/Loss~~that inflation has had a negligible effect on operations for the three months ended June 30, 2013. The inflation rate in the Sichuan Province has been lower than the average national inflation rate for China. In the second quarter of 2013, the TCM market inflation was relatively in a stable condition.

For the three months ended March 31, 2013, we had a total other comprehensive income of US $ 77,898, compared to other comprehensive income of US $ 15,988 for the three months ended March 31, 2012. The change in total other comprehensive income (loss) was due primarily related to foreign currency translation between RMB and USD.Taxes

~~Impact~~According to the Corporate Income Tax Law of ~~Inflation~~China, companies without any tax abatement programs are charged at a 25% income tax rate. There is no credit for income tax for the three months ended June 30, 203 and the income tax for the three months ended June 30, 2013 were US $0 while the income tax for the same period ending June 30, 2012 were US $280,281.

~~We believe that inflation has had a negligible effect on operations for the three months ended March~~ 31, 2013. The inflation rate in the Sichuan Province has been lower than the average national inflation rate for China. In the first quarter of 2013, the TCM market inflation was relatively in a stable condition.

~~Taxes~~Net Income/Loss

~~According~~We tohad net loss for the ~~Corporate~~three ~~Income~~months ~~Tax~~ended June ~~Law~~30, 2013 of ~~China~~US $220,727, ~~companies without~~while ~~any~~net ~~tax~~income ~~abatement~~for ~~programs~~the ~~are~~three ~~charged~~months atended aJune ~~25%~~30, ~~income~~2012 ~~tax~~of ~~rate.~~were ~~There~~US is$832,843. noThe ~~credit~~decrease ~~for~~in our net income ~~tax~~ for the ~~three~~period ~~months~~ ended ~~March~~June 3130, 2013 ~~while~~is ~~income~~attributable ~~tax~~principally to an increased cost of ~~for~~operation, cost of good combined with the ~~three~~reduction ~~months~~in ~~ended~~sales ~~March~~especially 31in the non-branded TCM raw products and general and selling, ~~2012~~general ~~were~~and USadministrative expense. ~~$444~~However the company believes through advertisement,~~687~~ an increase in awareness, along with focus on branded product net income can be increased. We are working to strengthen our internal management processes and to grow our sales revenues by expanding our product line, while maintaining an efficient cost structure. However, there can be no assurance that we will achieve or maintain continuing profitability, or that revenue growth will continue in the future.

~~Net~~Six ~~Income/Loss~~Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012

WeBalance had net loss for the three months ended March 31, 2013 of US $64,028, while net income for the three months ended March 31, 2012 of were US $1,316,530. The decrease in our net income for the period ended March 31, 2013 is attributable principally to an increased cost of operation, cost of good combined with the reduction in sales especially in the non-branded TCM raw products. However the company believes through advertisement, an increase in awareness, along with focus on branded product net income can be increased. We are working to strengthen our internal management processes and to grow our sales revenues by expanding our product line, while maintaining an efficient cost structure. However, there can be no assurance that we will achieve or maintain continuing profitability, or that revenue growth will continue in the future.Sheet

Our total assets increased by US $440,553 for the six months month ending June 30, 2013 to US $26,271,757 from December 31, 2012 which were US $25,831,204. Total liabilities increased by US 447,423 to US $12,897,089 for the six months period ended June 30, 2013 from US $12,449,666 as of December 31, 2012. Those changes are principally due to an increase of prepayment for land usage, inventory, accounts payable and accrued liabilities, other payable, due to shareholder, taxes payable and short-term loan payable.

Liquidity and Capital Resources

Balance Sheet	June 30, 2013 (USD)		December 31, 2012 (Audited) (USD)
Total Assets	$	26,271,757	$	25,831,204
Total Liabilities	$	12,897,089	$	12,449,666
Net Assets	$	13,374,668	$	13,381,538

~~Liquidity~~Results ~~is the ability~~ of a company to generate adequate amounts of cash to meet its needs for cash. As of March 31, 2013, we had cash and cash equivalents of $1,043,304, substantially almost all of which is located in financial institutions in China. The following table provides detailed information about our net cash flow for financial statement periods presented in this report:Operations

~~Summary~~The following table presents the unaudited consolidated results of ~~Cash~~operations ~~Flow~~of ~~Statements~~the ~~(USD)~~Company for the six months ended June 30, 2013 as compared to the results of operations for the six months ended June 30, 2012.

	For the three months ended
	March 31
	2013			2012
	Unaudited			Unaudited
Net cash provided by operating activities	$	(236,262	)	$	1,316,530
Net cash used in investing activities		(22,273	)		-
Net cash provided by financing activities		-			(475,564	)
Effect of foreign currency translation on cash and cash equivalents		6,690			1,218
Net increase (decrease) in cash and cash equivalent	$	(251,845	)	$	433,056

Cash flows used in operating activities were US $(236,262) during the first quarter ended on March 31, 2013, compared to cash flows of US $907,402 used in operating activities during the quarter ended March 31, 2012. This was due to a net loss of $64,028 for the three months ended March 31, 2013 from a net income of US $1,316,530 for the three months ended March 31, 2012. Net expenditures for inventory were US $101,092 for the three months ended March 31, 2013 compared to US $158,917 for the three months ended March 31, 2012. There was a decrease of US $800,643 in accounts receivable to US $(616,977) for the three months ended March 31, 2013 from US $183,666 for the three months ended March 31, 2012. Accounts payable and accrued liabilities increased to US $64,117 for the three months ended March 31, 2013 from US $(22,046) for the three months ended March 31, 2012. Taxes Payable decreased to US $ (18,887) for the three months ended March 31, 2013 from US $579,718 for the three months ended March 31, 2012.

	For the Six Months Ended June 30 (USD)
	2013			2012

Revenue	$	3,164,356		$	15,260,561
Cost of Sales		2,512,927			11,863,616
Gross Profit		651,429			3,396,945
Selling, General, and Administrative		733,366			492,859
Interest Expenses		202,813			29,743
Total Operating Expenses		936,179			522,602
Operating Income(Loss)		(284,750	)		2,874,343
Other Income(expenses)		-			(1	)
Provision(Credit) Income Tax		-			724,968
Net Income (Loss)		(284,750	)		2,149,373
Other Comprehensive Income		277,880			(72,495	)

Total comprehensive income (Loss)	$	(6,870	)	$	2,076,879

~~Cash flows used in investing activities was US $(22,273) for the three months ended March 31, 2013, compared to $0 for the three months ended March 31, 2012.~~Revenues

~~There~~Our ~~was~~revenues nofor ~~cash~~the ~~flows~~six ~~provided~~months byended ~~financing activities for~~June ~~the~~30, ~~three~~2013 ~~months~~were ~~ended~~US ~~March~~$ 313, ~~2013~~164,356, ~~compared~~a todecrease of 79% over revenues of US $~~(475~~15,~~564)~~260,561 for the ~~three~~six months ended ~~March~~June 3130, 2012. The decrease in sales revenues was due primarily to the decrease in demand for non-branded raw products and the Yishen capsule. This reduction in sales is within a broader slowdown in demand for China’s TCM market. Management considers the long term trend remains intact but the softening of China’s market has had an effect in our sales. This softening in demand contributed to a significant reduction in the volume of sales in raw TCM herbs and Yinshen capsules. The company also faced in period an increase in competition of non-branded products and in particular for raw non-branded products. Our sales arrangements are not subject to any warranties. In this period, TCM prices including DAR retail prices decreased due to the macro TCM market condition.

InCost July, 2011, the Company subsidiary corporation, Suining Shi Yinfa Bai Zhi Chan Ye You Xian Gong Si (“Yinfa”), entered into an unsecured long-term loan agreement with unrelated party Wang Lijun (Wang Lijun Loan). Wang Lijun Loan provides the amount of ~~for~~Sales; ~~2,000,000~~Gross ~~RMB, ($317,405 USD) for a term from July 1, 2011 to May 13, 2014 at fixed annual interest rate of 24 %, with interest is payable monthly.~~Profit

InCost ~~July,~~of ~~2012,~~sales ~~the~~are ~~Company~~expenses ~~subsidiary~~directly ~~corporation, Suining~~related ~~Shi~~to ~~Yinfa~~manufacturing ~~Bai~~and ~~Zhi~~selling ~~Chan~~our Yeproducts, ~~You~~including ~~Xian~~costs ~~Gong~~of Siraw ~~(“Yinfa”),~~materials ~~entered~~purchased ~~into~~from afarmers, ~~short-term~~product ~~loan~~delivery ~~agreement~~and ~~with Shanghai Pudong~~direct ~~Development~~labor ~~Bank (“Bank Loan”)~~cost. The ~~Bank~~cost ~~Loan provides the amount~~ of ~~for~~sales ~~10,000,000 RMB, ($1,587,024USD)~~ for athe ~~term from~~six ~~July~~months ~~13,~~ended ~~2012~~June ~~to July 12~~30, 2013 atwere aUS ~~fixed annual interest rate of 6.48 %~~$2, ~~with interest is payable monthly. As part of this transaction~~512,927, ~~the~~representing ~~Company entered into~~ a ~~bank~~decrease ~~loan security agreement (“Bank Collateral Agreement”) which provide for the collateralization~~ of ~~its~~79% ~~office~~over ~~building located at ground floor,~~ the cost ~~2nd floor and the 3 rd floor~~ of ~~the~~sales ~~Estate Management Building~~ of ~~Yinhejiayuan~~US ~~(address: No. 188 Xishan Road~~$11,863,616 ~~Suining.~~for ~~A second short-term loan under~~ the ~~same~~six ~~collateral~~months ~~agreements was~~ended ~~executed~~June ~~in August of 2012 10~~30,~~000,000~~ ~~RMB, ($1,587,024USD) bearing 6~~2012.6% ~~interest~~The ~~with~~decreased acosts ~~term~~ of ~~August~~sales ~~17,~~and ~~2012~~comparatively tolower ~~August~~gross ~~16,~~profit ~~2013.~~rate Awere ~~third~~principally ~~short-term~~due ~~loan~~to ~~under~~ the ~~same~~decline ~~collateral agreements was executed~~ in ~~September~~demand of ~~2012~~products ~~10,000,000~~and ~~RMB,~~increase ~~($1,587,024 USD)~~in ~~bearing~~the ~~6.6%~~price ~~interest with a term~~ of ~~September~~other ~~19,~~raw ~~2012 to September 18, 2013~~materials.

31Gross profit for the six months ended June 30, 2013 decreased by approximately 81% to US $ 651,429 from US $3,396,945 for the six months ended June 30, 2012. Gross profit margin for the six months ended June 30, 2013 was 21% compared to 22% for the six months ended June 30, 2012. The decrease in profit margin was mainly attributed to the reduction in the gross margin derived from the decline in demand of products and the increase in relative mix of sales of lower profit margin products.

InOperating October, 2012, the Company subsidiary corporation, Suining Shi Yinfa Bai Zhi Chan Ye You Xian Gong Si (“Yinfa”), entered into an unsecured short-term loan agreement with unrelated party Wang Li (Wang Li Loan). Wang Li Loan provides the amount of for 2,000,000 RMB, ($317,405 USD) for a term from October 1, 2012 to September 30, 2013 at fixed annual interest rate of 24 %, with interest is payable monthly.Expenses

~~Overall~~The operating expenses for the six months ended June 30, we2013 ~~have~~were ~~funded~~US ~~our~~$936,179, ~~cash~~representing ~~needs~~an ~~from~~increase ~~inception~~of ~~through~~79% over operating expenses of US $522,602 for the six months ~~September~~ended June 30, 2012. ~~with~~The alargest ~~series~~component of ~~debt~~operating ~~and~~expenses ~~equity~~is ~~transactions~~attributable to selling, general and administrative (“SG&A”) expense consisting primarily ~~with~~of ~~related~~administrative ~~parties~~expenses. IfThe weSG&A ~~are~~expenses ~~unable~~for tothe ~~receive additional~~six ~~cash~~months ~~from~~ended ~~our~~June ~~related parties~~30, we2013 ~~may~~were ~~need~~US to$733,366, representing ~~rely~~an onincrease ~~financing~~of ~~from~~49% ~~outside~~over ~~sources~~SG&A ~~through~~expenses ~~debt~~of orUS ~~equity~~$492,859 ~~transactions. Our~~for ~~related~~the ~~parties~~six ~~are~~months ~~under~~ended noJune ~~legal~~30, ~~obligation~~2012. toThe ~~provide~~increase usis ~~with~~primarily due ~~capital~~to ~~infusions.~~an ~~Failure~~increase toin ~~obtain~~allowance ~~such~~of ~~financing~~bad ~~could have~~debt asecond ~~material~~quarter ~~adverse~~in ~~effect~~2013, oncomparing ~~operations~~to ~~and~~the ~~financial~~same ~~condition~~period in 2012.

WeOther ~~had cash of US $1,043,304 on hand for the three months ended March 31, 2013, a decrease of US $251,845 from the beginning of the year of 2013. A significant part of accounts receivable was paid off.~~Income/Expense

OnThe ainterest ~~long-term~~costs ~~basis,~~for ~~our~~the ~~liquidity~~six ismonths ~~dependent on continuation~~ended ~~and~~June ~~expansion of our operations~~30, ~~receipt~~2013 ofwere ~~revenues~~US $202,813, ~~and~~representing ~~additional~~an ~~infusions~~increase of ~~capital~~7 ~~and~~times ~~debt~~over ~~financing.~~interest ~~Our~~costs ~~current~~of ~~capital and~~US ~~revenues~~$29,743 ~~are insufficient to fund such expansion. Modifications to our business plans may require additional capital~~ for ~~us to operate. For example, if we are unable to raise additional capital in~~ the ~~future~~six wemonths ~~may need to curtail our number of product~~ended ~~offers~~June or30, ~~limit~~2012 ~~our~~because ~~marketing efforts to~~ the ~~most~~company ~~profitable~~had ~~geographical~~more ~~areas.~~loan ~~This~~that ~~may~~it ~~result~~had in ~~lower~~June ~~revenues and market share for us. In addition~~30, ~~there can be no assurance that additional capital will be available to us when needed or available on terms favorable to us~~2012.

Demand for our products and services will be dependent on, among other things, market acceptance of our products, the Chinese TCM in general, and general economic conditions, which are cyclical in nature. A major portion of our activities is the receipt of revenues from the sales of our products, our business operations may be adversely affected by our competitors and prolonged recessionary periods.33

~~Our~~Other ~~success~~Comprehensive will be dependent upon implementing our plan of operations and the risks associated with our business plans. We manage the processing and DAR distribution business to retail consumers and wholesale buyers. We plan to strengthen our position in these markets and to expand our operations through aggressively marketing our products and our concept. Income/Loss

~~Off-Balance~~For ~~Sheet~~the ~~Arrangements~~six months ended June 30, 2013, we had a total other comprehensive income of US $ 277,880, compared to other comprehensive loss of US $72,495 for the six months ended June 30, 2012. The change in total other comprehensive income (loss) was due primarily related to foreign currency translation between RMB and USD.

~~There~~Impact are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of ~~operations, liquidity, capital expenditures or capital resources that is material to shareholders.~~Inflation

We ~~have~~believe ~~not~~that ~~entered~~inflation ~~into~~has ~~any~~had ~~other~~a ~~financial~~negligible ~~guarantees~~effect oron operations ~~other~~for ~~commitments to guarantee~~ the ~~payment~~six ~~obligations~~months ofended ~~any~~June ~~third~~30, ~~parties~~2013. WeThe ~~have~~inflation ~~not~~rate ~~entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected~~ in ~~our~~the ~~consolidated~~Sichuan ~~financial statements.~~Province ~~Furthermore,~~has webeen dolower ~~not~~than ~~have~~the ~~any~~average ~~retained~~national ~~or contingent interest in assets transferred to an unconsolidated entity~~inflation ~~that~~rate ~~serves~~for ~~as credit, liquidity or market risk support to such entity~~China. WeIn dothe ~~not~~first ~~have~~and ~~any~~second ~~variable~~quarter ~~interest~~of ~~in any unconsolidated entity that provides financing~~2013, ~~liquidity,~~the TCM market ~~risk~~inflation orwas ~~credit~~relatively ~~support to us or engages~~ in ~~leasing,~~a ~~hedging~~stable ~~or research and development services with us~~condition.

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~Taxes

~~Not~~According ~~required~~to ~~pursuant~~the toCorporate ~~Item~~Income ~~305(e)~~Tax Law of ~~Regulation~~China, ~~S-K~~companies without any tax abatement programs are charged at a 25% income tax rate. There is no credit for income tax for the six months ended June 30, 2013 and the income tax for the six months ended June 30, 2013 were US $0 while the income tax for the same period ending June 30, 2012 were US $724,968.

~~Item~~Net ~~4. Controls and Procedures~~Income/Loss

~~Disclosure~~We ~~Controls~~had net loss for the six months ended June 30, 2013 of US $284,750, while net income for the six months ended June 30, 2012 of were US $2,149,373. The decrease in our net income for the period ended June 30, 2013 is attributable principally to an increased cost of operation, cost of good combined with the reduction in sales especially in the non-branded TCM raw products and ~~Procedures~~allowance of bad debt. However the company believes through advertisement, an increase in awareness, along with focus on branded product net income can be increased. We are working to strengthen our internal management processes and to grow our sales revenues by expanding our product line, while maintaining an efficient cost structure. However, there can be no assurance that we will achieve or maintain continuing profitability, or that revenue growth will continue in the future.

~~Under~~Liquidity ~~the supervision~~ and ~~with~~Capital the participation of our management, including our principal executive officer (who is also our Chief Executive Officer) and principal financial officer (who is also our Chief Financial Officer), we conducted an evaluation of the effectiveness, as of March 31, 2013, of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are not effective due to the material weakness and significant deficiency in internal controls over financial reporting described below.Resources

32Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. As of June 30, 2013, we had cash and cash equivalents of $1,010,587, substantially almost all of which is located in financial institutions in China. The following table provides detailed information about our net cash flow for financial statement periods presented in this report:

~~Disclosure~~Summary ~~controls~~of ~~and~~Cash ~~procedures~~Flow ~~are~~Statements designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.(USD)

The material weakness and significant deficiency identified by our management as of March 31, 2013 relates to the ability of the Company to record transactions and provide disclosures in accordance with U.S. GAAP. We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of U.S. GAAP commensurate with our financial reporting requirements. For example, our staff members do not hold licenses such as Certified Public Accountant in the U.S., have not attended U.S. institutions for training as accountants, and have not attended extended educational programs that would provide sufficient relevant education relating to U.S. GAAP. Our staff needs substantial training to meet the demands of a U.S. public company and our staff’s understanding of the requirements of U.S. GAAP-based reporting is inadequate.

	For the six months ended
	June 30
	2013 Unaudited			2012 Audited
Net cash (used in) provided by operating activities	$	(284,647	)	$	469,488
Net cash used in investing activities		(22,397	)		-
Net cash provided by financing activities		-			221,979
Effect of foreign currency translation on cash and cash equivalents		22,482			(2,879	)
Net increase in cash and cash equivalent	$	284,562		$	688,588

~~Remediation~~Cash ~~Initiative~~flows used in operating activities were US $284,647 during the six months ended on June 30, 2013, compared to US$ 469,488 of net cash provided from the operating activities during the period ended June 30, 2012.

We previously began to provide U.S. GAAP training sessions to our accounting team and intend to increase the amount of training that each member of our accounting team receives. The training sessions will be organized to help our corporate accounting team gain experience in U.S. GAAP reporting and to enhance their awareness of new and emerging pronouncements with potential impact over our financial reporting.34

~~Inherent~~This ~~Limitations~~was ~~Over~~due ~~Internal~~to ~~Controls~~a decrease of US $1,864,623 in net profit of US $284,750 for the six months ended June 30, 2013 from a net income of US $2,149,373 for the six months ended June 30, 2012. Net expenditures for inventory were US $1,775,266 for the six months ended June 30, 2013 compared to US $2,393,181 for the six months ended June 30, 2012. There was a decrease of US $596,733 in accounts receivable to US $(202,957) for the six months ended June 30, 2013 from US $393,776 for the six months ended June 30, 2012. Accounts payable and accrued liabilities decrease to US $2,316 for the six months ended June 30, 2013 from US $53,225 for the six months ended June 30, 2012. Taxes Payable decrease to US $(8,246) for the six months ended June 30, 2013 from US $846,046 for the six months ended June 30, 2012.

~~Our~~Cash ~~internal~~flows ~~control~~used ~~over~~in ~~financial~~investing ~~reporting~~activities iswas ~~designed~~US ~~to provide~~$22,397 ~~reasonable~~for ~~assurance regarding~~ the six ~~reliability~~months ofended ~~financial~~June ~~reporting~~30, ~~and~~2013, ~~the~~compared ~~preparation~~to of$0 ~~financial statements~~ for ~~external~~ ~~purposes~~the insix ~~accordance~~months ~~with~~ended ~~U.S.~~June ~~GAAP.~~30, ~~Our internal control over financial reporting includes those policies and procedures that:~~2012.

~~(i)~~Cash ~~pertain~~flows toprovided from financing activities was US $0 for the ~~maintenance~~six ofmonths ~~records~~ended ~~that~~June 30, in2013, ~~reasonable~~compared ~~detail~~to US $221,979 ~~accurately~~of ~~and~~net ~~fairly~~cash ~~reflect~~provided from the ~~transactions~~financing ~~and~~activities ~~dispositions~~for ofthe ~~our~~six ~~assets;~~months ended June 30, 2012.

~~(ii)~~In ~~provide~~July, ~~reasonable~~2011, ~~assurance~~the ~~that~~Company ~~transactions~~subsidiary ~~are~~corporation, Suining ~~recorded~~Shi asYinfa ~~necessary~~Bai toZhi ~~permit~~Chan ~~preparation~~Ye ofYou ~~financial~~Xian ~~statements~~Gong inSi ~~accordance~~(“Yinfa”), entered into an unsecured long-term loan agreement with unrelated Uparty Wang Lijun (Wang Lijun Loan).S. ~~GAAP~~Wang Lijun Loan provides the amount of for 2,000,000 ~~and~~RMB, ~~that~~($317,405 ~~our~~USD) ~~receipts~~for ~~and~~a ~~expenditures~~term from ~~are~~July ~~being~~1, ~~made~~2011 ~~only~~to inMay ~~accordance~~13, ~~with~~2014 ~~authorizations~~at fixed annual interest rate of ~~our~~24 ~~management~~%, ~~and~~with ~~directors;~~interest ~~and~~is payable monthly.

In July, 2012, the Company subsidiary corporation, Suining Shi Yinfa Bai Zhi Chan Ye You Xian Gong Si (~~iii~~“Yinfa”), ~~provide~~entered ~~reasonable~~into ~~assurance~~a ~~regarding~~short-term ~~prevention~~loan oragreement ~~timely~~with ~~detection~~Shanghai Pudong Development Bank (“Bank Loan”). The Bank Loan provides the amount of ~~unauthorized~~for ~~acquisition~~10,000,000 ~~use~~RMB, or($1,587,024USD) ~~disposition~~for a term from July 13, 2012 to July 12, 2013 at a fixed annual interest rate of ~~our~~6.48 ~~assets~~%, ~~that~~with ~~could~~interest ~~have~~is payable monthly. As part of this transaction, the Company entered into a ~~material~~bank ~~effect~~loan onsecurity agreement (“Bank Collateral Agreement”) which provide for the ~~financial~~collateralization ~~statements~~of its office building located at ground floor, the 2nd floor and the 3 rd floor of the Estate Management Building of Yinhejiayuan (address: No. 188 Xishan Road, Suining. A second short-term loan under the same collateral agreements was executed in August of 2012 10,000,000 RMB, ($1,587,024USD) bearing 6.6% interest with a term of August 17, 2012 to August 16, 2013. A third short-term loan under the same collateral agreements was executed in September of 2012 10,000,000 RMB, ($1,587,024 USD) bearing 6.6% interest with a term of September 19, 2012 to September 18, 2013.

~~Management,~~In ~~including our principal executive officer and principal financial officer~~October, ~~does not expect that our internal controls will prevent or detect all errors and all fraud. A control system~~2012, no ~~matter how well designed and operated, can provide only reasonable, not absolute, assurance that~~ the ~~objectives~~Company ~~of the control~~subsidiary ~~system are met. Further~~corporation, ~~the~~Suining ~~design~~Shi ofYinfa aBai ~~control~~Zhi ~~system~~Chan ~~must~~Ye ~~reflect~~You ~~the~~Xian ~~fact~~Gong ~~that~~Si ~~there~~(“Yinfa”), ~~are~~entered ~~resource~~into ~~constraints,~~an ~~and~~unsecured ~~the~~short-term ~~benefits~~loan ofagreement ~~controls~~with ~~must~~unrelated beparty ~~considered~~Wang ~~relative~~Li to(Wang ~~their~~Li ~~costs~~Loan). ~~Because~~Wang ofLi ~~the~~Loan ~~inherent~~provides ~~limitations~~the inamount ~~all~~of ~~control~~for ~~systems~~2,000,000 ~~no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud~~RMB, ~~if any~~($317,405 ~~have~~USD) ~~been detected.~~for ~~Also,~~a ~~any~~term ~~evaluation~~from ofOctober ~~the~~1, ~~effectiveness~~2012 ~~of controls in future periods are subject~~ to ~~the~~September ~~risk~~30, ~~that~~2013 ~~those~~at ~~internal~~fixed ~~controls~~annual ~~may become~~interest ~~inadequate~~rate ~~because~~ of ~~changes in business conditions~~24%, ~~or that the degree of compliance~~ with ~~the~~interest ~~policies~~is orpayable ~~procedures may deteriorate~~monthly.

~~Changes~~Overall, inwe ~~Internal~~have ~~Control~~funded ~~over~~our ~~Financial~~cash ~~Reporting~~needs from inception through June 30, 2013 with a series of debt and equity transactions, primarily with related parties. If we are unable to receive additional cash from our related parties, we may need to rely on financing from outside sources through debt or equity transactions. Our related parties are under no legal obligation to provide us with capital infusions. Failure to obtain such financing could have a material adverse effect on operations and financial condition.

~~There~~We ~~was~~had nocash ~~change~~of inUS ~~our~~$1,010,587 ~~internal~~on ~~control~~hand ~~over~~for ~~financial reporting that occurred during~~ the ~~period~~six ~~covered~~months byended June ~~this Quarterly Report on Form 10-Q that has materially affected~~30, ~~or is reasonably likely to materially affect~~2013, ~~our~~a ~~internal~~decrease ~~control over financial reporting. We are aware that any system~~ of ~~controls, however~~US ~~well designed and operated~~$284,562 ~~can~~from ~~only provide reasonable, and not absolute, assurance that~~ the ~~objectives~~beginning of the ~~system are~~year ~~met, and that maintenance~~ of ~~disclosure controls and procedures is an ongoing process that may change over time~~2013.

33On a long-term basis, our liquidity is dependent on continuation and expansion of our operations, receipt of revenues, and additional infusions of capital and debt financing. Our current capital and revenues are insufficient to fund such expansion. Modifications to our business plans may require additional capital for us to operate. For example, if we are unable to raise additional capital in the future we may need to curtail our number of product offers or limit our marketing efforts to the most profitable geographical areas. This may result in lower revenues and market share for us. In addition, there can be no assurance that additional capital will be available to us when needed or available on terms favorable to us.

~~Part~~Demand IIfor our products and services will be dependent on, among other things, market acceptance of our products, the Chinese TCM in general, and general economic conditions, which are cyclical in nature. ~~OTHER~~ ~~INFORMATION~~A major portion of our activities is the receipt of revenues from the sales of our products, our business operations may be adversely affected by our competitors and prolonged recessionary periods.

~~Item 1. Legal Proceedings~~35

~~None~~Our success will be dependent upon implementing our plan of operations and the risks associated with our business plans. We manage the processing and DAR distribution business to retail consumers and wholesale buyers. We plan to strengthen our position in these markets and to expand our operations through aggressively marketing our products and our concept.

~~Item~~Off-Balance ~~1A.~~Sheet ~~Risk Factors~~Arrangements

~~Not~~There ~~required~~are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.

~~Item~~We 2.have ~~Unregistered~~not ~~Sales~~entered into any other financial guarantees or other commitments to guarantee the payment obligations of ~~Equity~~any ~~Securities~~third parties. We have not entered into any derivative contracts that are indexed to our shares and ~~Use~~classified ofas ~~Proceeds~~shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

~~None~~Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Item~~Not 3.required ~~Defaults~~pursuant ~~Upon~~to ~~Senior~~Item ~~Securities~~305(e) of Regulation S-K.

~~None~~Item 4. Controls and Procedures

~~Item~~Disclosure 4.Controls ~~Mine~~and ~~Safety Disclosures~~Procedures

~~Not~~Under ~~applicable~~the supervision and with the participation of our management, including our principal executive officer (who is also our Chief Executive Officer) and principal financial officer (who is also our Chief Financial Officer), we conducted an evaluation of the effectiveness, as of June 30, 2013, of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are not effective due to the material weakness and significant deficiency in internal controls over financial reporting described below.

~~Item~~Disclosure 5.controls ~~Other~~and ~~Information~~procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

~~None~~The material weakness and significant deficiency identified by our management as of June 30, 2013 relates to the ability of the Company to record transactions and provide disclosures in accordance with U.S. GAAP. We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of U.S. GAAP commensurate with our financial reporting requirements. For example, our staff members do not hold licenses such as Certified Public Accountant in the U.S., have not attended U.S. institutions for training as accountants, and have not attended extended educational programs that would provide sufficient relevant education relating to U.S. GAAP. Our staff needs substantial training to meet the demands of a U.S. public company and our staff’s understanding of the requirements of U.S. GAAP-based reporting is inadequate.

~~Item~~Remediation ~~6. Exhibits~~Initiative

~~(a)~~We ~~Exhibits~~previously began to provide U.S. GAAP training sessions to our accounting team and intend to increase the amount of training that each member of our accounting team receives. The training sessions will be organized to help our corporate accounting team gain experience in U.S. GAAP reporting and to enhance their awareness of new and emerging pronouncements with potential impact over our financial reporting.

Exhibit Number		Description of Exhibit
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
101		Interactive Data Files (XBRL).

34Inherent Limitations Over Internal Controls

~~SIGNATURES~~Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

~~Pursuant~~(i) pertain to the ~~requirements~~maintenance of ~~the~~records ~~Securities Exchange~~that, ~~Act~~in ofreasonable ~~1934~~detail, ~~the~~accurately ~~registrant~~and ~~has~~fairly ~~duly~~reflect ~~caused~~the ~~this~~transactions ~~report~~and todispositions beof ~~signed~~our ~~on its behalf by the undersigned, thereunto duly authorized.~~assets;

	China Health Resource, Inc.
May 20, 2013	By: /s/ Jiayin Wang
	Name: Jiayin Wang
	Title: Chief Executive Officer and Director

(ii)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

	China Health Resource, Inc.
May 20, 2013	By: /s/ Weihai Liu
	Name: Weihai Liu
	Title: Chief Financial Officer

(iii)

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

35Management, including our principal executive officer and principal financial officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We are aware that any system of controls, however well designed and operated, can only provide reasonable, and not absolute, assurance that the objectives of the system are met, and that maintenance of disclosure controls and procedures is an ongoing process that may change over time.

Part II. OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

Not required.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

On June 19, 2013, the Board of Directors approved a securities purchase agreement (the “Securities Purchase Agreement”) with certain accredited investor (the “Investor”) pursuant to which we issued the Investor an aggregate of 50,000,000 shares (the “Investor Shares”) of our common stock, par value $0.007 per share (“Common Stock”) in exchange for aggregate consideration of $350,000 (the “Private Placement”). The Company entered the Securities Purchase Agreement with the Investor on June 19, 2013.

The Securities Purchase Agreement allows for the sale of up to $350,000 of shares of Common Stock in one closing until July 19, 2013. The Securities Purchase Agreement contains representations, warranties and covenants of the Investors and us that are typical for transactions of this type.

The Investor Shares issued to the Investors were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act, provided by Section 4(2) and Regulation D (Rule 506) and Regulation S under the Securities Act. Each Investor was an accredited investor (as defined by Rule 501 under the Securities Act) and a non-U.S. persons, as defined in Rule 902(k) of Regulation S at the time of such Investor’s respective Private Placement. In addition, the Company’s shares will be issued without registration under Section 5 of the Securities Act in reliance on the exemption from registration contained in Section 4(2) of the Securities Act. Specifically, (1) the Company had determined that the Investor was knowledgeable and experienced in finance and business matters and thus they are able to evaluate the risks and merits of acquiring the Investor Shares; (2) the Investor had advised the Company that the Investor was able to bear the economic risk of purchasing the Company’s common stock; (3) the Company had provided the Investor with access to the type of information normally provided in a prospectus; and (4) the Company did not use any form of public solicitation or general advertising in connection with the issuance of the shares.

The foregoing summaries of the Securities Purchase Agreement are not complete, and are qualified in their entirety by reference to the full text of the agreements that were attached as exhibits to the Current Report on Form 8-K filed on June 25, 2013. Readers should review those agreements for a more complete understanding of the terms and conditions associated with this transaction.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

(a)

Exhibits

Exhibit Number		Description of Exhibit

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

101		Interactive Data Files (XBRL).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Health Resource, Inc.

August 30, 2013	By: /s/ Jiayin Wang
	Name: Jiayin Wang
	Title: Chief Executive Officer and Director

	China Health Resource, Inc.

August 30, 2013	By: /s/ Weihai Liu
	Name: Weihai Liu
	Title: Chief Financial Officer

Filing Compare · CHINA HEALTH RESOURCE, INC.