UNITED STATES SECURITIES AND EXCHANGE COMMISSION

~~SECURITIES~~Washington, ~~AND~~DC ~~EXCHANGE COMMISSION~~20549

Washington, D.C. 20549

FORM 10-K

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended: December 31, 2011
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
	For the transition period from ________ to _________

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Commission~~For ~~File~~the ~~Number:~~fiscal ~~000-50029~~year ended December 31, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _______________.

Commission File No. 000-50029

CHINA HEALTH RESOURCE, INC.

(Exact ~~name~~Name of Registrant as ~~specified~~ Specified in ~~its~~ Its Charter)

Delaware	73-1629948
DELAWARE		73-1629948
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

343 Sui Zhou Zhong Road

Suining City, Sichuan Province, P.R. China 629000

(Address of Principal Executive Offices, including zip code)

+(86-825) 239-1788

(~~Issuer~~Registrant’s Telephone Number, Including Area Code)

Securities registered ~~pursuant~~under to Section 12(b) of the Exchange Act: None

~~Title~~Securities ofregistered ~~each~~under ~~class~~Section ~~Name~~12(g) of ~~each~~the ~~exchange~~Exchange onAct: ~~which~~Ordinary ~~registered~~stock, ~~None~~par ~~Not~~value ~~Applicable~~$0.001 per share

~~Securities~~Indicate ~~registered~~by ~~pursuant~~check tomark ~~Section~~if the registrant is a well-known seasoned ~~12(g)~~issuer, as defined in Rule 405 of the Securities Act:. Yes¨Nox

~~Common~~Indicate ~~Stock~~by ~~$.001~~check ~~par~~mark ~~value~~if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨Nox

Indicate by check mark ifwhether the registrant is(1) has filed aall ~~well-known~~reports ~~seasoned~~required ~~issuer,~~to asbe ~~defined~~filed inby ~~Rule~~Section 13 ~~405~~or 15(d) of the Securities Exchange Act~~. Yes~~ of 1934 during the preceding 12 ~~☐ No~~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. YesxNo¨

Indicate by check mark if ~~the~~disclosure ~~registrant~~of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405) is not ~~required~~contained toherein, ~~file~~and ~~reports~~will ~~pursuant~~not be contained, to ~~Section~~the 13best of registrant’s knowledge, in definitive proxy or ~~15(d)~~information ofstatements ~~the~~incorporated ~~Exchange~~by ~~Act. Yes~~reference in Part ~~☐ No~~III of this Form ☒10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the ~~issuer~~registrant ~~(1)~~is ~~filed~~a ~~all~~large ~~reports~~accelerated filer, ~~required~~accelerated tofiler, bea ~~filed~~non-accelerated byfiler, ~~Section~~or 13a orsmaller 15reporting ~~(d)~~company. ofSee ~~the~~definitions ~~Exchange~~of ~~Act~~“large ~~during~~accelerated ~~the~~filer," ~~past~~"accelerated 12filer” ~~months~~and ~~(or~~"smaller ~~for~~reporting ~~such~~company" ~~shorter~~in ~~period~~Rule ~~that the registrant was required to file such reports), and (~~12b-2) ~~has~~of ~~been subject to such filing requirements for~~ the ~~past~~Exchange 90Act ~~days. Yes ☒ No ☐~~(check one):

~~Indicate by~~Large ~~check~~accelerated ~~mark~~filer if¨ ~~disclosure~~Accelerated offiler ~~delinquent~~¨ ~~filers pursuant to Item 405 of Regulation S~~Non-Kaccelerated isfiler ~~not~~¨ ~~contained~~(Do ~~herein, and will~~ not ~~be contained,~~check toif ~~the~~a ~~best~~smaller ofreporting ~~the~~company) ~~registrant’s~~Smaller ~~knowledge,~~reporting incompany ~~definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐~~x

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

~~Large~~As ~~accelerated~~of ~~filer~~December ☐31, 2012, ~~Accelerated~~there ~~filer~~were ☐177,435,953 ~~Non~~shares of the registrant’s Common Stock, par value $0.001, issued and outstanding, of which approximately 104,788,894 are held by non-~~accelerated~~affiliates ~~filer~~of ☐the ~~Smaller~~registrant. The ~~reporting~~aggregate ~~company~~market ☒value of securities held by non-affiliates is approximately $1,173,636 as of April 12, 2013, based upon the registrant’s closing bid price as quoted on the OTC Bulletin Board on April 12, 2013, of $0.0112 per share.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 31, 2011, there were 177,435,953 shares of the registrant’s Common Stock, par value $0.001, issued and outstanding, of which approximately 104,788,894 are held by non-affiliates of the registrant. The aggregate market value of securities held by non-affiliates is approximately $3,248,455 as of June 30, 2011, based upon the registrant’s closing bid price as quoted on the OTC Bulletin Board on June 30, 2011, of $0.031 per share.

Information related to our company, including certain reports filed with or furnished to the SEC, are available through our website (http://www.chinahealthresource.com). We are not including any information on our website as part of, or incorporating it by reference into, our Form 10-K.

CHINA HEALTH RESOURCE, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

DECEMBER 31, 2011

TABLE OF CONTENTS

		Page	~~Page~~
PART I
Item 1.	Business	~~Business~~1	2
Item 1A.	Risk Factors	~~Risk Factors~~8	7
Item 1B.	Unresolved Staff Comments	~~Unresolved Staff Comments~~8	7
Item 2.	Properties	~~Properties~~8	7
Item 3.	Legal Proceedings	~~Legal Proceedings~~9	8
Item 4.	Submission of Matters to a Vote of Security Holders	~~Submission of Matters to a Vote of Security Holders~~9	8
PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	~~Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities~~10	8
Item 6.	Selected Financial Data	~~Selected Financial Data~~10	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~11	9
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	~~Quantitative and Qualitative Disclosures about Market Risk~~19	14
Item 8.	Financial Statements and Supplementary Data	~~Financial Statements and Supplementary Data~~19	14
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~19	14
Item 9A.	Controls and Procedures	~~Controls and Procedures~~19	14
Item 9B.	Other Information	~~Other Information~~21	15
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~Directors, Executive Officers and Corporate Governance~~22	16
Item 11.	Executive Compensation	~~Executive Compensation~~24	18
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~27	21
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~Certain Relationships and Related Transactions, and Director Independence~~29	23
Item 14.	Principal Accountant Fees and Services	~~Principal Accounting Fees and Services~~29	23
PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~Exhibits and Financial Statement Schedules~~30	24
		Signatures	24
SIGNATURES		55
		Exhibit Index	25
EXHIBITS INDEX		56

~~Explanatory~~The ~~Notes~~statements contained in this Annual Report on Form 10-K that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business, which can be identified by the use of forward-looking terminology, such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the reader of the forward-looking statements that such statements, which are contained in this annual report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employee, and general business factors affecting our operations, markets, growth, services, products, licenses and other factors discussed in our other filings with the Securities and Exchange Commission ("SEC"), and that these statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing us, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.

InThese ~~this~~forward-looking ~~Annual~~statements ~~Report~~are onsubject ~~Form~~to ~~10-K~~numerous assumptions, ~~China~~risks ~~Health~~and ~~Resource,~~uncertainties ~~Inc~~that may cause our actual results to be materially different from any future results expressed or implied by us in those statements. Our actual results may differ significantly from those projected in the forward-looking statements. Factors isthat ~~sometimes~~might ~~referred~~cause or contribute to assuch ~~the~~differences ~~“Company”~~include, ~~“we”~~but are not limited to, ~~“our”~~those ordiscussed ~~“China~~in ~~Health~~Item ~~Resource,~~1- ~~Inc.”~~Business and Item 7 - Management’s Discussion and ~~U.S.~~Analysis ~~Securities~~of Financial Condition and ~~Exchange~~Results ~~Commission~~of isOperations. ~~sometimes~~You ~~referred~~are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the ~~“SEC”~~date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances taking place after the date of this document.

~~CAUTIONARY~~These ~~STATEMENTS~~risk ~~REGARDING~~factors ~~FORWARD~~should be considered in connection with any subsequent written or oral forward-~~LOOKING~~looking statements that we or persons acting on our behalf may issue. All written and oral ~~INFORMATION~~forward looking statements made in connection with this annual report that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Further, the information about our intentions contained in this document is a statement of our intention as of the date of this document and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and our assumptions as of such date. We may change our intentions, at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.

~~Except~~All ~~for~~references ~~historical~~in ~~information,~~ this ~~report~~Form ~~contains forward~~10-~~looking statements~~K ~~within~~ to the ~~meaning of Section 21E of the Securities Exchange Act of 1934~~“Company,” ~~as amended. Such forward-looking statements involve risks and uncertainties~~“CHRI,” including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the ~~words~~ “~~expect~~Registrant,” “~~anticipate~~we,” “~~intend,~~us” or “~~believe~~our” ~~and~~are ~~similar~~to ~~language. Our actual~~China ~~results~~Health ~~may~~Resource, ~~differ~~Inc., ~~significantly~~a ~~from~~Delaware ~~those projected in the forward-looking statements~~corporation. ~~Factors~~These ~~that~~terms ~~might~~also ~~cause~~refer, orwhere ~~contribute~~context requires, to ~~such~~our ~~differences~~subsidiary ~~include~~corporation, ~~but~~Suining ~~are~~Shi ~~not~~Yinfa ~~limited~~Bai ~~to,~~Zhi ~~those~~Chan ~~discussed~~Ye inYou ~~Item~~Xian 1-Gong ~~Business~~Si, ~~and~~a ~~Item 7 - Management’s~~corporation ~~Discussion~~organized and ~~Analysis~~existing ofunder ~~Financial~~the ~~Condition~~laws ~~and Results~~ of ~~Operations.~~the ~~You~~Peoples’ ~~are~~Republic ~~cautioned~~of ~~not~~China to(“Yinfa” ~~place~~or” ~~undue~~Yin ~~reliance on the~~Fa”), ~~forward-looking~~acquired ~~statements,~~in ~~which~~August ~~speak only as of the date of this report~~2006. WeAll ~~undertake~~references noin ~~obligation~~this toForm ~~publicly~~10-K ~~release any revisions~~ to the ~~forward-looking~~“PRC” ~~statements~~are orto ~~reflect events or circumstances taking place after~~ the ~~date~~Peoples’ Republic of ~~this document~~China.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

All references in this Form 10-K to the “Company,” “CHRI,” the “Registrant,” “we,” “us” or “our” are to China Health Resource, Inc., a Delaware corporation. These terms also refer, where context requires, to our subsidiary corporation, Suining Shi Yinfa Bai Zhi Chan Ye You Xian Gong Si, a corporation organized and existing under the laws of the Peoples’ Republic of China (“Yinfa”), acquired in August 2006. All references in this Form 10-K to the “PRC” are to the Peoples’ Republic of China.

PART I

Item 1. Business.

History

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 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~~ 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.

~~Our Business~~1

~~Since~~We ~~the~~are ~~completion~~engaged ofin the ~~Plan~~production, ~~of Exchange~~manufacturing ~~with~~and ~~Yinfa,~~distribution ~~our core business has been~~ in ~~pharmaceuticals~~China ~~and the continued operations~~ of ~~Yinfa.~~herbal ~~Yinfa~~pharmaceuticals isbased ~~a Chinese pharmaceutical company focused~~ on ~~producing, processing, and commercializing Dahurian Angelica Root (“DAR”), a popular~~ traditional Chinese medicine, ~~(“TCM”)~~which ~~and~~we ~~developing~~refer ~~DAR-related products~~ to ~~pharmaceutical~~herein ~~manufacturers~~as ~~and wholesale markets.~~ Traditional ~~DAR~~Chinese isMedicine, aor ~~popular~~TCM. ~~herb~~We ~~employed~~are ~~extensively~~based ~~as an ingredient~~ in ~~food, medicine and cosmetics for~~ the ~~treatment~~city of ~~pain~~Suining, ~~swelling and pustule. Suining City in~~ Sichuan Province, of China isand ~~the~~our ~~major~~operations ~~planting~~are ~~and~~exclusively ~~production area~~ in China. Our ~~for~~subsidiary ~~DAR~~Yinfa asis a ~~result~~Chinese ~~of the~~pharmaceutical ~~unique~~company ~~local~~focused ~~climate~~on ~~and soil properties. As mandated by the central government~~producing, ~~100%~~processing ofand ~~DAR~~commercializing ~~for~~TCM ~~pharmaceutical~~products to ~~use~~pharmaceutical inmanufacturers ~~China~~and ~~must~~wholesale ~~be produced with GAP standards in Suining by Yinfa, bearing the “Sichuan Angelica” trademark~~markets.

InOur ~~May~~products ~~2005,~~include weDahurian ~~applied for and obtained Good~~Angelica ~~Agricultural~~Root ~~Practice~~ (“~~GAP”) certification for~~ DAR~~, in cooperation with Sichuan Yinfa Resource Development Group Co. Ltd., our affiliate (“Yinfa Resource~~”)~~. The~~ ~~standards~~ which ~~must~~is bea ~~met~~popular toherb ~~obtain~~employed ~~GAP~~extensively ~~certification~~as ~~include the~~an ~~study~~ingredient ofin ~~our~~food, ~~environment~~medicine ~~quality including water~~ and ~~soil~~cosmetics ~~samples,~~for ~~seed~~the treatment ~~quality, use~~ of ~~pesticides~~pain, ~~and~~swelling ~~use of fertilizers. These standards were approved by the Chinese State Food~~ and ~~Drug Administration (the “SFDA”)~~pustule. Our ~~GAP~~products ~~farm~~are ~~production base~~developed ~~includes~~through ~~approximately~~extensive ~~133,334~~research ~~square meters of experimental planting fields,~~ and ~~1,333,340~~development ~~square~~efforts ~~meters~~to ~~of contracted farm~~determine ~~production~~effective ~~bases,~~uses ~~all~~for ~~of which have passed inspection by~~ the ~~SFDA,~~plants ongrown ~~February~~under ~~26,~~our ~~2006. The~~control ~~GAP~~and ~~standards~~cultivated ~~are inspected annually. The GAP certificate has been issued~~ in ~~name~~areas ofwhere ~~our~~unique ~~partner,~~local ~~Yinfa~~climates ~~Resource. The~~and ~~significance~~soil ~~of our exclusive~~properties ~~GAP~~result ~~certification~~in ~~for DAR demonstrates~~ the ~~high~~finest quality ~~standards of our DAR and DAR-related products~~.

InWe ~~2007,~~obtained ~~Yinfa~~Good ~~achieved~~Agricultural ~~a cooperation with~~Practice ~~the~~(“GAP”) ~~Sichuan~~certification ~~Province~~for ~~Suining~~our ~~City~~ DAR ~~Association~~products ~~(“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, Yinfa is entitled to receive 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% must be paid to the Association for related expenses. In addition, Yinfa is entitled to receive 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.

2Our Business

~~Currently,~~Since ~~raw-DAR~~the incompletion ~~both~~of ~~its~~the ~~original~~Plan ~~root~~of Exchange ~~form~~with ~~and~~Yinfa, ~~processed~~our ~~form~~core ~~(both~~business ~~sliced~~has been in pharmaceuticals and ~~powder)~~the iscontinued ~~one~~operations of Yinfa’s. ~~major~~Yinfa ~~products~~is a Chinese pharmaceutical company focused on producing, ~~which~~processing, isand ~~sold~~commercializing toDahurian ~~pharmaceutical~~Angelica ~~manufacturers~~ Root (~~80%~~“DAR”), ora ~~wholesalers~~popular traditional Chinese medicine (~~20%~~“TCM”). ~~Our~~and developing DAR-related ~~product~~products ~~includes~~to ~~Yisheng~~pharmaceutical ~~Capsule,~~manufacturers ~~which~~and ~~has~~wholesale ~~been~~markets. DAR ~~certified~~is bya popular herb employed extensively as an ingredient in food, medicine and cosmetics for the ~~SFDA~~treatment of pain, swelling and ~~sold~~pustule. toSuining City in Sichuan Province of China is the major planting and production area in China for DAR as a result ~~regional~~of ~~distributors~~the ~~throughout~~unique local climate and soil properties. As mandated by the central government, 100% of DAR for pharmaceutical use in China must be produced with GAP standards in Suining by Yinfa, bearing the “Sichuan Angelica” trademark.

In ~~addition~~May 2005, ~~this~~we ~~year~~applied ~~the~~for ~~Company~~and ~~has added~~obtained ~~Rhizoma~~Good ~~Gastrodia~~Agricultural Practice (“~~Gastrodia~~GAP”) ~~along~~certification for DAR, in cooperation with ~~various~~Sichuan ~~other~~Yinfa ~~raw~~Resource ~~TCM~~Development ~~products~~Group Co. Ltd., our affiliate (“Yinfa Resource”). The standards which must be met to obtain GAP certification include the ~~Company’s~~study ~~product~~of ~~offering~~our environment quality including water and soil samples, seed quality, use of pesticides, and use of fertilizers. These ~~Gastrodia~~standards were approved by the Chinese State Food and Drug Administration (the “SFDA”). Our GAP farm production base includes approximately 133,334 ~~along~~square ~~with~~meters ~~various~~of ~~other~~experimental ~~raw~~planting ~~TCM~~fields, ~~products~~and 1,333,340 square meters of contracted farm production bases, all of which have passed inspection by the SFDA, on February 26, 2006. The GAP standards are ~~sold~~inspected annually. toThe ~~pharmaceutical~~GAP ~~manufacturers~~certificate ~~(80%)~~has orbeen ~~wholesalers~~issued ~~(20%)~~in name of our partner, Yinfa Resource. The significance of our exclusive GAP certification for DAR demonstrates the high quality standards of our DAR and DAR-related products.

WeIn ~~believe~~2007, ~~our~~Yinfa ~~business~~achieved ~~model~~a ~~will~~cooperation with ~~help~~the ~~facilitate~~Sichuan Province Suining City DAR Association (“Association”) and received the exclusive rights to the “Sichuan Angelica” certified trademark from the ~~process~~Chinese State Administration of ~~growing~~Industry and ~~commercializing~~Commerce ~~DAR~~through December 13, as2016. As ~~well~~holder asof ~~further~~the ~~research~~rights ~~and~~to ~~development~~the trademark, Yinfa is entitled to receive a management fee of ~~DAR~~1RMB ~~and~~(or ~~DAR-related~~approximately ~~products~~US $0. 14) per Wekilogram ~~will~~of ~~continue~~DAR to(including ~~explore~~packaging fees) from any user of the ~~development~~trademark, of which 60% may be used by Yinfa for further development and ~~addition~~investment of its DAR inbusiness aand ~~range~~the ofremaining ~~foods,~~40% ~~medicines~~must ~~and~~be ~~cosmetics.~~paid to the Association for related expenses. In addition, Yinfa weis ~~continue~~ entitled to ~~consider~~receive ~~and~~100% ~~explore~~of ~~opportunities~~the torevenue ~~expand~~stream ~~our~~from ~~current~~the ~~asset~~use ~~base~~of ~~and~~the ~~product~~DAR ~~offerings~~trademark tothrough ~~increase~~December ~~our~~13, ~~revenues~~2016 and ~~enhance~~95% of ~~shareholder~~the ~~value~~revenue stream thereafter. ~~These~~There ~~opportunities~~are ~~may~~approximately ~~include~~235 regional certification trademarks in China, ~~but~~including 65 for natural resources, of which over 20 are ~~not~~for ~~limited~~natural herb resources. In addition to, ~~acquisitions~~the orDAR ~~licensing~~Association, ofin ~~additional~~2010, ~~products~~Yinfa ~~through~~received the exclusive alicense ~~combination~~to oruse ~~merger~~and ofmanage ~~Yinfa~~the ~~with~~“Sichuan ~~other~~Angelica” ~~Chinese~~trademark ~~companies~~by inthe ~~synergistic~~General orAdministration ~~complementary~~of ~~industries~~Quality Supervision, Inspection and Quarantine of People’s Republic of China.

Currently, raw-DAR in both its original root form and processed form (both sliced and powder) is one of Yinfa’s major products, which is sold to pharmaceutical manufacturers (80%) or wholesalers (20%). Our ~~Market~~DAR-related ~~Opportunity~~product includes Yisheng Capsule, which has been certified by the SFDA, and sold to regional distributors throughout China.

~~We believe that TCM presents a highly attractive opportunity for the following reasons.~~2

~~The~~In ~~trend towards organic materials. Since World War II~~addition, ~~traditional~~in ~~agricultural and organic agriculture~~2011, ~~has~~the ~~been~~Company ~~subject to extensive application of synthetic chemicals,~~has ~~such~~added asRhizoma ~~synthetic~~Gastrodia ~~fertilizers,~~(“Gastrodia”) ~~pesticides,~~along ~~herbicides,~~with ~~and~~various ~~mass-production~~other ~~techniques.~~raw ~~The~~TCM ~~advocacy~~products ofto ~~organic agriculture and~~ the ~~trend~~Company’s ~~for~~product ~~organic materials is recognized globally and is a strong part of the Chinese culture~~offering. ~~In addition, TCM represents~~ ~~a vast market in China and a growing market internationally. Different from modern chemical-intensive medication~~Gastrodia, ~~TCM~~along ~~relies~~with on various ~~natural~~other ~~herbs.~~raw ~~Naturalism~~TCM isproducts ~~the~~are ~~essence~~sold ofto ~~traditional~~pharmaceutical ~~Chinese~~manufacturers ~~herbal~~(80%) ~~theory~~or ~~and~~wholesalers ~~the functions of herbs have been studied and applied for thousands of years in China~~(20%).

~~Substantial~~We ~~markets. As~~believe ~~reported in~~our ~~Victoria~~business ofmodel ~~Australia~~will ~~State Government’s China Pharmaceutical Industry Report released in November 2010 by ChinaBio~~help ~~LLC,~~facilitate ~~from 2001 to 2008,~~ the ~~Chinese~~process ~~pharmaceutical industry grew at a compounded annual growth rate (CAGR)~~ of ~~20%.~~growing ~~Both Morgan Stanley~~ and ~~WiCON~~commercializing ~~predicted a sales increase of 16% in 2009. However~~DAR, ~~growth~~as ~~substantially~~well ~~exceeded~~as ~~expectations~~further ~~with~~research ~~sales increasing by 21.19%, along with output value~~ and ~~overall~~development ~~healthcare~~of ~~expenditures~~DAR ~~increasing by 21.02%~~ and ~~11%, respectively~~DAR-related products. We Inwill ~~2010,~~continue ~~WiCON predicts China’s drug sales~~ to ~~increase~~explore bythe ~~RMB~~development 20and ~~billion.~~addition ~~IMS~~of ~~expects~~DAR ~~that~~in ~~China will grow at~~ a ~~CAGR~~range of ~~21.8% from 2008 – 2013~~foods, ~~becoming~~medicines ~~the 3rd largest pharmaceutical market in the world by 2011~~ and ~~the 2nd largest by 2020, growing to US$220 billion~~cosmetics. In ~~As reported by China Medical News in 2008~~addition, ~~the~~we ~~global~~continue ~~trade~~to ~~volume~~consider ofand ~~TCM~~explore ~~increased~~opportunities ~~from approximately $140 billion in 2006~~ to ~~$154~~expand ~~billion~~our incurrent ~~2007,~~asset ~~with~~base ~~the~~and ~~global~~product ~~export~~offerings ~~volume increasing from approximately $110 billion~~ to ~~$118 billion in the same~~increase ~~period.~~our ~~(China~~revenues ~~Medical~~and ~~News,~~enhance ~~Vol.~~shareholder ~~23, p~~value.2 ~~Market~~These ~~Journal,~~opportunities ~~2008). Additionally,~~may ~~as governments and world bodies~~include, ~~such as~~but ~~the~~are ~~World~~not ~~Health~~limited ~~Organization, continue~~ to ~~accept TCM~~, ~~the~~acquisitions ~~number~~or licensing of ~~potential~~additional ~~customers~~products ~~continues~~through ~~to grow, as shown by the increasing trade volume and exports. We believe that we are in~~ a ~~position~~combination toor ~~take~~merger ~~advantage~~ of ~~the~~Yinfa ~~growing~~with ~~acceptance of~~other ~~TCM~~Chinese ~~through~~companies ~~the~~in ~~development~~synergistic ofor ~~our~~complementary ~~products~~industries.

Acceptance of GAP standards in China. Even though Chinese herbal theory has evolved over thousands of years, China did not play a key role historically in the global herbal medication market. This was due to a lack of standards for quality control of Chinese medicinal herbs. This situation has changed since GAP was adopted by China in 2003. GAP regulates controls at every stage of herb development from the ecological environment, germplasm and breeding, to cultivating, raising, collecting, transporting, packaging and quantitative administration. GAP is an essential step to implementing good manufacturing practice in the TCM industry because quality control begins with the planting of herbs. Our ~~exclusive~~Market ~~GAP certification and reputation for quality puts us in a unique position of market leadership.~~Opportunity

~~The~~We ~~raw~~believe ~~herb~~that ~~material~~TCM ispresents formed through different growing and production stages. Different germplasm, ecological environment, culture technology, and harvesting times and processing methods can all influence the output and quality of the herbs. Therefore, without adequate quality control, there can be significant risks when buying herbs from different sources in the market. For example, in the open market, herbs in the same genus but in different species are often confused and mixed together. Only a ~~specific species will have the most~~highly ~~active~~attractive ~~ingredients.~~opportunity ~~Our~~for ~~extensive quality control programs and unique growing conditions yield herbs with~~ the ~~highest~~following ~~level of active ingredients consistently~~reasons.

3The trend towards organic materials. Since World War II, traditional agricultural and organic agriculture, has been subject to extensive application of synthetic chemicals, such as synthetic fertilizers, pesticides, herbicides, and mass-production techniques. The advocacy of organic agriculture and the trend for organic materials is recognized globally and is a strong part of the Chinese culture. In addition, TCM represents a vast market in China and a growing market internationally. Different from modern chemical-intensive medication, TCM relies on various natural herbs. Naturalism is the essence of traditional Chinese herbal theory and the functions of herbs have been studied and applied for thousands of years in China.

~~Increasing~~Substantial markets. As ~~use~~reported in ~~combination~~Victoria ~~with~~of ~~Western~~Australia State Government’s China Pharmaceutical Industry ~~medicine. Social~~Report released ~~and~~in ~~demographic~~November ~~factors~~2010 ~~contribute~~by ChinaBio LLC, from 2001 to 2008, the Chinese pharmaceutical industry grew at a compounded annual growth rate (CAGR) of 20%. Both Morgan Stanley and WiCON predicted a sales increase of 16% in ~~the~~2009. However, ~~TCM~~growth ~~market~~substantially exceeded expectations with sales increasing by 21.19%, along with output value and ~~the~~overall healthcare ~~need~~expenditures ~~for~~increasing ~~new~~by 21.02% and 11%, ~~natural~~respectively. In 2010, WiCON predicts China’s drug sales to ~~therapies~~increase by RMB 20 billion. ~~TCM~~ isIMS expects that China will grow at a ~~supplement~~CAGR ~~for~~of ~~chemical-intensive~~21.8% ~~treatments~~from 2008 – 2013, ~~such~~becoming asthe ~~chemotherapy~~3rd largest pharmaceutical market in the world by 2011 and the 2nd largest by 2020, ~~due~~growing to ~~its~~US$220 ~~natural~~billion. ~~features~~As reported by ~~and~~China ~~functions~~Medical News in ~~strengthening~~2008, the ~~immune~~global ~~system.~~trade Involume ~~addition~~of TCM increased from approximately $140 billion in 2006 to $154 billion in 2007, with the ~~increased~~global ~~side~~export ~~effects~~volume ofincreasing ~~chemical-intensive~~from ~~treatments,~~approximately ~~we believe~~$110 ~~that~~billion ~~standard~~to ~~chemical-intensive~~$118 ~~treatment~~billion ~~regimens~~in ~~have~~the ~~several~~same ~~other~~period. ~~limitations~~(China Medical News, ~~including~~Vol. ~~multiple~~23, ~~daily~~p.2 ~~dosage~~Market ~~requirements~~Journal, 2008). Additionally, as governments and world bodies, such as the World ~~lengthy~~Health ~~treatment~~Organization, ~~periods~~continue to accept TCM, ~~limited~~the ~~effectiveness~~number of potential customers continues to grow, as shown by the increasing trade volume and ~~severe~~exports. According ~~side~~to ~~effects~~China News, ~~all~~as a result of ~~which~~the ~~may~~increasing ~~decrease~~wealth ~~patient~~of ~~compliance~~China and an aging population, ~~ultimately~~it is estimated that by 2015, China will be the second largest market in the world and the herbal ~~therapeutic~~medicine ~~efficacy~~production value will exceed more than $887 billion. We believe that we are in a position to take advantage of the growing acceptance of TCM through the development of our products.

Acceptance of GAP standards in China. Even though Chinese herbal theory has evolved over thousands of years, China did not play a key role historically in the global herbal medication market. This was due to a lack of standards for quality control of Chinese medicinal herbs. This situation has changed since GAP was adopted by China in 2003. GAP regulates controls at every stage of herb development from the ecological environment, germplasm and breeding, to cultivating, raising, collecting, transporting, packaging and quantitative administration. GAP is an essential step to implementing good manufacturing practice in the TCM industry because quality control begins with the planting of herbs. Our ~~Proprietary~~exclusive GAP~~-Certified~~ ~~DAR~~certification ~~Products~~and reputation for quality puts us in a unique position of market leadership.

AThe ~~GAP~~raw ~~certificate~~herb ~~means~~material ~~that~~is ~~the~~formed ~~planting,~~through ~~quality~~different growing and ~~manufacturing~~production ofstages. Different ~~DAR~~germplasm, ~~meets~~ecological aenvironment, ~~high~~culture technology, and ~~certifiable~~harvesting times ~~standard.~~and Weprocessing ~~are~~methods ~~confident~~can inall influence the output and quality of the herbs. Therefore, ~~and~~without ~~therefore~~adequate quality control, there can be significant risks when buying herbs from different sources in the market ~~for~~. For example, ~~our~~in ~~DAR~~the ~~products.~~open ~~Our~~market, herbs ~~process~~in the same genus but in ~~growing~~different ~~DAR~~species isare ~~certified~~often ~~according~~confused toand ~~GAP~~mixed together. ~~The~~Only ~~table~~a ~~below~~specific ~~highlights~~species ~~the~~will ~~standards~~have ~~which~~the ~~DAR~~most ~~products~~active ~~must~~ingredients. ~~meet~~Our toextensive bequality ~~GAP-certified~~control programs and unique growing conditions yield herbs with the highest level of active ingredients consistently.

~~Ingredients Constituting GAP DAR (State Food and Drug Administration, “Traditional Chinese Medicine Production Quality Administration Standard,” No. 32 Order.)~~3

No.	Ingredient		GAP DAR
1	Water		< 12.0%
2	Ash		< 6.0%
3	Insoluble Acid		< 2.0%
4	Heavy Metal	Lead	< 5.0mg/kg
		Cadmium	< 0.3mg/kg
		Mercury	< 0.2mg/kg
		Arsenic	< 2.0mg/kg
5	Pesticide	Residue Benzene hexachloride (BHC)	< 2%
		Gesarex	< 2%
		Terrachlor	< 1%
6	Microbes	Virus	< 30000unit/g
		Mucedine	< 100 unit/g
		Colibacillus	N/A
7	Extract		> 14.0%
8	Imperatorin & Alloisoimperatorin		> 0.16%
9	Total Coumarin		> 0.5%

Increasing use in combination with Western medicine. Social and demographic factors contribute to the growth in the TCM market and the need for new, natural therapies. TCM is a supplement for chemical-intensive treatments, such as chemotherapy, due to its natural features and functions in strengthening the immune system. In addition to the increased side effects of chemical-intensive treatments, we believe that standard chemical-intensive treatment regimens have several other limitations, including multiple daily dosage requirements, lengthy treatment periods, limited effectiveness and severe side effects, all of which may decrease patient compliance and, ultimately, therapeutic efficacy.

AsOur ~~mentioned~~Proprietary ~~above, the ecological environment is another important factor affecting the quality of DAR. The suitable environment for DAR is a warm and moist climate with medium~~GAP-~~dry soil.~~Certified Suining, where Yinfa is based, is located at the edge of the Sichuan basin, southwest China, covered by the subtropical climate belt. The annual mean temperature in this region is approximately 63.3°F, and annual rainfall is approximately 39.09 inches. In addition, the soil in this region contains abundant elements, such as potassium, phosphorus, and others, which is beneficial to the growth of herbs, such as DAR. Products

~~Marketing~~A ~~Strategy~~GAP certificate means that the planting, quality and manufacturing of DAR meets a high and certifiable standard. We are confident in the quality of, and therefore the market for, our DAR products. Our process in growing DAR is certified according to GAP. The table below highlights the standards which DAR products must meet to be GAP-certified.

WeIngredients ~~expect~~Constituting toGAP ~~use our proprietary technology in~~ DAR (State toFood ~~develop~~ and ~~commercialize more efficient, effective and convenient DAR products. To achieve this objective, our business~~Drug ~~model incorporates our self-owned production base~~Administration, ~~DAR~~“Traditional ~~associates,~~Chinese ~~farmers~~Medicine ~~and~~Production ~~research~~Quality ~~and~~Administration ~~development affiliates. We believe the business model will facilitate the growing process~~Standard,” ~~research and development, commercializing DAR, sales and marketing~~No. ~~Currently,~~ ~~our~~32 ~~DAR-related products include the Yisheng Capsule, Kimchee-Mate and Fragrant Bag, which have been certified by the SFDA and marketed through regional distributors throughout China~~Order. ~~Yinfa continues to explore the application for DAR in a range of food, medicine and cosmetics.~~)

In addition, we have adopted the following product development and commercialization strategies:

No.	Ingredient		GAP DAR
1	Water		< 12.0%
2	Ash		< 6.0%
3	Insoluble Acid		< 2.0%
4	Heavy Metal	Lead	< 5.0mg/kg
		Cadmium	< 0.3mg/kg
		Mercury	< 0.2mg/kg
		Arsenic	< 2.0mg/kg
5	Pesticide	Residue Benzene hexachloride (BHC)	< 2%
		Gesarex	< 2%
		Terrachlor	< 1%
6	Microbes	Virus	< 30000unit/g
		Mucedine	< 100 unit/g
		Colibacillus	N/A
7	Extract		> 14.0%
8	Imperatorin & Alloisoimperatorin		> 0.16%
9	Total Coumarin		> 0.5%

4As mentioned above, the ecological environment is another important factor affecting the quality of DAR. The suitable environment for DAR is a warm and moist climate with medium-dry soil. Suining, where Yinfa is based, is located at the edge of the Sichuan basin, southwest China, covered by the subtropical climate belt. The annual mean temperature in this region is approximately 63.3°F, and annual rainfall is approximately 39.09 inches. In addition, the soil in this region contains abundant elements, such as potassium, phosphorus, and others, which is beneficial to the growth of herbs, such as DAR.

~~Commercialize~~Marketing GAP DAR products. We plan to develop high quality DAR products certified by GAP, which may include DAR seeds to pharmaceutical factories as raw material, or DAR-related products. Such DAR-related products may include medicines used for the treatment of tension and cluster headaches, including migraines, along with other DAR-related products. We believe that our DAR and DAR-related products will be competitive in the marketplace due to our GAP certification and their increased efficacy over competing products.Strategy

~~Develop~~We ~~sales~~expect ~~and~~to ~~marketing~~use ~~functions~~our ~~across~~proprietary technology ~~multiple~~in DAR ~~products.~~to Wedevelop ~~have~~and acommercialize ~~long-range~~more ~~plan~~efficient, toeffective ~~build~~and aconvenient ~~pharmaceutical~~DAR ~~company~~products. toTo ~~take~~achieve ~~advantage~~this ofobjective, ~~the~~our ~~local resources~~business ofmodel ~~DAR~~incorporates ~~and~~our ~~develop~~self-owned ~~and~~production ~~commercialize~~base, DAR ~~and~~associates, ~~its~~farmers ~~related~~and ~~products,~~research ~~diversifying~~and ~~our~~development ~~product~~affiliates. We believe ~~lines~~the tobusiness ~~better~~model ~~compete~~will infacilitate the growing ~~TCM~~ ~~market.~~process, Weresearch ~~believe~~and ~~that~~development, ~~Yinfa’s~~commercializing ~~commercialization~~DAR, ~~strategy~~sales ~~will~~and ~~allow~~marketing. Currently, usour toDAR-related ~~fully~~products ~~enhance~~include the ~~value~~Yisheng ofCapsule, ~~its~~Kimchee-Mate ~~DAR product~~ and ~~retain~~Fragrant ~~significant~~Bag, ~~control~~which ~~over~~have ~~its~~been ~~development~~certified by the SFDA and ~~commercial~~marketed ~~activities~~through regional distributors throughout China. InYinfa ~~order~~continues to ~~facilitate~~explore the ~~sales~~application ~~channel~~ for DAR~~, we~~ ~~are~~in ~~considering~~a ~~several~~range of ~~sales and marketing strategies~~food, ~~including~~medicine ~~strengthening~~and ~~our nation-wide network in China via regional distributors~~cosmetics.

Commercialize Gastrodia products. We plan to develop high quality Gastrodia products, which may include Gastrodia to pharmaceutical factories as raw material. Gastrodia is used for the treatment of headaches, including migraines. We believe that our Gastrodia products will be competitive in the marketplace because the region where our Gastrodia production farms are located are well-known for producing high-quality Gastrodia.4

WeIn ~~have also entered into agreements with other pharmaceutical companies which purchase DAR as raw material. For example~~addition, we have anadopted ~~exclusive agreement with Chengdu Derentang Pharmaceutical Ltd. (“Derentang”),~~ the ~~largest Chinese medicine distributor in the Sichuan province, which owns approximately~~following ~~600~~product ~~medical~~development ~~franchise stores throughout China, of which 120 stores are in Sichuan. We are the exclusive supplier of DAR to Derentang in the Sichuan area~~ and ~~our~~commercialization ~~DAR products are sold in all of Derentang’s medical franchise stores. This agreement will expire in 2017.~~strategies:

~~Seek~~Commercialize ~~support~~GAP ~~from~~DAR ~~local resources~~products. In We ~~order~~plan to ~~commercialize~~develop ~~TCM~~high ~~products~~quality ~~and~~DAR ~~increase~~products ~~the~~certified ~~income~~by ~~for TCM farmers~~GAP, ~~the~~which ~~local~~may ~~government~~include ofDAR ~~Suining~~seeds ~~City~~to ~~has~~pharmaceutical ~~successfully developed~~factories ~~grower~~as ~~networks~~raw ~~for~~material, or ~~TCM~~DAR-related toproducts. Such ~~facilitate~~DAR-related ~~the~~products ~~process~~may ~~from~~include ~~fields~~medicines toused ~~end~~for ~~users,~~the ~~including~~treatment ~~planting,~~of ~~production,~~tension ~~distribution~~ and ~~sales. Additionally~~cluster headaches, weincluding ~~intend~~migraines, toalong ~~take~~with ~~advantage~~other ofDAR-related ~~the~~products. We ~~vast~~believe ~~TCM~~that ~~resources~~our ~~available~~DAR toand ~~aid~~DAR-related ~~in the development of~~products ~~our~~will ~~products~~be competitive in ~~Sichuan~~the ~~province,~~marketplace ~~which~~due ~~contains~~to ~~numerous~~our ~~research~~GAP ~~institutions~~certification and ~~universities~~their ~~that~~increased ~~focus~~efficacy onover ~~research~~competing ~~and development of TCM~~products.

~~Pursue~~Develop ~~strategic~~sales ~~partners~~and marketing functions across multiple DAR products. We ~~For~~have ~~certain~~a long-range plan to build a pharmaceutical company to take advantage of the local resources of DAR and develop and commercialize DAR and its related products, wediversifying ~~intend~~our product lines to ~~enter~~better ~~into~~compete in ~~collaborative~~the ~~arrangements~~growing ~~with~~TCM ~~third~~market. ~~parties~~We inbelieve ~~order~~that ~~for~~Yinfa’s commercialization strategy will allow us to: fully enhance the value of its DAR product and retain significant control over its development and commercial activities. In order to facilitate the sales channel for DAR, we are considering several sales and marketing strategies, including strengthening our nation-wide network in China via regional distributors.

·Commercialize Gastrodia products. We ~~fund~~plan to develop high quality Gastrodia products, which may include Gastrodia to pharmaceutical factories as raw material. Gastrodia is used for the treatment of headaches, including migraines. We believe that our ~~research~~Gastrodia ~~and~~products ~~development~~will ~~activities;~~be competitive in the marketplace because the region where our Gastrodia production farms are located are well-known for producing high-quality Gastrodia.

·We have also entered into agreements with ~~fund~~other ~~manufacturing~~pharmaceutical bycompanies ~~third~~which ~~parties;~~purchase DAR as raw material. For example, we have an exclusive agreement with Chengdu Derentang Pharmaceutical Ltd. (“Derentang”), the largest Chinese medicine distributor in the Sichuan province, which owns approximately 600 medical franchise stores throughout China, of which 120 stores are in Sichuan. We are the exclusive supplier of DAR to Derentang in the Sichuan area and our DAR products are sold in all of Derentang’s medical franchise stores. This agreement will expire in 2017.

·Seek support from local resources. ~~seek~~In order to commercialize TCM products and ~~obtain~~increase ~~regulatory~~the ~~approvals;~~income for TCM farmers, the local government of Suining City has successfully developed grower networks for TCM to facilitate the process from fields to end users, including planting, production, distribution and sales. Additionally, we intend to take advantage of the vast TCM resources available to aid in the development of our products in Sichuan province, which contains numerous research institutions and universities that focus on research and development of TCM.

~~· successfully~~Pursue ~~commercialize~~strategic ~~our~~partners. For certain DAR products., we intend to enter into collaborative arrangements with third parties in order for us to:

~~Pursuant~~· tofund ~~an exclusive agreement with DongUi Cosmetics Co. (“DongUi”) in 2007, a Korean corporation, for the development of~~ our ~~DAR~~research ~~market in South Korea. DongUi acts as our sole marketing agent in South Korea for DAR. DongUi’s initial order was approximately 300 tons of DAR raw material~~ and, ~~under~~development ~~the terms of the agreement, DongUi is obligated to increase their annual DAR order at a rate of at least 10% per annum. The collaborative agreement will expire in 2017.~~activities;

~~Competition~~· fund manufacturing by third parties;

~~The~~· ~~TCM~~seek ~~industry is highly competitive in many areas. Our DAR~~ and ~~DAR-related~~obtain ~~products~~regulatory ~~will~~approvals; ~~compete with other available products based primarily on:~~and

· ~~efficacy~~ successfully commercialize our products.

·Pursuant to an exclusive agreement with ~~safety~~DongUi Cosmetics Co. (“DongUi”) in 2007, a Korean corporation, for the development of our DAR market in South Korea. DongUi acts as our sole marketing agent in South Korea for DAR. DongUi’s initial order was approximately 300 tons of DAR raw material and, under the terms of the agreement, DongUi is obligated to increase their annual DAR order at a rate of at least 10% per annum. The collaborative agreement will expire in 2017.

·Develop ~~tolerability~~Our Product Lines and Product Awareness. Brand awareness marketing will include the promotion and introduction to new markets of the current popular CHRI products such as Yisheng Capsule, Kimchee-Mate and Fragrant Bag and Rhizoma Gastrodia. We plan to have special trainers and presenters who can conduct promotional events and seminars to increase awareness of our products.

·Seek Acquisitions of Complimentary ~~acceptance~~Companies byor ~~doctors~~Assets. We believe that there may be TCM or assets in China that would be complimentary with our current product offerings and which could fit well with our sales and marketing platform. We may seek to acquire such assets or other companies as a means to grow our revenue and profitability.

~~· patient compliance and acceptance~~5

~~· patent protection~~Competition

5The TCM industry is highly competitive in many areas. Our DAR and DAR-related products will compete with other available products based primarily on:

· ~~convenience~~ efficacy

· ~~price~~ safety

· ~~insurance~~ ~~and other reimbursement coverage~~tolerability

· ~~distribution~~ acceptance by doctors

· ~~marketing~~ patient compliance and acceptance

· ~~adaptability~~ topatent ~~various models of dosing~~protection

~~Competitors~~· ~~include national and regional TCM providers, TCM manufacturers, wholesalers and chain drug stores.~~convenience

~~Many~~· of our competitors possess greater financial, managerial and technical resources and have established reputations for successfully developing and marketing TCM, all of which put us at a competitive disadvantage. Our competitors may be able to apply their resources and capabilities to develop and commercialize products that have distinct, enhanced, or perceived advantages over our products. In addition, our competitors may be in a position to devote greater resources to the sales, marketing, and distribution of these products and, therefore, considerably impact our ability to successfully sell, market and distribute our own products.price

~~Manufacturing~~· insurance and other reimbursement coverage

We· currently rely on several third-party contract manufacturers to produce sufficient quantities of DAR-related products. We believe that our initial focus on the application for GAP certification for DAR will reduce the risk and time involved in the development of manufacturing capabilities because production of DAR-related products involves well-established and well-accepted manufacturing techniques and processes. We intend to continue to rely upon third-party contract manufacturers for production of our DAR-related products. The use of third parties for these activities allows us to minimize our initial capital investment and reduce the risk that would be associated with the establishment of our own commercial manufacturing and distribution ~~operations.~~

~~Chinese~~· ~~Government Regulation~~marketing

We· ~~must~~adaptability follow various government regulations and, in particular, the SFDA regulations. Government regulations may have material impact on our operations, increase costs and could prevent or delay our licensing, manufacturing and selling our products. Our research, development, testing, manufacturing and marketing activities are subject to various ~~governmental~~models ~~regulations in China, including health and drug regulations. Government regulations, among other things, cover the inspection~~ of and controls over testing, manufacturing, safety and environmental considerations, efficacy, labeling, advertising, promotion, record keeping and sale and distribution of pharmaceutical products. We will not be able to license, manufacture, sell and distribute the vast majority of our products without proper approvals from government agencies and in particular the SFDA. Each new product must receive proper approvals before licensing, manufacturing, selling, and distributing, and there is no assurance that we will obtain such approvals each time.dosing

InCompetitors ~~addition,~~include ~~delays~~national ~~or rejections may be encountered based upon additional government regulation from future legislation, administrative action or changes in governmental policy~~ and ~~interpretation~~ ~~during the period of product development and product assessment. Although we have, so far, obtained the~~regional ~~marketing~~TCM ~~rights for selling some of our products in China~~providers, weTCM may not continue to receive and maintain regulatory approvals for the sales of these products. Our marketing activities are also subject to government regulations with respect to the prices that we intend to charge or any other marketing and promotional related activities. Government regulations may substantially increase our costs for developingmanufacturers, ~~licensing,~~wholesalers ~~manufacturing~~ and ~~selling~~chain ~~products,~~drug ~~negatively impacting our operation, revenue, income and cash flow~~stores.

~~The~~Many ~~manufacture~~of ~~and~~our ~~sale~~competitors ofpossess ~~pharmaceutical~~greater ~~products~~financial, inmanagerial ~~the~~and ~~PRC~~technical isresources ~~heavily~~and ~~regulated~~have byestablished ~~many~~reputations ~~state,~~for ~~provincial~~successfully developing and ~~local~~marketing ~~authorities~~TCM, all of which put us at a competitive disadvantage. ~~These~~Our ~~regulations~~competitors ~~significantly increase~~may ~~the~~be ~~difficulty~~able ~~and~~to ~~costs~~apply ~~involved~~their inresources ~~obtaining~~and capabilities to develop and ~~maintaining~~commercialize ~~regulatory~~products ~~approvals~~that ~~for~~have ~~marketing~~distinct, ~~new~~enhanced, ~~and~~or ~~existing~~perceived advantages over our products. In addition, our ~~Our~~competitors ~~future~~may ~~growth~~be ~~and~~in ~~profitability~~a ~~depend~~position to adevote ~~large~~greater ~~extent~~resources onto the sales, marketing, and distribution of these products and, therefore, considerably impact our ability to ~~obtain~~successfully ~~regulatory~~sell, ~~approvals~~market and distribute our own products.

~~Under the SFDA guidelines for licensing of pharmaceutical products, all pharmaceutical manufacturers must obtain and maintain Good~~ Manufacturing Practices (“GMP”) certifications. We are currently in compliance with the SFDA guidelines and maintain GMP certifications. However, should we fail to receive or maintain the GMP certifications under the guidelines in the future, our businesses would be materially and adversely affected.

6We currently rely on several third-party contract manufacturers to produce sufficient quantities of DAR-related products. We believe that our initial focus on the application for GAP certification for DAR will reduce the risk and time involved in the development of manufacturing capabilities because production of DAR-related products involves well-established and well-accepted manufacturing techniques and processes. We intend to continue to rely upon third-party contract manufacturers for production of our DAR-related products. The use of third parties for these activities allows us to minimize our initial capital investment and reduce the risk that would be associated with the establishment of our own commercial manufacturing and distribution operations.

~~Moreover,~~Chinese ~~the~~Government ~~laws and regulations regarding acquisitions of the pharmaceutical industry in the PRC may also change and may significantly impact our ability to grow through acquisitions.~~Regulation

~~Employees~~We must follow various government regulations and, in particular, the SFDA regulations. Government regulations may have material impact on our operations, increase costs and could prevent or delay our licensing, manufacturing and selling our products. Our research, development, testing, manufacturing and marketing activities are subject to various governmental regulations in China, including health and drug regulations. Government regulations, among other things, cover the inspection of and controls over testing, manufacturing, safety and environmental considerations, efficacy, labeling, advertising, promotion, record keeping and sale and distribution of pharmaceutical products. We will not be able to license, manufacture, sell and distribute the vast majority of our products without proper approvals from government agencies and in particular the SFDA. Each new product must receive proper approvals before licensing, manufacturing, selling, and distributing, and there is no assurance that we will obtain such approvals each time.

AsIn ofaddition, ~~December~~delays ~~31,~~or ~~2011,~~rejections wemay be ~~had~~encountered ~~230~~based ~~full-time employees.~~upon ~~There~~additional ~~are~~government 30regulation from future legislation, administrative action or changes in governmental policy and interpretation during the ~~administration~~period ~~department,~~of product development and 45product inassessment. Although ~~the~~we ~~sales~~have, ~~department~~so far, obtained the marketing rights for selling some of ~~which~~our 34products ~~have~~in ~~college~~China, ~~undergraduate~~we may not continue to receive and maintain regulatory ~~degrees~~approvals for the sales of these products. Our ~~There~~marketing activities are 5also ~~university~~subject ~~professors~~to government regulations with respect ~~doctorate~~to ~~degrees~~the inprices ~~research~~that we intend to charge or any other marketing and ~~development.~~promotional ~~All~~related ~~employees~~activities. Government regulations ~~are~~may ~~working~~substantially inincrease our costs for developing, licensing, manufacturing and selling products, negatively impacting ~~subsidiary~~our ~~located~~operation, inrevenue, ~~China~~income and cash flow.

~~Seasonality~~6

~~Our~~The ~~business~~manufacture isand ~~subject~~sale toof ~~seasonal fluctuations.~~pharmaceutical ~~DAR~~products ~~is planted during the winter months and is suitable for harvest beginning~~ in the ~~summer. The~~PRC ~~prime season for harvest and resulting sales~~ is ~~typically~~heavily ~~from~~regulated ~~July~~by ~~through~~many ~~October~~state, ~~subject~~provincial toand ~~climate~~local ~~conditions~~authorities. AsThese aregulations ~~result, we typically~~significantly ~~enter~~increase ~~into~~the ~~contracts~~difficulty ~~with~~and ~~farmers~~costs ~~during~~involved ~~the~~in ~~first~~obtaining ~~quarter~~and ofmaintaining ~~the~~regulatory ~~fiscal~~approvals ~~year~~ for ~~the~~marketing ~~purchase~~new ofand ~~raw~~existing ~~DAR~~products. ~~We then process~~ ~~the~~Our ~~harvested~~future ~~DAR~~growth and ~~sell~~profitability ~~products~~depend to ~~our~~a ~~customers~~large ~~during~~extent ~~the~~on ~~second half of the fiscal year. Consequently,~~ our ~~revenues~~ability ~~are received~~to ~~primarily~~obtain inregulatory ~~the second half of the fiscal year~~approvals.

~~Customers~~Under the SFDA guidelines for licensing of pharmaceutical products, all pharmaceutical manufacturers must obtain and maintain Good Manufacturing Practices (“GMP”) certifications. We are currently in compliance with the SFDA guidelines and maintain GMP certifications. However, should we fail to receive or maintain the GMP certifications under the guidelines in the future, our businesses would be materially and adversely affected.

~~Our~~Moreover, ~~business~~the islaws ~~not~~and ~~dependent~~regulations ~~upon one customer. Due~~regarding toacquisitions ~~our~~of ~~arrangement with~~ the ~~DAR~~pharmaceutical ~~Association,~~industry wein ~~are~~ the ~~exclusive~~PRC ~~distributor~~may ofalso ~~Sichuan~~change ~~DAR. This~~and ~~exclusive~~may ~~arrangement provides~~significantly ~~significant~~impact ~~diversification of~~ our ~~customer~~ability ~~base~~to ~~and,~~grow ~~as such, keeps us from being dependent on any major revenue-generating~~through ~~customers, the loss of whom would impact our business~~acquisitions.

~~Research and Development~~Employees

As of ~~January~~December 131, ~~2011~~2012, ~~our~~we ~~research~~had ~~and~~230 ~~development~~full-time ~~has~~employees. ~~been~~There ~~subsidized~~are by30 in the ~~Chengdu~~administration ~~city government~~department, ~~through~~and 45 in the ~~Chengdu~~sales ~~University~~department, of ~~Traditional~~which ~~Chinese~~34 ~~Medicine.~~have ~~The~~college ~~medical~~undergraduate ~~discoveries~~degrees. ~~and~~There ~~products~~are ~~resulting~~5 ~~from~~university ~~this~~professors ~~research~~with ~~and~~doctorate ~~development~~degrees ~~belong~~in toresearch ~~Yinfa~~and ~~Resource,~~development. ofAll ~~which~~employees ~~Yinfa~~are ~~contractually~~working ~~has~~in our ~~the~~subsidiary ~~rights~~located toin ~~use and profit from~~China.

~~Environment~~Seasonality

AsThe ~~described~~planting ~~above,~~of weDAR ~~maintain~~is ~~certification~~subject to seasonal ~~with~~fluctuations. ~~GAP~~DAR ~~standards~~is planted during the winter months and is suitable for harvest in the summer. ~~Consistent~~The ~~with~~prime ~~these~~season ~~standards~~for harvest is typically from July through November, wesubject ~~maintain~~to anclimate ~~environmentally~~conditions. ~~sound~~As ~~production~~a ~~site~~result, ~~and~~we ~~utilize~~typically ~~products~~enter into contracts with farmers ~~such~~during asthe ~~organic~~first ~~fertilizer~~quarter toof ~~ensure~~the ~~that~~fiscal ~~our~~year for the purchase of raw DAR, and purchase raw DAR~~-related~~ ~~products~~from ~~maintain~~farmers aduring ~~high~~the ~~quality~~third and forth quarters. We ~~generally~~then ~~expend 6%~~process ofthe ~~our~~harvested ~~annual~~DAR ~~profits~~and tosell ~~maintain~~products to our ~~production~~customers ~~site~~throughout tothe ~~ensure~~year. ~~compliance~~Therefore, ~~with~~our ~~best~~revenues occur ~~environmental~~throughout ~~practices~~the year.

Customers

Our business is not dependent upon one customer. Due to our arrangement with the DAR Association, we are the exclusive distributor of Sichuan DAR. This exclusive arrangement provides significant diversification of our customer base and, as such, keeps us from being dependent on any major revenue-generating customers, the loss of whom would impact our business.

Research and Development

We enjoy relatively low research and development expenses as most TCM medicines are based on standardized formulas. In 2008, SFDA promulgated a notice of registration of Chinese traditional medicine providing that TCM composed of classic prescriptions will be exempted from pharmacological and toxicological tests and studies. The notice defined classic prescription and classic TCM formulas as those herbal remedies recorded in ancient Chinese medicine books from Qing Dynasty or earlier which are currently widely used. According to such notice, the production and manufacturing of TCM products are subject to non-clinical safety studies only and exempted from pharmacological and toxicological tests and studies. Thus, TCM products are entitled to obtain faster SFDA approval. As such, we enjoy relatively low research and development expenses because most of our products are based on classic TCM formulas that are covered by this notice.

The research and development process includes qualitative research, preparation for production and other miscellaneous costs.

By January, 2011, our research and development has been subsidized by the Chengdu city government, through the Chengdu University of Traditional Chinese Medicine. The medical discoveries and products resulting from this research and development belong to Yinfa Resource, of which Yinfa contractually has the rights to use and profit from.

Environment

As described above, we maintain certification with GAP standards. Consistent with these standards, we maintain an environmentally sound production site and utilize products such as organic fertilizer to ensure that our DAR and DAR-related products maintain a high quality. We generally expend 6% of our annual profits to maintain our production site to ensure compliance with best environmental practices.

Item 1A. Risk Factors.

The information to be reported under this Item is not required of smaller reporting companies.

Item 1B. Unresolved Staff Comments.

The information to be reported under this Item is not required of smaller reporting companies.

Item 2. Properties.

There is no private ownership of land in China; all land ownership is held by the government of China, its agencies and collectives. Land use rights are obtained from the government for periods ranging from 50 to 70 years, and are typically renewable. Land use rights can be transferred upon approval by the land administrative authorities of China (State Land Administration Bureau) upon payment of the required transfer fee.

Owned Property

Our main office is located at 343 Sui Zhou Zhong Road, Suining, Sichuan Province, People’s Republic of China, which is owned by us and has a total area of 1,775 square feet. No other businesses operate from this office.

We also own a three-story building in Suining, Sichuan Province, China, with a total area of approximately 15,000 square feet, which contains our administration, sales, and research & development departments. We purchased this building from a related party.

Leased Property

We ~~lease~~have ~~our~~entered two (2) new leases for our warehouses. One warehouse is of approximately ~~2,600~~800 square feet~~. Under~~ ~~the~~and ~~new~~locates ~~lease~~at ~~for~~Shehong ~~the~~County ~~year~~Suining ~~ending~~City, ~~December~~Sichuan 31Province, China ~~2010,~~with wean ~~pay~~approximate ~~approximately $2,079~~annual ~~per~~rent ~~year~~of $15,572. We ~~renew~~This ~~our~~ lease onbecame aeffective ~~year-to-year~~from ~~basis~~February, ~~automatically,~~2013 ~~unless~~for ~~notice~~three is(3) ~~given~~years byterm ~~one~~and will ofend ~~the~~in ~~parties~~February 2016. ~~This~~ ~~lease~~The ~~was~~other ~~renewed~~warehouse ~~automatically~~is ~~for~~of ~~2011~~approximately ~~and~~500 ~~2012~~square ~~with~~feet noand ~~change~~locates inat ~~terms~~Pinghe orVillage, ~~rental~~Shehong ~~amount. Under~~County, ~~the~~Suining ~~new~~City, ~~lease~~Sichuan ~~for~~Province ~~the~~with ~~year~~an ~~ending~~approximate ~~December~~annual ~~31,~~rent ~~2011~~of $6,488. weThis ~~pay~~lease ~~approximately~~became $2effective from February,~~079~~ ~~per~~2013 ~~year~~for three (3) years term and will end in February 2016.

We also leased our warehouse of approximately 2,600 square feet. Under the lease for the year ending December 31, 2010, we pay approximately $2,079 per year. We renew our lease on a year-to-year basis, automatically, unless notice is given by one of the parties. This lease was renewed automatically for 2011 and 2012 with no change in terms or rental amount. Under the renewed lease for the year ending December 31, 2012, we pay approximately $2,079 per year.

In previous years, we leased farm land of approximately 861,543 square feet from a cooperative of farmers. This lease has been terminated as of October 26, 2011, as a result of a cooperative agreement between the Company and the DAR Association, in which the DAR farmers cooperative have agreed to transfer all land and facilities to the DAR Association management and all DAR products from the DAR Association are sold exclusively to the Company In October 2011 we negotiated a new agreement to lease farm land of approximately 90,000,000 square feet from village members of the DAR Association. Under the terms of the lease, we pay approximately $1,760,066 per year. The lease expires August 31, 2030, unless notice is given by one of the parties.

Item 3. Legal Proceedings.

AsFrom oftime to time, we may become involved in various lawsuits and legal proceedings, which arise in the ~~date~~ordinary course of ~~this~~business. ~~report~~However, welitigation ~~are~~is ~~not~~subject ato inherent ~~party~~uncertainties, and an adverse result in these or other matters may arise from time to ~~any~~time ~~pending~~that ~~legal~~may ~~proceeding~~harm ~~and~~business. We are currently not aware of any ~~threatened~~such legal ~~proceeding~~proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Item 4. ~~Submission~~Mine ofSafety ~~Matters to a Vote of the Security Holders.~~Disclosures

~~None~~Not applicable.

~~PART II~~9

~~Item~~PART ~~5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.~~II

~~Our~~Market Class A Common Stock has been quoted on the Over-the-Counter Bulletin Board (the “OTCBB”) under the symbol “CHRI” since June 22, 2004. The range of closing high and low bid quotations for each quarter of the past two (2) fiscal years is as follows:Information

FYE 2010	High	Low
1/1/10 – 3/31/10	$0.029	$0.006
4/1/10 – 6/30/10	$0.029	$0.005
7/1/10 – 9/30/10	$0.016	$0.005
10/1/10 – 12/31/10	$0.050	$0.008
FYE 2011	High	Low
1/1/11 – 3/31/11	$0.10	$0.04
4/1/11 – 6/30/11	$0.05	$0.02
7/1/11 – 9/30/11	$0.04	$0.01
10/1/11 – 12/31/11	$0.06	$0.02

Our Class A Common Stock has been quoted on the Over-the-Counter Bulletin Board (the “OTCBB”) under the symbol “CHRI” since June 22, 2004. The range of closing high and low bid quotations for each quarter of the past two (2) fiscal years is as follows:

FYE 2011	High		Low
1/1/11 – 3/31/11	$	0.10	$	0.04
4/1/11 – 6/30/11	$	0.05	$	0.02
7/1/11 – 9/30/11	$	0.04	$	0.01
10/1/11 – 12/31/11	$	0.06	$	0.02

Holders

FYE 2012	High		Low
1/1/12 – 3/31/12	$	0.08	$	0.02
4/1/12 – 6/30/12	$	0.05	$	0.02
7/1/12 – 9/30/12	$	0.04	$	0.01
10/1/12 – 12/31/12	$	0.02	$	0.01

~~As of March 29, 2012, there were approximately 4,964 holders of record of our Common Stock and 177,435,953 shares issued and outstanding.~~ Holders

~~Dividends~~As of April 10, 2013, there were approximately 4,962 holders of record of our Common Stock and 177,435,953 shares issued and outstanding.

WeDividend ~~have~~Policy not declared or paid any cash dividends on either our Common Stock since our formation, and do not presently anticipate paying any cash dividends on our Common Stock in the foreseeable future. We currently intend to retain any future earnings to finance the expansion and development of our business. The future payment of cash dividends on any class of our Common Stock will depend on our earnings, capital requirements and financial position, applicable requirements of the Delaware General Corporation Law, general economic conditions and other factors considered relevant by our board of directors.

~~There~~We ~~are~~have nonot ~~contractual~~declared ~~restrictions~~or paid any cash dividends on either our Common Stock since our formation, and do not presently anticipate paying any cash dividends on our Common ~~ability~~Stock in the foreseeable future. We currently intend to ~~declare~~retain any future earnings to finance the expansion and ~~pay~~development of our business. The future payment of cash dividends on any class of our Common Stock will depend on our earnings, capital requirements and financial position, applicable requirements of the Delaware General Corporation Law, general economic conditions and other factors considered relevant by our board of directors.

~~Securities~~There ~~Authorized~~are ~~for~~no ~~Issuance~~contractual ~~Under~~restrictions ~~Equity~~on ~~Compensation~~our ~~Plan~~ability to declare and pay dividends.

~~None.~~Securities Authorized for Issuance Under Equity Compensation Plan

None.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None

Item 6. Selected Financial Data.

~~The~~Not ~~information to be reported under this Item is not~~ required ~~of smaller reporting companies~~.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

Certain 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. The words “believe”, “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 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 DAR and related products on a timely basis and in the prescribed condition, evolving standards in the TCM 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 SEC.

COMPANY OVERVIEW

General

~~All~~We ~~references~~were incorporated in ~~this~~the ~~Form~~State ~~10-K~~of toDelaware 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, ~~“CHRI~~as the acquirer,” executed a Plan of Exchange with Yinfa (acquiree), the ~~“Registrant~~shareholders of Yinfa and the Company’s then majority shareholders,” “pursuant to which we issued 30,”000,000 ~~“us”~~(pre-forward orsplit) “new shares of our” ~~are~~Class A Common Stock to ~~China~~the ~~Health~~Yinfa ~~Resource,~~shareholders ~~Inc.,~~in a ~~Delaware~~transaction ~~corporation. These~~exempt ~~terms~~from ~~also~~the ~~refer~~registration requirements of the Securities Act of 1933, ~~where~~as ~~context~~amended, ~~requires~~in reliance upon Regulation S thereunder, toin exchange for all of their shares of registered capital of Yinfa. As a result, Yinfa became our wholly-owned subsidiary. Yinfa ~~corporation~~was founded on April 24, ~~Suining Shi~~2001, with registered capital of US $125,500 (RMB 1,000,000) and total assets of US $1,475,795. Yinfa’s ~~Bai~~business ~~Zhi~~incorporates ~~Chan~~a Yeself-owned ~~You~~production ~~Xian~~base ~~Gong~~and Sia network of DAR (as defined below) associates, farmers and research and development affiliates. The transaction was treated for accounting purposes as a ~~corporation~~capital ~~organized~~transaction and ~~existing~~recapitalization by ~~under~~the accounting acquirer and as a re-organization by the ~~laws~~accounting acquiree. We disposed of ~~the~~VDL ~~Peoples’~~on ~~Republic~~August 22, 2006 pursuant ofto 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 ~~acquired~~DAR Planting is in ~~August~~process ~~2006~~of obtaining business approval and certificate from different government departments, and no business activity has occurred.

9We 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.

WeOur ~~were~~products ~~incorporated~~include inDahurian ~~the State of Delaware~~Angelica onRoot ~~February 26, 2002. In June and July 2002, we acquired approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation~~ (“~~VDL~~DAR”), 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 weis ~~issued 30,000,000 (pre-forward split) new shares of our Common Stock to the Yinfa shareholders in~~ a ~~transaction~~popular ~~exempt~~herb ~~from~~employed ~~the~~extensively ~~registration requirements of the Securities Act of 1933,~~ as ~~amended,~~an iningredient ~~reliance upon Regulation S thereunder,~~ in ~~exchange for all of their shares of registered capital of Yinfa. As a result~~food, ~~Yinfa~~medicine ~~became~~and ~~our~~cosmetics ~~wholly-owned~~for ~~subsidiary.~~the ~~Yinfa~~treatment ~~was founded on April 24, 2001, with registered capital~~ of ~~US $125~~pain,~~500~~ ~~(RMB~~swelling ~~1,000,000)~~ and ~~total assets of US $1,475,795~~pustule. ~~Yinfa’s~~ ~~business~~Our ~~incorporates~~products aare ~~self-owned~~developed ~~production~~through ~~base~~extensive ~~and a network of DAR (as defined below) associates, farmers and~~ research and development ~~affiliates.~~efforts ~~The~~to ~~transaction~~determine effective ~~was~~uses ~~treated~~ for ~~accounting~~the ~~purposes~~plants asgrown aunder ~~capital~~our ~~transaction~~control and ~~recapitalization by~~cultivated ~~the~~in ~~accounting~~areas ~~acquirer~~where ~~and~~unique aslocal aclimates ~~re-organization~~and bysoil ~~the accounting acquiree. We disposed of VDL on August 22, 2006 pursuant~~properties toresult ~~the~~in ~~agreement between~~ the ~~Company,~~finest ~~VDL and Arie Hinkis, our former president~~quality. ~~On May 21, 2007, we changed our name to China Health Resource, Inc. to more accurately reflect our business operations.~~

We obtained Good Agricultural Practice (“GAP”) certification for our DAR products and received the exclusive rights to the “Sichuan Angelica” certified trademark from the Chinese State Administration of Industry and Commerce through December 13, 2016.

Our Business

~~Since~~Our ~~the completion of the Plan of Exchange with Yinfa, our~~ core business ~~has~~is ~~been~~herbal in pharmaceuticals and ~~the~~supplements ~~continued~~based ~~operations~~upon ~~of Yinfa~~TCM. Our subsidiary Yinfa is a Chinese pharmaceutical company focused on ~~developing~~producing, ~~and~~processing and commercializing ~~Dahurian~~TCM ~~Angelica~~products ~~Root~~to ~~(“DAR”),~~pharmaceutical amanufacturers ~~popular~~and ~~traditional~~wholesale ~~Chinese medicine (“TCM”)~~markets. Our ~~business plan includes distributing DAR and its related~~ products ~~for~~include ~~the treatment of pain~~DAR, ~~swelling~~which ~~and pustule. DAR~~ is a popular herb employed extensively as an ingredient in food, medicine and cosmetics. ~~The~~for ~~Suining~~the ~~district~~treatment inof ~~China’s Sichuan~~pain, ~~Province~~swelling isand ~~the~~pustule. Our ~~major~~products ~~planting~~are ~~and~~developed ~~production~~through ~~area~~extensive inresearch ~~China~~and ~~for~~development ~~DAR~~efforts asto adetermine ~~result~~effective ofuses for the ~~local~~plants ~~climate and soil properties.~~grown ~~Over~~under ~~70%~~our ofcontrol ~~DAR~~and ~~for~~cultivated ~~general~~in ~~use~~areas ~~and~~where ~~100%~~unique oflocal ~~DAR~~climates ~~for~~and ~~pharmaceutical~~soil ~~use~~properties result in ~~China~~the isfinest ~~produced in Suining~~quality.

In ~~May~~year ~~2005~~2006, we ~~applied for and~~ obtained ~~Good Agricultural Practice of Medical Plants and Animals (“~~GAP”) certification for DAR, in ~~cooperation~~partnership with Sichuan Yinfa Resource Development Group Co. Ltd., ~~our affiliate~~ (“Yinfa Resource”). The standards which must be met to obtain GAP certification include the study of our environment quality including water, and soil samples, seed quality, ~~minimum~~use of pesticides, and ~~fertilizer~~use of fertilizers. These standards were ~~adopted~~approved by the Chinese State Food and Drug Administration (the “SFDA”) . Our GAP ~~project~~farm ~~involves~~production base includes approximately 133,334 square meters of experimental planting fields, and 1,333,340 square meters of ~~fields~~contracted ~~run~~farm byproduction ~~companies we have hired~~bases, all of which passed inspection by the SFDA, on February 26, 2006. The GAP standards are inspected annually. The GAP certificate has been issued in name of our partner , Yinfa Resource. Our exclusive GAP certification ~~means~~ ~~that~~for ~~our~~DAR ~~planning,~~demonstrates ~~quality,~~the ~~and~~high ~~manufacturing~~quality standards of our DAR ~~have met the requisite high~~ and ~~certifiable standard~~DAR-related products.

In 2007, ~~Yinfa~~the ~~contracted~~Company achieved cooperation with the Sichuan Province Suining City DAR Association (“Association”) and received the exclusive rights to the “~~Suining~~ Sichuan ~~Angelic~~Angelica” certified trademark from the Chinese State Administration of Industry and Commerce through December 13, 2016. As As holder of the rights to the trademark, ~~Yinfa~~the Company is ~~entitled~~receives ~~to receive~~ 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% ~~must~~is be paid ~~to the Association~~ for related expenses. In addition, ~~Yinfa~~the ~~is entitled~~Company ~~to receive~~ 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.

InCurrently, ~~December~~raw ~~2008,~~DAR wein ~~leased~~both anits ~~additional~~original root ~~3,262~~form and processed form (both sliced and powder) is one of our major products and it is sold to pharmaceutical manufacturers ~~acres~~(80%) ~~from~~or ~~Yinfa~~wholesalers ~~Resource~~(20%). ~~for~~Our ~~commercial~~DAR-related ~~uses~~product offerings also include Yisheng Capsule, aswhich ~~described~~has ~~above~~been ~~under~~certified ~~Item~~by 2the SFDA and sold to regional distributors throughout China to treat fatigue by improving blood circulation. ~~“Property~~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)

WeIn ~~believe our business model will help facilitate the process of growing and commercializing DAR~~addition, ~~research~~in ~~and~~2011 ~~development, sales and marketing. Our current DAR-related product includes~~ the ~~Yisheng~~Company ~~Capsule, which~~ has ~~been~~added Rhizoma ~~certified~~Gastrodia by(“Gastrodia”) ~~the~~along ~~SFDA~~with ~~and~~various isother ~~being~~raw ~~sold~~TCM ~~into~~products ~~the market via regional distributors throughout China. We will continue~~ to ~~explore~~ the ~~development~~Company’s ~~and~~product ~~addition of DAR in a range of foods, medicines and cosmetics~~offering. ~~Also~~Gastrodia, wealong ~~will~~with ~~grow~~various ~~and commercialize Gastrodia and~~ other raw TCM products. Inare ~~addition,~~sold ~~we continue~~ to ~~consider~~pharmaceutical ~~and~~manufacturers ~~explore~~(80%) ~~opportunities to~~or ~~expand~~wholesalers ~~our~~(20%). ~~current~~With the ~~asset~~expansion ~~base~~of ~~and~~TCM ~~product~~to ~~offerings~~markets toin ~~increase~~the ~~our~~United ~~revenues~~States and ~~enhance~~other ~~shareholder value. These opportunities may include~~countries, ~~but~~we ~~are~~expect ~~not~~to ~~limited~~continue to, ~~acquisitions~~identify orunique ~~in-licensing~~TCM products of ~~additional products and~~ the ~~combination~~highest orquality ~~merger~~to ofadd ~~Yinfa with~~to ~~other~~our ~~Chinese companies in synergistic or complementary industries~~markets.

10The 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 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, 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.

Seasonality

~~Our~~The ~~business~~planting of DAR is subject to seasonal fluctuations. DAR is planted during the winter months and is suitable for harvest ~~beginning~~ in the summer. The prime season for harvest ~~and resulting~~ ~~sales~~ is typically from July through ~~October~~November, subject to climate conditions. As a result, we typically enter into contracts with ~~farmers~~ farmers during the first quarter of the fiscal year for the purchase of raw DAR, and purchase raw DAR from farmers during the third and forth quarters. We then process the harvested DAR and sell products to our customers ~~during~~throughout the ~~second half of the fiscal~~ year. ~~Consequently~~Therefore, our revenues occur ~~are~~throughout ~~received primarily in~~ the ~~second half of the fiscal~~ year.

~~Critical~~CRITICAL ~~Accounting~~ACCOUNTING ~~Policies~~POLICIES

While our significant accounting policies are more fully described in Note 2 to our financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.

Revenue recognition

Our revenue recognition policies are in accordance with Staff Accounting Bulletin No. 104. Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk of loss and title passes to the customer.

We 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.

Accounts Receivable

Accounts receivable 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.

Inventory

Inventory 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.

Property, Plant, and Equipment

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.

Depreciation is 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:

Equipment:	Straight-line for 5 to 20 years with a 30% 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

We recognize an 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.

11Use of Estimates

~~Results~~The preparation of ~~Operations~~financial ~~for~~statements in conformity with US GAAP requires management to make estimates and assumptions that affect the ~~Years~~reported ~~Ended~~amounts of assets and ~~December~~liabilities ~~31,~~and ~~2011~~disclosure of contingent assets and ~~2010~~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.

Foreign Currency Transaction

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.

Our financial statements are translated into USD, which is our reporting currency. Assets and liabilities are translated at the prevailing exchange rate at each reporting period end. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from translation of these financial statements are reflected as other comprehensive income in the statements of operations and accumulated other comprehensive income in the statements of changes in shareholders' equity.

The translation rates are as follows:

	December 31 2012	December 31 2011

Year-end RMB:USD Exchange Rate	RMB 6.3011 =$1	RMB 6.3009 =$1

Average RMB:USD Exchange Rate	RMB 6.3057 = $1	RMB 6.4614 =$1

Recently Accounting Pronouncements

In February 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 is effective prospectively 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 a material impact on the Company’s consolidated financial position and results of operations.

Significant Factors Affecting Our Results of Operation

We believe that the following factors will continue to affect our financial performance:

Price Control of Drugs by PRC Government and SDRC

The State Development and Reform Commission of the PRC (“SDRC”) and the price administration bureaus of 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.

Principal Components of Our Income Statement

Sales

Our 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.

Cost of 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.

Gross Profit

Our gross profit of 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.

Operating expenses

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

Selling, General, and Administrative, Interest and other expenses

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 sales 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.

With the anticipated expansion of business, we anticipate the absolute dollars of selling, and administrative expenses will increase. But comparing to the stronger growth of business, we estimate they will still account for a similar percentage against revenues to the present.

Other comprehensive income

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

RESULTS OF OPERATIONS

Results of Operations for the years ended December 31, 2012 and 2011

The following table presents the consolidated results of operations of the Company for the year ended December 31, 2012 as compared to the results of operations for the year ended December 31, 2011.

	For the Year Ended December 31
	2012			2011

Revenue	$	22,927,862		$	34,338,974
Cost of Sales		19,427,125			24,056,723
Gross Profit		3,500,737			10,282,251
Selling, General, and Administrative		966,503			808,148
Interest Expenses		270,752			75,630
Total Operating Expenses		1,237,255			883,778
Operating Income(Loss)		2,263,482			9,398,473
Other Income(expenses)		(8	)		(497	)
Provision(Credit) Income Tax		578,906			2,426,516
Net Income (Loss)		1,684,568			6,971,460
Other Comprehensive Income		892			425,576

Total comprehensive income (Loss)	$	1,685,460			7,397,037

Highlights

Our total assets at December 31, ~~2011 were~~2012 were US $1425,~~368~~831,~~305~~204 compared to December 31, ~~2010~~2011 were US $514,~~728~~368,~~151~~305, principally due to an increase in the trade accounts receivable and prepayment for inventory and an increase in inventory level. Total liabilities increased to US $212,~~680~~449,~~185~~666 at December 31, ~~2011~~ 2012 from US $12,~~908~~680,~~962~~185 at December 31, ~~2010~~2011, principally due to an increase in the other payable and an increase in notes payable.

Profit/Loss	For the year ended
	December 31, 2011	December 31, 2010
Operating Income (Loss)	9,398,473	3,744,889
Net Income (Loss) Before Tax	9,397,976	3,745,863
Corp. Income Tax	2,426,516	1,038,578
Net Income (Loss)	6,971,460	2,707,286

Revenues

Our revenues for the year ended December 31, ~~2011~~ 2012 were US $3422,~~338~~927,~~974~~862, ana ~~increase~~decrease of ~~234~~33% over revenues of US $1034,~~282~~338,~~207~~ 974 for the year ended December 31, ~~2010~~2011. The ~~increase~~ decrease in sales revenues was due primarily to anthe ~~increase~~decrease in demand for non-branded raw products and the ~~volume~~Yishen capsule. This reduction in sales ofis ~~DAR~~within ~~and~~a ~~other~~broader slowdown in demand for China’s TCM ~~products~~market. ~~received~~Management ~~during~~considers the long term trend remains ~~2011.~~intact ~~Most~~but the softening of ~~the~~China’s ~~revenue~~market ~~growth~~has ~~was~~had ~~attributable~~an effect in our sales. This softening in demand contributed to ~~increased~~a significant reduction in the volume of sales in raw ~~DAR~~TCM herbs and ~~other~~Yinshen ~~TCM~~capsules. ~~such~~The ascompany ~~Gastrodia,~~also ~~etc~~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.

Cost of Sales; Gross Profit

Cost of sales includes expenses directly ~~related~~ related to manufacturing and selling our products, including costs of raw materials purchased from farmers, product delivery and ~~direct~~ direct labor costs. Our cost of sales for the year ended December 31, ~~2011~~2012 was US $2419,~~056~~427,~~723~~125, or approximately 7085% of revenues, ~~compared~~ compared to US $524,~~767~~056,~~564~~723, or approximately 5670% of revenues, for the year ended December 31, ~~2010~~2011. The ~~increase~~decreased in costs of sales ~~is principally~~ ~~due~~and tocomparatively ~~increased~~lower ~~costs~~gross ~~for~~profit ~~our~~rate ~~product,~~were ~~increased~~principally ~~purchasing~~due ~~cost of DAR and other TCM, and improvements~~ to the ~~DAR-related~~decline ~~products’ packaging.~~in ~~The~~demand ~~increased cost~~ of ~~raw~~products ~~DAR is attributable to increased fertilizer~~ and ~~labor~~increase ~~costs~~ in the ~~farming~~price of ~~process~~other ~~over~~raw ~~last year~~materials.

Gross profit for the year ended December 31, ~~2011~~ ~~increased~~2012 decreased by approximately ~~128~~66% to US $103,~~282~~500,~~251~~737 from US $410,~~514~~282,~~644~~251 for the year ended December 31, ~~2010~~2011. ~~Gross~~The decrease in profit margin ~~for~~ was mainly attributed to the ~~period~~reduction ~~ended~~in ~~December~~the ~~31,~~gross ~~2011~~margin ~~was~~derived ~~30%~~from ~~compared~~the todecline ~~44%~~in ~~for~~demand of products and the ~~year~~increase ~~ended~~in ~~December~~relative ~~31,~~mix ~~2010~~of sales of lower profit margin products.

Operating Expenses

Operating expenses for the year ended ~~December~~ December 31, ~~2011~~2012 increased by 1540% to US $~~883~~1,~~778~~237,255 from US $~~769~~883,~~755~~ 778 for the year ended December 31, ~~2010~~2011. The largest component of operating expenses is attributable to selling, general and administrative (“SG&A”) expense consisting primarily of administrative expenses. SG&A increased overall to US $~~808~~966,~~148~~503 for ~~2011~~2012 compared to US $~~751~~808,~~532~~ 148 for ~~2010~~2011. The ~~increase~~ increase is primarily due to an increase in wages, welfares and consulting fees in ~~2011~~2012.

Other Income/Expense

We recorded other expenses of US $~~497~~8 attributable to the refund of rental of store. Interest expense for ~~2011~~2012 was US $75270,~~630~~752 compared to US $1875,~~222~~630 in ~~2010~~2011.

Other Comprehensive Income/Loss

For the year ended December 31, 2012, we had a total other comprehensive income of US $ 892, compared to other comprehensive income of US $ 425,576 for the year ended December 30, 2011. The change in total other comprehensive income (loss) was due primarily related to foreign currency translation between RMB and USD.

Impact of Inflation

We believe that inflation has had a negligible effect on operations during ~~2011~~2012. The inflation rate in the Sichuan Province has been lower than the average national inflation rate for China. ~~However,~~In the ~~rate~~year of ~~inflation~~2012, ~~in China increased in 2010 and a drought in 2010 also affected all agricultural prices. We believe that we can offset any inflationary increases in~~ the ~~cost~~TCM ofmarket ~~sales~~inflation bywas ~~continuing~~relatively ~~to increase our sales of DAR and other TCM~~ in ~~response~~a tostable ~~continued demand and by improving operating efficiencies~~condition.

Taxes

According to the Corporate Income Tax Law of China, companies without any tax abatement programs are charged at a 25% income tax rate. As of December 31, ~~2011~~2012, we accrued ~~income~~ income taxes of US $2578,~~426,516~~906. As of December 31, ~~2010~~2011, we accrued income taxes of US $12,~~038~~426,~~578~~516.

Net Income

We had net income for the year ended December 31, ~~2011~~2012 of US $61,~~971~~684,~~460~~568, or US $0.0401 per share of Common Stock, compared to a net income for the year ended December 31, ~~2010~~ 2011 of US$26,~~707~~971,~~286~~460. Comprehensive income for the year ended December 31, ~~2011~~2012 was US $71,~~397~~685,~~037~~460, a ~~167~~77% ~~increase~~decrease from a comprehensive income of US $27,~~785~~397,~~880~~037 for the year ended December 31, ~~2010~~ 2011. The ~~deterioration~~decrease in our ~~operating~~net ~~results~~income for ~~2011~~the year ended December 31, 2012 is attributable principally to ~~huge~~an increased ~~sales~~cost of operation, ~~relatively~~cost ~~stable~~of ~~SG&A~~good ~~expenses,~~combined ~~and~~with athe ~~foreign~~reduction ~~currency~~in ~~translation~~sales ~~gain~~especially ~~between~~in the ~~RMB and~~non-branded UTCM raw products.S. ~~dollar~~However ofthe UScompany believes ~~$425~~through advertisement,~~576~~ 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.

Liquidity and Capital Resources

Cash flows used in operating activities ~~were~~ were US $923,~~251~~130,193 during the year ended December 31, ~~2011~~2012, compared to cash flows of US $~~125~~92,~~636~~ 251 used in operating activities during the year ended December 31, ~~2010~~2011. Increase in cash flows from operations in ~~2010~~2012 were due primarily to an reduction of notes payable for stock based compensation and increase of accounts receivable, prepaid expenses, decrease of accounts payable, and notes payable.

Cash flows used in investing activities ~~was~~ was US $~~104~~3,~~992~~ 850 for the year ended December 31, ~~2011~~2012, ~~from~~compared USto $~~xxx~~ 12,133 for the year ended December 31, ~~2010~~2011. Cash flows used in investing activities during ~~2011~~2012 was due to the new equity investment and purchases of property, plant and equipment.

Cash flows provided by financing activities for the year ended December 31, ~~2011~~2012 was US $~~247~~4,~~624~~186,673 compare to US $~~206~~247,~~756~~624 for the year ended December 31, ~~2010~~2011. The increase in cash flows from financing activities was due to the increase in borrowing and loans.

In ~~November~~July, 2011, the Company subsidiary corporation, Suining Shi Yinfa Bai Zhi Chan Ye You Xian Gong Si (“Yinfa”), entered into aan ~~short~~unsecured long-term loan agreement with ~~Suining~~unrelated ~~City~~party ~~Commercial~~Wang ~~Bank~~Lijun (~~“Bank~~Wang Lijun Loan”). ~~The~~Wang ~~Bank~~Lijun Loan provides the amount of for 12,~~600~~000,000 RMB, ($~~253~~317,~~932USD~~405 USD) for a term from ~~November 3~~July 1, 2011 to ~~November~~May 313, ~~2012~~2014 at a fixed annual interest rate of ~~6,875~~24 %, with interest is payable monthly. As part of that transaction, the Company entered into a bank loan security agreement (“Bank Collateral Agreement”) which provides for the collateralization of its office building located at ground floor, the 2 nd 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 December of 2011 3,000,000 RMB ($476,122USD) bearing 6.475% interest with a term of December 12, 2011 to December 12, 2012.

OnIn ~~December 27~~July, ~~2010~~2012, the Company subsidiary corporation, Suining Shi Yinfa Bai Zhi Chan Ye You Xian Gong Si (“Yinfa”), entered into an ~~unsecured~~a ~~promissory~~short-term ~~note~~loan agreement with Shanghai Pudong Development Bank (“~~Jiayin~~Bank ~~Wang Note~~Loan”). The Bank Loan provides the amount of for 10,000,000 RMB, ($1,587,024USD) for a term from July 13, 2012 to July 12, 2013 at a fixed annual interest rate of 6.48 %, with Mrinterest is payable monthly. ~~Jiayin~~As ~~Wang~~part of this transaction, the Company entered into a bank loan security agreement (“Bank Collateral Agreement”) which provide for the ~~company’s~~collateralization of ~~Chairman,~~its ~~President~~office building located at ground floor, the 2nd floor and ~~Chief~~the ~~Executive~~3 ~~Officer~~rd floor of the Estate Management Building of Yinhejiayuan (address: No. ~~The~~188 ~~Jiayin~~Xishan ~~Wang~~Road, ~~Note~~Suining. ~~provides~~A ~~Yinfa~~second ~~with~~short-term ~~RMB~~loan 3under the same collateral agreements was executed in August of 2012 10,000,000 ~~(approximately~~RMB, US ($~~476~~1,~~123~~587,024USD) ~~from~~bearing Mr6.6% ~~Wang, payable~~interest ~~after~~with ~~one~~a ~~year~~term onof ~~December~~August 2617, ~~2011~~2012 to August 16, 2013. ~~And~~ ~~due~~A tothird short-term loan under the ~~arrangement~~same ~~between~~collateral ~~both~~agreements ~~parties,~~was ~~this~~executed ~~promissory~~in ~~note~~September ~~was~~of ~~automatically extended~~2012 ~~for~~10,000,000 ~~one~~RMB, ~~year~~($1,587,024 ~~and~~USD) isbearing ~~now~~6.6% ~~payable~~interest with ona ~~December~~term 25of September 19, 2012 to September 18, 2013.

~~Overall~~In October, we2012, ~~have~~the ~~funded~~Company ~~our~~subsidiary ~~cash~~corporation, ~~needs from~~Suining ~~inception~~Shi ~~through~~Yinfa ~~December~~Bai ~~31,~~Zhi ~~2011~~Chan ~~with~~Ye aYou ~~series~~Xian ofGong ~~debt~~Si ~~and equity transactions~~(“Yinfa”), ~~primarily~~entered ~~with~~into ~~related~~an ~~parties.~~unsecured Ifshort-term weloan ~~are~~agreement ~~unable~~with unrelated toparty ~~receive~~Wang ~~additional~~Li ~~cash~~(Wang ~~from~~Li ~~our~~Loan). ~~related~~Wang ~~parties,~~Li weLoan ~~may~~provides ~~need~~the toamount ~~rely~~of onfor ~~financing~~2,000,000 ~~from~~RMB, ~~outside~~($317,405 ~~sources~~USD) ~~through~~for ~~debt~~a orterm ~~equity transactions.~~from ~~Our~~October ~~related~~1, 2012 ~~parties are under no legal obligation~~ to ~~provide~~September us30, ~~with~~2013 ~~capital~~at ~~infusions.~~fixed ~~Failure~~annual tointerest ~~obtain~~rate ~~such~~of ~~financing could~~24 ~~have~~%, awith ~~material~~interest ~~adverse~~is ~~effect~~payable ~~on operations and financial condition~~monthly.

13Overall, we have funded our cash needs from inception through December 31, 2012 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.

We had cash of US $~~241~~ 1,~~755~~295,149 on hand as of December 31, ~~2011~~2012, an increase of US $~~151~~1,~~450~~053,394 from the beginning of the year and attributable in substantial to an increase in cash inflow. Currently, we have enough cash to fund our operations for about nine (39) months. This is based on current cash flows from financing ~~activities~~ activities and projected revenues. If the projected revenues fall short of needed capital we may not be able to sustain our capital needs. We will then need to obtain additional capital through equity or debt financing to sustain operations for an additional year. Our current level of operations would require capital of approximately US $21,~~000~~587,~~000~~024 to sustain operations through year ~~2012 and~~2013 and each year thereafter.

On 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.

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.

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.

~~Off~~OFF-~~Balance~~BALANCE ~~Sheet~~SHEET ~~Arrangements~~ARRANGEMENTS

As of December 31, ~~2011~~2012, we did not ~~have~~ have any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

~~The~~As ~~information~~a tosmaller bereporting ~~reported~~company ~~under~~we ~~this~~are ~~Item is~~ not required ofto ~~smaller~~respond to ~~reporting~~this ~~companies~~item.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements of the Company and notes thereto are included at the end of Part IV of this annual report, beginning at page F-1.

Item 9. Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

~~Evaluation of~~ Disclosure Controls and Procedures

WeOur ~~maintain~~management, ~~disclosure~~under ~~controls~~the supervision and ~~procedures that~~with ~~are~~the ~~designed~~participation toof ~~ensure~~our ~~that~~chief ~~the~~executive ~~information~~officer ~~required~~and tochief befinancial ~~disclosed~~officer, inhas performed an evaluation of the ~~reports~~effectiveness of ~~that~~the wedesign ~~file~~and ~~under~~operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Disclosure controls and procedures are those controls and procedures designed to provide reasonable assurance that the information required to be disclosed in our Exchange Act filings is (1) recorded, processed, summarized and reported within the time periods specified in in the ~~Securities and Exchange Commission~~SEC’s rules, regulations and related forms, and ~~that~~(2) ~~such information is~~ accumulated and communicated to ~~our~~ management, including our ~~Chief~~chief executive ~~Executive~~officer ~~Officer~~ and ~~Chief~~chief ~~Financial~~financial ~~Officer~~officer, as appropriate, to allow timely decisions regarding required ~~disclosures~~disclosure. In ~~designing~~Based on ~~and evaluating the disclosure controls and procedures, management recognized~~ that ~~any~~ ~~controls and procedures~~evaluation, noour ~~matter~~chief ~~how~~executive ~~well~~officer ~~designed~~ and ~~operated,~~chief ~~can~~financial ~~only~~officer ~~provide~~concluded ~~reasonable~~that ~~assurance~~as of ~~achieving~~December ~~the~~31, ~~desired control objectives~~2012, our controls and inprocedures ~~reaching~~were anot ~~reasonable~~effective ~~level~~due ofto ~~assurance,~~certain ~~management~~significant ~~necessarily~~deficiencies ~~was~~(as ~~required~~defined toin ~~apply~~Public ~~its~~Company ~~judgment in~~Accounting ~~evaluating~~Oversight ~~the~~Board Standard ~~cost-benefit~~No. ~~relationship~~2) ofin ~~possible~~our internal controls ~~and~~over ~~procedures~~financial reporting.

14This is due to the fact that we lacks sufficient personnel with the appropriate level of knowledge, experience and training in the application of US generally accepted accounting principles (“GAAP”) standards, especially related to complicated accounting issues. This could cause us to be unable to fully identify and resolve certain accounting and disclosure issues that could lead to a failure to maintain effective controls over preparation, review and approval of certain significant account reconciliation from Chinese GAAP to US GAAP and necessary journal entries. Our internal audit function is significantly deficient due to insufficient qualified resources and appropriate systems to perform such function. Therefore, the ability to prevent and control lapses and errors in our accounting function could not be rendered effectively.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our fourth fiscal quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.19

~~Management’s~~Also, ~~Report~~we Onare ~~Internal~~integrating the financial resources of several ~~Control~~businesses ~~Over~~in ~~Financial~~our ~~Reporting~~new corporate structure. The relatively small number of professionals we employ in bookkeeping and accounting functions prevents us from appropriately segregating duties within our internal control systems. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

~~Our~~Based ~~management~~on isthe ~~responsible for establishing and maintaining adequate internal~~ control ~~over~~deficiencies ~~financial~~identified ~~reporting~~above, aswe ~~defined~~intend to indesign ~~Rule~~and ~~13a-15(f)~~plan ~~and~~to ~~15d-15(f)~~implement, ~~promulgated~~specific ~~under the~~remediation ~~Exchange~~initiatives ~~Act.~~which include:

~~The~~· ~~Company’s~~Evaluating ~~management, including~~ the ~~Company’s~~ ~~Chief~~roles ~~Executive~~of ~~Officer~~our ~~and~~existing ~~Chief~~accounting ~~Financial~~personnel ~~Officer,~~in ~~assessed~~an ~~the~~effort ~~effectiveness~~to ofrealign the ~~Company’s internal control over financial~~ reporting asstructure of ~~December~~our ~~31,~~internal ~~2011. In~~auditing ~~making~~staff ~~this~~in ~~assessment,~~China ~~the~~that ~~Company’s~~will ~~management used~~test ~~the~~and ~~criteria~~monitor ~~set forth by~~ the ~~Committee~~implementation of ~~Sponsoring~~our ~~Organizations~~accounting ofand ~~the~~internal ~~Treadway Commission (“COSO”) in Internal Control-Integrated Framework. The COSO framework is based upon five integrated components of~~ control: ~~control environment, risk assessment, control activities, information and communications and ongoing monitoring~~procedures.

~~Based~~· onEngaging ~~the~~an ~~assessment performed~~outside, ~~management has~~independent ~~concluded that the Company’s~~ internal ~~control~~controls ~~over~~consultant ~~financial~~to ~~reporting,~~assist asus ofin ~~December~~addressing ~~31, 2011, is effective and provides reasonable assurance regarding~~ the ~~reliability~~aforementioned ofdeficiencies ~~its financial reporting~~ and ~~the~~generally ~~preparation~~provide ofguidance ~~its~~on ~~financial~~proper ~~statements~~US ~~in accordance with generally accepted~~ accounting ~~principles~~practices.

~~There~~· ~~has~~Increasing ~~been no change in~~ our ~~internal~~accounting ~~controls over~~and ~~financial~~financing ~~reporting~~personnel ~~during our fourth fiscal quarter ended December 31~~resources, ~~2011,~~by ~~that~~retaining ~~has~~more ~~materially~~US ~~affected,~~GAAP orknowledgeable ~~is reasonably likely to materially affect, our internal controls over~~ financial ~~reporting~~professionals.

~~Because~~These ofremedial ~~its~~measures ~~inherent~~may ~~limitations~~not be fully effectuated or may be insufficient to address the significant deficiencies we identified, and there can be no assurance that significant deficiencies or material weaknesses in our internal control over financial reporting ~~may~~will not ~~prevent~~be ~~material~~identified ~~errors~~ or ~~fraud~~occur in the future. AIf ~~control~~additional significant ~~system,~~deficiencies no(or ~~matter~~if ~~how~~material ~~well~~weaknesses) ~~conceived~~in ~~and~~our ~~operated~~internal controls are discovered or occur in the future, among other ~~can~~similar ~~provide~~or ~~only~~related ~~reasonable,~~effects: ~~not~~(i) ~~absolute,~~we ~~assurance~~may ~~that~~fail ~~the~~to ~~objectives~~meet offuture ~~the~~reporting ~~control~~obligations ~~system~~on ~~are~~a ~~met.~~timely ~~The~~basis, ~~continued~~(ii) ~~effectiveness~~our consolidated financial ofstatements ~~our~~may ~~internal~~contain ~~control~~material ~~over~~misstatements, ~~financial~~(iii) ~~reporting~~we ismay ~~subject~~be required to ~~risks,~~restate ~~including~~prior ~~that~~period ~~the~~financial ~~control~~results, ~~may~~(iv) ~~become~~we ~~inadequate because~~may ofbe ~~changes~~subject into ~~conditions~~litigation and/or ~~that~~regulatory ~~the~~proceedings, ~~degree~~and of(v) ~~compliance with~~ our ~~policies~~business orand ~~procedures~~operating results may ~~deteriorate~~be harmed.

~~This annual report does not include an attestation report of the Company~~Management’s ~~registered~~Annual ~~independent~~Report ~~public~~on ~~accounting~~Internal ~~firm~~Control ~~regarding internal control~~ over ~~financial reporting. Management’s~~ ~~report~~Financial was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual reportReporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Internal control over financial reporting includes policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and/or our board of directors; and

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

Under the supervision and with the participation of our chief executive officer and chief financial officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2012, using the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“Treadway”).

Based on this evaluation, our management concluded that as of December 31, 2012, our controls and procedures were not effective due to the significant deficiencies in our internal controls over financial reporting discussed above.

Inherent Limitations over Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all errors or misstatements and all fraud. Therefore, even those systems determined to be effective can provide only reasonable, not absolute, assurance that the objectives of the policies and procedures are met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

1521

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

~~Our~~The ~~directors~~following table and ~~executive~~the ~~officers~~paragraphs ~~and~~following ~~their~~sets ~~respective~~forth the ~~ages~~name, ~~as of~~age ~~March~~and ~~31,~~position ~~2010,~~of ~~are~~our asexecutive ~~follows:~~officers and directors.

Name	Age	Principal Positions
NAME	AGE	POSITION
Jiayin Wang	6061	Chief Executive Officer, President, and Director (Principal Executive Officer)
Weihai Liu	4142	Chief Financial Officer (Principal Financial Officer)
Bing Wang	4344	Independent Director
Ping Gao	4647	Independent Director

The following describes the business experience of each of our executive officers and directors, including other directorships held in reporting companies, if any:

Jiayin Wang. Mr. Jiayin Wang has served as our President and as director of the Corporation since October 20, 2008. He founded YinFa Resource, an affiliate of the Corporation, in 2001 and has continuously served as its president and chairman. Mr. Wang has been the People’s Senator of Suining City, Sichuan Province, the PRC since 1995 and the Chairman of Sichuan Province DAR Association since 2001. Mr. Wang was named Excellent Entrepreneur of Sichuan Province in 2004, National Entrepreneur Star Award in 2001 and 2004, Entrepreneur Star of Sichuan Province in 2001 and 2004 and Top Ten Entrepreneur Star of Suining City in 2005, among many other awards. On August 20, 2010, Mr. Wang was appointed Chief Executive Officer of the Corporation.

Weihai Liu. Mr. Weihai Liu has served as our Chief Financial Officer of the Corporation since September 29, 2010. From 2005 to most recently, Mr. Liu was Head of Finance in Guangdong Dongsong Sanxiong Electrical Appliance Co., Ltd where he was in charge of all aspects in budget management, accounting, financial management, taxation planning, assets and investment risk management. He also created systems of cost accounting, cost control, cost analysis, internal audit and also the financial management of all branch companies. From 1996 to 1998, he served as CFO in Guangzhou Longfa Group, which had four subsidiaries located in Beijing and Guangdong Province. Mr. Liu is a Certified Public Accountant in China.

Bing Wang. Mr. Bing Wang has served as our Independent Director of the Corporation since 2006. Mr. Wang has extensive experience in business and investment management. Mr. Wang has a strong professional relationship with the Sichuan provincial government and the Suining municipal government.

Ping Gao. Mr. Ping Gao has served as our Independent Director of the Corporation since 2010. In September 2004, he was President of the Suining City Leprosy Hospital. In August 2000, he was Vice President of Suining City Public Hospital. In August 1982, he was Lead Botanist at the Yajiang County Forestry Bureau for 15 years. Mr. Ping graduated from Xiamen University with an undergraduate engineering degree in 1964.

Term of Office

All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.

Committees of the Board of Directors

Our board of directors intends to establish an audit committee, a compensation committee and a nominating and corporate governance committee. Our board may establish other committees from time to time to facilitate the management of our company; however, we have not yet established any such committees.

1622

Audit committee. Our audit committee will oversee a broad range of issues surrounding our accounting and financial reporting processes and audits of our financial statements, including by (1) assisting our board in monitoring the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditor's qualifications and independence and the performance of our internal audit function and independent auditors, (2) appointing, compensating, retaining and overseeing the work of any independent registered public accounting firm engaged for the purpose of performing any audits, reviews or attest services, and (3) preparing the audit committee report that may be included in our annual proxy statement or annual report on Form 10-K. We will have at least three directors on our audit committee, each of whom will be independent under the requirements of the NASDAQ Capital Market, the Sarbanes-Oxley Act and the rules and regulations of the SEC. We have not yet formed our audit committee.

Compensation committee. Our compensation committee will review and recommend our policies relating to compensation and benefits for our executive officers and other significant employees, including reviewing and approving corporate goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers, evaluating the performance of our executive officers relative to goals and objectives, determining compensation for these executive officers based on these evaluations and overseeing the administration of our incentive compensation plans. The compensation committee will also prepare the compensation committee report that may be included in a subsequent annual report on Form 10-K. We will have at least two directors on our compensation committee, each of whom will be independent under the requirements of the NASDAQ Capital Market. We do not yet have a compensation committee.

Nominating and corporate governance committee. Our nominating and corporate governance committee will (1) identify, review and recommend nominees for election as directors, (2) advise our board of directors with respect to board composition, procedures and committees, (3) recommend directors to serve on each committee, (4) oversee the evaluation of our board of directors and our management, and (5) develop, review and recommend corporate governance guidelines and policies. We will have at least two directors on our nominating and corporate governance committee, each of whom will be independent under the requirements of the NASDAQ Capital Market. We do not yet have a nominating and corporate governance committee.

Director Independence

Currently Mr. Bing Wang and Ping Gao are our independent directors within the meaning of applicable Nasdaq Listing Rules and the rules promulgated by the SEC.

Code of Ethics

The Company has adopted a Code of Ethics for its directors, executive officers and employees.

Shareholder Communications

The Corporation provides a process for stockholders to send communications to the Board. Information regarding stockholder communications with the Board can be found on the Corporation’s Web site at http://www.chinahealthresource.com.

Compliance with Section 16(a) of the Act

Section 16(a) of the Exchange Act requires the Corporation’s officers and Directors, and persons who beneficially own more than ten percent of a registered class of the Corporation’s equity securities (collectively, the “Reporting Persons”) to file reports of ownership and changes in ownership with the SEC. Such Reporting Persons are required by the SEC rules to furnish the Corporation with copies of all Section 16 forms they file. Based solely on its review of the copies of such filings, the Corporation believes that during the fiscal year ended December 31, 2011, the following filings were late: Mr. Jiayin Wang will file one late report covering a total of one late transaction.

17Based solely upon a review of copies of Section 16(a) reports and representations received by us from reporting persons, and without conducting any independent investigation of our own, in the year ended December 31, 2012, our officers, directors and ten percent shareholders are in compliance with Section 16(a).

Item 11. Executive Compensation.

Compensation Discussion and Analysis

Philosophy and objectives

For the period December 31, ~~2010~~2011 through ~~December~~ December 31, ~~2011~~2012, all compensation decisions were made by our board of directors. The primary objective of our compensation policies and programs with respect to executive compensation is to serve our shareholders by attracting, retaining and motivating talented and qualified individuals to manage and lead our business. We will focus on providing a competitive compensation package that provides significant short and long-term incentives for the achievement of measurable corporate and individual performance objectives. We intend to establish a compensation committee and future decisions regarding executive compensation will be the responsibility of that committee.

Elements of executive compensation

Base salary. We will provide our senior management with a level of base salary in the form of cash compensation appropriate to their roles and responsibilities. Base salaries for our executives are established based on the executive’s qualifications, experience, scope of responsibilities, future potential and past performance and cash available to pay executive compensation. Base salaries will be reviewed annually and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. We will consider four factors in determining the base salaries of our named executive officers. These four factors are, in order of significance, (1) creating an incentive to achieve corporate goals, (2) individual performance, (3) cash available to pay compensation and (4) the total compensation each executive officer previously received while employed with us, if any.

Incentive cash bonuses. Our practice will be to seek to award incentive cash bonuses to our executive officers based upon their individual performance, as well as our overall business and strategic objectives. In determining the amount of cash bonuses paid to our named executive officers, we will consider the same four factors as in determining their base salaries. See “Summary Compensation Table” below.

Compliance with Sections 162(m) and 409A of the Internal Revenue Code

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1 million paid to certain executive officers, unless such compensation qualifies as performance-based compensation. Among other things, in order to be deemed performance-based compensation for Section 162(m) purposes, the compensation must be based on the achievement of pre-established, objective performance criteria and must be pursuant to a plan that has been approved by our shareholders. At least for the next several years, we expect the cash compensation paid to our sole executive officer and other executive officers, if any, to be below the threshold for non-deductibility provided in Section 162(m), and our equity incentive plans will afford our compensation committee with the flexibility to make a variety of types of equity awards to our executive officers, the deductibility of which will not be limited under Section 162(m). However, our compensation committee, which we expect to form, will fashion our future equity compensation awards. However, we do not now know whether any such awards will satisfy the requirements for deductibility under Section 162(m).

We also currently intend for our executive compensation program to satisfy the requirements of Internal Revenue Code Section 409A, which addresses the tax treatment of certain nonqualified deferred compensation benefits.

18Executive Officers Compensation Table —Years Ended December 31, 2012, 2011 and 2010

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our principal executive officer as of the end of fiscal 2012 and the two most highly compensated executive officers as of the end of fiscal 2012. We refer to these executive officers as our “Named Executive ~~Compensation~~Officers.”

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our principal executive officer as of the end of fiscal 2011 and the two most highly compensated executive officers as of the end of fiscal 2011. We refer to these executive officers as our “Named Executive Officers.” 24

Summary Compensation Table

Name and Position	Year	Salary ($)(2)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings($)		All Other Compensation ($)		Total Compensation ($)
Jiayin Wang ⁽¹⁾	2012	$	-		-	$		$	77,332		-		-	$	-	$	77,3322
Principal	2011	$	-		-	$	-	$	77,332		-		-	$	-	$	77,332
Executive Officer,	2010	$	-	$	138,000	$	140,000	$	19,333		-		-	$	-	$	297,333
President and Director

Weihai Liu ⁽²⁾	2012	$	-											$		$	0
Principal Financial	2011	$	-		-		-		-		-		-	$	-	$	0
Officer	2010	$	-		-		-		-		-		-	$	-	$	0

Jiang Chen ⁽³⁾	2012	$	-	$	-	$	-		-		-		-	$	-	$	-
Former Principal	2011	$	-	$	-	$	-		-		-		-	$	-	$	-
Executive Officer	2010	$	-	$	-	$	-		-		-		-	$	-	$	-
and Director

Yi Zhou ⁽⁴⁾	2012	$	-	$	-	$	-		-		-		-	$	-	$	-
Former Principal	2011	$	-	$	-	$	-		-		-		-	$	-	$	-
Financial Officer	2010	$	11,710	$	-	$	-		-		-		-	$	-	$	11,710
and Director

	Year	Salary	Bonus	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All Other Compensation	Total
		($)	($)	($)	($)	($)	($)	($)	($)
Name and Principal
Position (a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
Jiayin Wang (1)	2011	-	-	-	$77,332	-	-	-	$77,332
Principal Executive Officer, President and Director	2010	-	$138,000	$140,000	$19,333	-	-	-	$297,333
	2009	$29,274	-	-	-	-	-	-	$29,274
Weihai Liu (2)	2011	-	-	-	-	-	-	-	$0
Principal Financial Officer	2010	-	-	-	-	-	-	-	$0
	2009	-	-	-	-	-	-	-	$0
Jiang Chen (3)	2011	-	-	-	-	-	-	-	-
Former Principal Executive Officer and Director	2010	-	-	-	-	-	-	-	-
	2009	$8,000	-	-	-	-	-	-	$8,000
Yi Zhou (4)	2011	-	-	-	-	-	-	-	-
Former Principal Financial Officer and Director	2010	-	-	-	-	-	-	-	$11,710
	2009	$11,710		-	-	-	-	-	$15,000

(1) Mr. Jiayin Wang’s employment with the Corporation as President commenced in October 20, 2008, and his employment as Principal Executive Officer commenced August 20, 2010.

(1) Mr. Jiayin Wang’s employment with the Corporation as President commenced in October 20, 2008, and his employment as Principal Executive Officer commenced August 20, 2010

(2) Mr. Weihai Liu employment with the Corporation as Principal Financial Officer commenced in September 29, 2010.

(3) Mr. Jiang Chen’s employment with the Corporation terminated in August, 2010.

(4) Ms. Yi Zhou’s employment with the Corporation terminated in September, 2010.

Summary of Executive Compensation

Jiayin Wang. Mr. Jiayin Wang ~~served~~ served as President and director of the Board under a 3 year term beginning in 2008. Mr. Wang was to receive a an annual salary of RMB 200,000, or approximately U.S.$29,851 for the fiscal year 2010, based upon the closing foreign exchange rate published by Bloomberg on March 25, 2010 of U.S.$1.00 = RMB 6.5615 (the “RMB Rate”). Mr. Wang elected to forego his salary for 2010 ~~and~~, 2011 and 2012. On August 20, 2010, Mr. Wang accepted the Corporation’s offer regarding his employment with the Corporation as its Chief Executive Officer. His position as Chief Executive Officer offers no salary, although he was granted a signing bonus of U.S. $50,000 payable in shares of the Company's 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 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"). On August 20, 2010, Mr. Wang also received a past performance bonus in the amount of U.S. $88,000 payable in shares of Common Stock (shares not registered under the 1933 Act) 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. Mr. Wang was also offered stock options to purchase up to six million (6,000,000) shares of common stock at a price of $.02 per share vesting over 18 months in equal monthly installments pursuant to a Stock Option Agreement with the Company which is granted pursuant to the company’s 2009 Omnibus Incentive Plan and have a grant date of August 20, 2010.

Weihai Liu. On September 29, 2010, Mr. Liu accepted the Corporation’s offer regarding his employment with the Corporation as its Chief Financial Officer. Mr. Liu was to receive an annual salary of RMB 80,000, (approximately U.S. $11,941). Mr. Liu elected to forego this salary for 2010 and 2011.25

Jiang Chen. On August 20, 2010, Mr. Chen resigned as Chief Executive Officer. There is no severance or termination agreement.

Yi Zhou. On September 29, 2010, Ms. Zhou resigned as Chief Financial Officer. There is no severance or termination agreement.

Other than the agreements mentioned herein, the Corporation has no employment agreements with any of our named executive officers, nor do we have any compensatory plans or arrangements with respect to any named executive officers that results or will result from the resignation, retirement or any other termination of such executive officer's employment with the Corporation or from a change-in-control of the Corporation or a change in the named executive officer's responsibilities following a change-in-control wherein the amount involved, including all periodic payments or installments, exceeds $100,000.

Outstanding Equity Awards at Fiscal Year-End

We had no outstanding options, warrants or rights to acquire shares of our common stock under plans either approved, or not approved, by our stockholders. Board members are eligible to participate in the 2009 Omnibus Incentive Plan after the Effective Date.

Compensation of Directors

~~The~~For ~~table~~the ~~below~~year ~~summarizes~~ended ~~the~~December ~~compensation~~31, 2012, ofno ~~all~~cash ~~persons~~compensation ~~who~~was ~~served~~paid, and no equity grants were made, to the Corporation’s directors. Mr. Jiayin Wang's compensation as aan ~~Director~~executive officer of the Corporation inis ~~fiscal~~disclosed ~~2009:~~under "Executive Compensation - Summary Compensation Table." Usually, the Board reviews the level of compensation it receives for its service every year. The Board may take action at any time to amend the amount or type of compensation it receives.

~~DIRECTOR COMPENSATION~~26

Fees Earned or Paid in Cash Stock Awards Option Awards Non-Equity Incentive Plan Compensation Change in Pension Value and Nonqualified Deferred Compensation Earnings All Other Compensation Total ($) ($) ($) ($) ($) ($) ($) Name (a) (b) (c) (d) (e) (f) (g) (j) Jiayin Wang - - - - - - - Bing Wang - - - - - - - Gao Ping - - - - - - - Gewei Wang - - - - - - - Yi Zhou - - - - - - -

For the year ended December 31, 2011, no cash compensation was paid, and no equity grants were made, to the Corporation’s directors. Mr. Jiayin Wang's compensation as an executive officer of the Corporation is disclosed under "Executive Compensation - Summary Compensation Table." Usually, the Board reviews the level of compensation it receives for its service every year. The Board may take action at any time to amend the amount or type of compensation it receives.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain ~~information~~ information regarding beneficial ownership of our common stock as of March 31, ~~2011~~2013, for:

• each person or group known to us to beneficially own 5% or more of our common stock;

• each of our directors and director nominees;

• each of our named executive officers; and

• all of our executive officers and directors as a group.

Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, each entity or person listed below maintains an address of 343 Sui Zhou Zhong Road, Suining City, Sichuan Province, P.R. China.

The number of shares beneficially owned by by each shareholder is determined under rules promulgated by the SEC. There are no shares of common stock as to which any person has the right to acquire beneficial ownership within 60 days after March 31, 2012 through the exercise of any stock option, warrant or other right. The percentage ownership is based on 177,435,953 shares of common stock outstanding as of March 29, 2012.

21There are no shares of common stock as to which any person has the right to acquire beneficial ownership within 60 days after April 30, 2013 through the exercise of any stock option, warrant or other right. The percentage ownership is based on 177,435,953 shares of common stock outstanding as of April 30, 2013.

Beneficial owner	Number of shares beneficially Owned	Percentage of shares outstanding (1)
Name and Address of Beneficial Owner		Number of Shares Beneficially Owned			Percentage of Shares Beneficially Owned (1)
Common Stock, Lei Guo (2), No. 188 Xishan Road, Chuanshan District, Suining City, Sichuan Province, the People’s Republic of China	43,000,000 (2)	24.2%
5% or greater shareholders
Jiayin Wang	72,647,059	40.9%
Common Stock, Lei Guo (2), No. 188 Xishan Road, Chuanshan District, Suining City, Sichuan Province, the People’s Republic of China			43,000,000	(2)		24.2	%
Jiang Chen Principal Executive Officer	0	0%
Jiayin Wang			72,647,059			40.9	%
Yi Zhou Principal Financial Officer	0	0%
Officers and Directors (other than Mr. Jiayin Wang, whose share ownership is referenced under the heading 5% of greater shareholders)
Gewei Wang Director	0	0%
Weihai Liu			0			0
Bing Wang Director	0	0%
Bing Wang			0			0
All Directors and Executive Officers as a Group	72,647,059	40.9%
Ping Gao			0			0
Jiang Chen			0			0
Yi Zhou			0			0
Gewei Wang			0			0
All officers and directors as a group (5 persons)			72,647,059			40.9	%

(1) This percentage is a fraction with its denominator as 177,435,953 shares of the Corporation’s Common Stock.

(2) Lei Guo (the “Trustee”) is the trustee, on behalf of Sichuan Yinfa Resource Development Co., Ltd., a PRC company (“Yinfa Resource”). This amount includes the 43,000,000 shares of common stock issued and held by Mr. Lei Guo, as Trustee, on behalf of Sichuan Yinfa Resource Development Co., Ltd. Yinfa Resource, as Trustor, retains sole dispositive and voting control over the subject shares. Mr. Jiayin Wang is the controlling stockholder and founder of YinFa Resource and, consequently, is the indirect beneficial owner of the shares of common stock held by the Trustee27

Lei Guo (the “Trustee”) is the trustee, on behalf of Sichuan Yinfa Resource Development Co., Ltd., a PRC company (“Yinfa Resource”). This amount includes the 43,000,000 shares of common stock issued and held by Mr. Lei Guo, as Trustee, on behalf of Sichuan Yinfa Resource Development Co., Ltd. Yinfa Resource, as Trustor, retains sole dispositive and voting control over the subject shares. Mr. Jiayin Wang is the controlling stockholder and founder of YinFa Resource and, consequently, is the indirect beneficial owner of the shares of common stock held by the Trustee.

Equity Compensation Plan Information

Plan category	~~Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)~~	~~Weighted-average~~Number ~~exercise~~of ~~price~~securities to be issued upon exercise of outstanding options, warrants and rights (ba)	~~Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)~~		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	~~28,000,000(1)~~	0	28,000,000	(1)		0		28,000,000
Equity compensation plans not approved by security holders	0	0	0			0		0
Total	~~28,000,000~~	0	28,000,000			0		28,000,000

(1) Pursuant to the Employment Agreement with Mr. Jiayin Wang, options to acquire stock at $.02 per share vested in 2010 for 3 months at 33,333.33 shares per month. Mr. Wang has not exercised these vested options as of March 29, ~~2012~~2013.

Policies and Procedures for Related Party Transactions

We intend to adopt a written policy that requires any transaction, arrangement or relationship in which we will be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of the company's total assets at year end for the last two completed fiscal years, and in which any of our directors, executive officers or shareholders beneficially owning at least 5% of any class of our voting securities, or any of their immediate family members or any entity in which any of the foregoing persons is employed or is a general partner or principal had or will have a direct or indirect material interest, to be submitted to our audit committee for review, consideration and approval. In the event that a proposed transaction with a related person involves an amount that is less than the threshold amount stated above, the transaction will be subject to the review and approval of our Chief Executive Officer (or our Chief Financial Officer in the event our Chief Executive Officer, an immediate family member of the Chief Executive Officer, or an entity in which our Chief Executive Officer or a member of his immediate family is employed or is a general partner or principal is a party to such transaction). If the transaction is approved by our Chief Executive Officer or Chief Financial Officer, such officer will report the material terms of the transaction to our audit committee at its next meeting. The policy will provide for periodic monitoring of pending and ongoing transactions. In approving or rejecting the proposed transaction, our audit committee will consider the relevant facts and circumstances available to it, including, (1) the impact on a director’s independence if the related person is a director or his or her family member or related entity, (2) the material terms of the proposed transaction, including the proposed aggregate value of the transaction, (3) the benefits to us, (4) the availability of other sources for comparable services or products (if applicable), and (5) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to our employees generally. Our audit committee will approve only those transactions that the committee determines to be, in light of known circumstances, in, or not inconsistent with, our best interests and the best interest of our shareholders.

There have been no transactions or proposed transactions in which we or any of our subsidiaries was or is to be a party in which the amount involved exceeds the lesser of $120,000 or 1% of the average total assets of the Company at year-end for the last two completed fiscal years and in which any of our directors, executive officers or beneficial holders of more than 5% of the outstanding shares of Common Stock, or any member of the immediate family of any of the foregoing persons, had, has or will have any direct or indirect material interest, except as follows:

Mr. Jianyin Wang is the controlling shareholder of Sichuan Yinfa Resource and the President and Director of the Company. Mr. Wang loaned the Company RMB 3,000,000 (approximately $ US $451,467) on December 27, 2010 through an unsecured promissory note payable on December 26, ~~2011~~2012 which note has been extended to December 26, ~~2012~~2013 as set forth in Section 7 hereof.

Item 14. Principal Accounting Fees and Services.

The following table sets forth fees billed to us for professional services rendered by Lake & Associates CPA’s LLC, our independent auditor, for the audit of our financial statements for the years ended December 31, ~~2009~~2012 and December 31, ~~2008~~2010.

	2011		2010
	2012		2011
Audit Fees	$	3247,000	$	3047,000
Audit-Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—
Total Audit and Audit-Related Fees	$	3247,000	$	3047,000

2329

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following financial statements of the Company are included following the signature page, commencing on page F-1:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets – as of December 31, ~~2011 and~~2012 ~~2010~~and 2011

Consolidated Statement of Operations – For years ended December 31, ~~2011~~2012 and ~~2010~~2011

Consolidated Statement of Cash Flows – For years ended December 31, ~~2011~~2012 and ~~2010~~2011

Consolidated Statement of Equity (Deficit) – For years ended December 31, ~~2011~~2012 and ~~2010~~2011

Notes to Audited Financial Statements

(b) Exhibits: The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-K

~~SIGNATURES~~30

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CHINA HEALTH RESOURCE, INC.
By: /s/ Wang, Jiayin	Date: April 12, 2012
Wang, Jiayin
President

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated

Signature	Title	Date
/s/ Wang, Jiayin	Chief Executive Officer, President, and Director	April 12, 2012
Wang, Jiayin	(Principal Executive Officer)
/s/ Liu, Weihai	Chief Financial Officer and Director	April 12, 2012
Liu, Weihai	(Principal Financial Officer)
/s/ Ping Gao	Director	April 12, 2012
Ping, Gao
/s/ Wang, Bing	Director	April 12, 2012
Wang, Bing

CHINA HEALTH RESOURCE, INC.

EXHIBIT INDEX

2010 ANNUAL REPORT ON FORM 10-K

Exhibit Number	Description
3.1	Certificate of Incorporation, as adopted on February 26, 2002 and as amended on May 14, 2003, October 13, 2006, April 23, 2007 and May 8, 2007.(1)
3.2	Amended and Restated By-laws, as adopted on February 17, 2009.(1)
7.1	Bank Loan documents between Suining Shi Yinfa Bai Zhi Chan Ye You Xiam Gog Si and Suining City Commercial National Bank dated December 27, 2010 and related Bank Collateral Agreement. (2)
7.2	Unsecured promissory note agreement with Mr. Jiayin Wang, Company’s Chairman, President and Chief Executive Officer dated December 27, 2010.(2)
10.1	License Agreement Relating to the Exclusive Right to Use “Suining Sichuan Angelica” Certified Trademark, by and between Sichuan Province Suining City DAR Association and Yinfa, dated March 16, 2004.(3)
10.2	Import-Export Agent Executive Agreement, by and between Suining Yinfa DAR Industrial Co. and Korean DongUi Cosmetics Co., dated March 5, 2007. (4)
10.3	Sichuan DAR Purchase and Processing Contract, by and between Suining Yinfa DAR Industrial Co. and Chengdu Derentang Pharmacy Company Medicine Branch, dated April 18, 2007.(5)
10.4	Debt Transfer and Assumption Agreement by and among Yinfa, Suining Yinfa Building Construction and Development Co., Ltd., Chengdu Lianqiang Investment Co. and Yinfa Resource, dated September 20, 2008.(6)
14.1	Code of Ethics.(7)
21.1	Subsidiaries of Registrant. (8)
31.1	Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer.(8)
31.2	Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer.(8)
32.1	Section 1350 Certifications of Chief Executive Officer.(8)
32.2	Section 1350 Certifications of Chief Financial Officer.(8)

(1)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(2)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2010.
(3)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
(4)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 6, 2007.
(5)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2007.
(6)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.
(7)	Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006.
(8)	Filed herewith.

CHINA HEALTH RESOURCE, INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011 AND 2010

Report of Independent Registered Public Accounting Firm	F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 2011 and 2010	F-3
Consolidated Statements of Operations for the years ended December 31, 2011 and 2010	F-4
Consolidated Statement of Cash Flows for the years ended December 31, 2011 and 2010	F-5
Consolidated Statement of Equity (Deficit) for the years ended December 31, 2011 and 2010	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of China Health Resource Inc.

We have audited the accompanying consolidated balance sheets of China Health Resource Inc. and Subsidiaries (a Delaware corporation) as of December 31, ~~2011~~2012 and ~~2010~~2011, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the two-year period ended December 31, ~~2011~~2012. These financial statements are the responsibility of the company’s management. ~~Our~~ Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements ~~referred~~ referred to above present fairly, in all material respects, the financial position of China Health Resource Inc. and Subsidiaries. (a Delaware corporation). as of December 31, ~~2011~~2012 and ~~2010~~2011 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, ~~2011~~2012 in conformity with accounting principles generally accepted in the United States of America.

/s/ Lake & Associates, CPA’s LLC Lake & Associates, CPA’s LLC Schaumburg, Illinois April 25, 2013

Lake & Associates, CPA’s LLC

Schaumburg, Illinois

April 24, 2012

1905 Wright Boulevard

Schaumburg, IL 60193

Phone: 847-524-0800

Fax: 847-524-1655

~~F-2~~31

China Health Resource, Inc. and Subsidiaries

Audited Consolidated Balance Sheets

As of December 31, ~~2011~~2012 and December 31, ~~2010~~ 2011

ASSETS	December 31, 2011			December 31, 2010
CURRENT ASSETS
Cash and Cash Equivalents	$	241,755		$	90,306
Accounts Receivable		5,386,455			1,701,812
Advances to suppliers		32,231			491
Prepayment for land usage		3,520,131			-
Deferred Inventory Cost		3,079,930			2,453,892
Inventory		1,276,462			653,695
TOTAL CURRENT ASSETS		13,536,964			4,900,196
FIXED ASSETS
Property, Plant, and Equipment		1,043,867			991,883
Accumulated Depreciation		(212,526	)		(163,928	)
TOTAL NET FIXED ASSETS		831,341			827,955
TOTAL ASSETS	$	14,368,305		$	5,728,151
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities	$	875,080		$	436,015
Other Payables		201,271			110,516
Due to Shareholder		376,457			376,457
Taxes Payable		21,200			-
Notes Payable		1,206,177			905,974
Convertible debt					80,000
TOTAL CURRENT LIABILITIES		2,680,185			1,908,962
TOTAL LIABILITIES		2,680,185			1,908,962
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock Class A ( 500,000,000 shares authorized,
177,435,953 and 159,935,953 issued and outstanding,		177,436			159,936
par value $0.001)
Preferred Stock (50,000,000 shares authorized,
0 issued and outstanding)		-			-
Additional paid in capital		1,728,539			1,274,144
Accumulated other comprehensive income		661,313			235,737
Retained earnings (deficit)		9,120,832			2,149,372
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		11,688,120			3,819,189
TOTAL LIABILITIES AND EQUITY	$	14,368,305		$	5,728,151

(Expressed in USD)

The accompanying notes are an integral part of these financial statements.

	12/31/2012		12/31/2011

ASSETS

Current Assets
Cash and Cash Equivalents	$	1,295,149	$	241,755
Accounts Receivable		6,036,252		5,386,455
Advance to Suppliers		4,291,635		32,231
Prepayment For Land Usage		3,520,020		3,520,131
Deferred Inventory Cost		8,253,292		3,079,930
Inventory		1,648,759		1,276,462
Total Current Assets		25,045,107		13,536,964

Fixed Assets
Property, Plant and Equipment, Net		786,097		831,341
Total Assets	$	25,831,204	$	14,368,305

LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities	$	5,665,986	$	875,080
Other Payable		326,781		201,271
Due to Shareholder		376,457		376,457
Taxes Payable		684,559		21,200
Notes Payable		-		1,206,177
Short-Term Loan Payable		5,395,883		-
Total Current Liabilities	$	12,449,666	$	2,680,185

Total Liabilities	$	12,449,666	$	2,680,185

STOCKHOLDERS' EQUITY

Common Stock Class A (500,000,000 shares authorized, 177,435,953 shares issued and outstanding, par value US$0.001) at December 31, 2012 and December 31, 2011.	$	177,436	$	177,436
Preferred Stock (50,000,000 shares authorized , 0 issued and outstanding)		-		-
Additional Paid in Capital		1,736,497		1,728,539
Retained Earnings		662,205		9,120,832
Accumulated Other Comprehensive Income		10,805,400		661,313
Total Stockholders’ Equity		13,381,538		11,688,120

Total Liabilities & Stockholders’ Equity	$	25,831,204	$	14,368,305

~~F-3~~32

China Health Resource, Inc. and Subsidiaries

Audited Consolidated ~~Statement~~Statements of Operations

For the Year ~~Ended~~ended December 31, ~~2011~~2012 and ~~2010~~2011

	For the 12 months ended
	December 31, 2011			December 31, 2010
REVENUES
Sales	$	34,338,974		$	10,282,207
Cost of Sales		24,056,723			5,767,564
GROSS PROFIT		10,282,251			4,514,644
OPERATING EXPENSES
Selling, General, and Administrative		808,148			751,532
Interest Expense		75,630			18,222
TOTAL OPERATING EXPENSES		883,778			769,755
OPERATING INCOME (LOSS)		9,398,473			3,744,889
OTHER INCOME / (EXPENSES)
Other		(497	)		975
TOTAL OTHER INCOME / (EXPENSE)		(497	)		975
NET INCOME (LOSS) BEFORE TAXES		9,397,976			3,745,863
INCOME TAX EXPENSE		2,426,516			1,038,578
NET INCOME (LOSS)	$	6,971,460		$	2,707,286
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation (Loss) Gain		425,576			78,595
COMPREHENSIVE INCOME (LOSS)	$	7,397,037		$	2,785,880
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		171,327,620			148,661,443
Fully diluted		171,327,620			153,661,443
NET INCOME (LOSS) PER COMMON SHARE
Basic		0.04			0.02
Fully diluted		0.04			0.02

(Expressed in USD)

The accompanying notes are an integral part of these financial statements.

	For the year ended			For the year ended
	12/31/2012			12/31/2011
REVENUES
Sales	$	22,927,862		$	34,338,974
Cost of Sales		19,427,125			24,056,723
Gross Profit		3,500,737			10,282,251

Operating Expenses
Selling, General and Administrative Expense		966,503			808,148
Interest Expense		270,752			75,630
Total Operating Expenses		1,237,255			883,778
Operating Income		2,263,482			9,398,473

OTHER INCOME / (EXPENSES)
Other Expense		(8	)		(497	)
Total Other Income/(Expense)		(8	)		(497	)

Net Income (Loss) Before Taxes		2,263,474			9,397,976

Provision( Credit) Income Tax		578,906			2,426,516

Net Income (Loss)		1,684,568			6,971,460

Other Comprehensive Income (Loss)
Foreign Currency Translation (Loss) & Gain
		892			425,576
Comprehensive Income (Loss)	$	1,685,460		$	7,397,036

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	$	0.01		$	0.04
Fully diluted	$	0.01		$	0.04

~~F-4~~See Accompanying Notes to the Financial Statements and Accountant’s Report

China Health Resource, Inc. and Subsidiaries

Audited Consolidated ~~Statement~~Statements of Cash Flows

For the Year ~~Ended~~ended December 31, ~~2011~~2012 and ~~2010~~2011

	For the 12 months ended
	December 31, 2011			December 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	6,971,460		$	2,707,286
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation		39,227			32,761
Contribution from shareholder's loan imputed interest		30,063			-
Common stocks to investment banking service		30,000			-
Stock-based compensation		31,832			145,958
Convertible debt for consulting service		-			80,000
Accounts receivable		(3,044,523	)		(770,828	)
Employee Advances and Other Receivable		(30,927	)		33,596
Bad debt provision		-			2,849
Prepayment for land usage and inventory		(3,920,957	)		(2,400,054	)
Inventory		(574,740	)		(256,846	)
Accounts payable and accrued liabilities		237,797			178,464
Other payable		82,997			436,593
Others		10,839			8,634
Tax payable		44,681			(324,048	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(92,251	)		(125,636	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		(12,133	)		(11,129	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(12,133	)		(11,129	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on short-term-note payable		711,920			206,756
Payments from short-term-note payable		(464,296	)		-
NET CASH PROVIDED BY FINANCING ACTIVITIES		247,624			206,756
FOREIGN CURRENCY TRANSLATION		8,209			2,104
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		151,449			72,095
CASH AND CASH EQUIVALENTS:
Beginning of period		90,306			18,211
End of period	$	241,755		$	90,306
SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash financing activity:
Common stock issued for settlement of CEO performance bonus payable	$	300,000		$	-
Common stock issued for settlement of convertible debt	$	80,000		$	-
Common stock issued for settlement of investment banking service	$	30,000		$	-
Inventory received in exchange for Note Receivable	$	-		$	350,384

(Expressed in USD)

The accompanying notes are an integral part of these financial statements.

	For the year ended
	December 31, 2012			December 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	1,684,568		$	6,971,460
Adjusted to reconcile net income to net cash used in operating activities
Depreciation		41,303			39,227
Stock-based compensation		7,958			31,832
Contribution from shareholder's loan imputed interest					30,063
Common stocks to investment banking service					30,000
Accounts Receivable		(649,492	)		(3,044,523	)
Employee Advance and Other Receivable		(4,256,282	)		(30,927	)
Prepayment for land usage		(5,169,667	)		(3,920,957	)
Inventory		(372,065	)		(574,740	)
Accounts Payable and Accrued Liabilities		4,811,248			237,797
Other Payable		125,424			82,997
Others		7,731			10,839
Tax Payable		639,081			44,681
Net Cash Provided by (used in) Operating Activities		(3,130,193	)		(92,251	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		(3,850	)		(12,133	)
Net Cash Provided by (used in) Investing Activities		(3,850	)		(12,133	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceed on short-term Loan Payable		6,502,030			711,920
Payment From short-term Notes payment		(2,315,357	)		(464,296	)
Net Cash Provided by Financing Activities		4,186,673			247,624

Foreign Currency Translation		764			8,209
Net Increase (Decrease)in Cash and Equivalents		1,053,394			151,449

CASH AND CASH EQUIVALENTS:
Beginning of period		241,755			90,306
End of period	$	1,296,516		$	241,755

~~F-5~~See Accompanying Notes to the Financial Statements and Accountant’s Report

China Health Resource, Inc. and Subsidiaries

Audited Consolidated ~~Statement~~Statements of Equity ~~(Deficit)~~

For the Year ~~Ended~~ended December 31, ~~2011~~2012 and ~~2010~~2011

																		Accumulated
	Common Stock								Preferred Stock				Additional		Retained			Other
	Class A		par value		Class B		par value						Paid-in		Earnings			Comprehensive
		Shares		0.001		Shares		0.01		Shares		Amount		Capital		(Deficit)			Income		Total
Balances @ December 31, 2009		142,288,894	$	142,289		-	$	-	$	-	$	-	$	1,145,832	$	(557,914	)	$	157,143	$	887,350
Issuance for CEO's appointment and bonus		17,647,059	$	17,647									$	120,353							138,000
Share-based compensation (option expenses)													$	7,959							7,959
Net Income (Loss) for the period															$	2,707,286					2,707,286
Other comprehensive income																		$	78,594		78,594
Balances @ December 31, 2010		159,935,953		159,936		-		-		-		-		1,274,144		2,149,372			235,737		3,819,189
Issuance for CEO's appointment and bonus																					-
Conversion of consulting service fee		10,000,000	$	10,000									$	70,000							80,000
Issuance for CEO's performance bonus payable		6,000,000	$	6,000									$	294,000							300,000
Share-based compensation (option expenses)													$	31,831							31,831
Shares issued to investment banking service		1,500,000	$	1,500									$	28,500							30,000
Contribution from shareholder's loan imputed interest													$	30,063							30,063
Net Income (Loss) for the period															$	6,971,460					6,971,460
Other comprehensive income																		$	425,576		425,576
Balances @ December 31, 2011		177,435,953		177,436		-		-		-		-		1,728,539		9,120,832			661,313		11,688,120

(Expressed in USD)

F-6

																		Accumulated
	Common Stock								Preferred Stock				Additional		Retained			Other
	Class A Shares		par value 0.001		Class B Shares		par value 0.01		Shares		Amount		Paid-in Capital		Earnings (Deficit)			Comprehensive Income		Total
Balance at January 1, 2010		142,288,894	$	142,289		-		-		-		-	$	1,145,832	$	(557,914	)	$	157,143	$	887,350
Issuance for CEO's appointment and bonus		17,647,059		17,647										120,353							138,000
Share-based compensation (option expenses)														7,959							7,959
Net Income (Loss) for the period																2,707,286					2,707,286
Other comprehensive income																			78,594		78,594
Balance at December 31, 2010		159,935,953	$	159,936		-		-		-		-	$	1,274,144	$	2,149,372		$	235,737	$	3,819,189

Balance at January 1, 2011		159,935,953	$	159,936		-		-		-		-	$	1,274,144	$	2,149,372		$	235,737	$	3,819,189
Issuance for CEO's appointment and bonus																					-
Conversion of consulting service fee		10,000,000		10,000										70,000							80,000
Issuance for CEO's performance bonus payable		6,000,000		6,000										294,000							300,000
Share-based compensation (option expenses)														31,831							31,831
Shares issued to investment banking service		1,500,000		1,500										28,500							30,000
Contribution from shareholder's loan imputed interest														30,063							30,063
Net Income (Loss) for the period																6,971,460					6,971,460
Other comprehensive income																			425,576		425,576
Balance at December 31, 2011		177,435,953	$	177,436		-		-		-		-	$	1,728,539	$	9,120,832		$	661,313	$	11,688,120

Balance at January 1, 2012		177,435,953	$	177,436		-		-		-		-	$	1,728,539	$	9,120,832		$	661,313	$	11,688,120
Share-based compensation (option expenses)														7,958							7,958
Net Income(Loss) for the period																1,684,568					1,684,568
Other comprehensive income																			892		892
Balance at December 31, 2012		177,435,953	$	177,436		-		-		-		-	$	1,736,497	$	10,805,400		$	662,205	$	13,381,538

See Accompanying Notes to the Financial Statements and Accountant’s Report

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

ORGANIZATION AND BUSINESS BACKGROUND

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.”.

On 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 six simultaneous transactions 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.

The 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.

Accordingly, the consolidated financial statements include the following:

	(1)	The balance sheet consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.
	(2)	The statement of operations includes the operations of the acquirer for the periods presented and the operations of the acquiree from the date of the merger.

(1)

The balance sheet consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost.

~~F-7~~(2) The statement of operations includes the operations of the acquirer for the periods presented and 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 (DAR) and its related products. DAR is one of the major herbs used in 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.

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

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

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. CHRI and its wholly owned subsidiary Yin Fa are hereafter referred to as (the “Company”).

In 2011, Suining Yinfa DAR Industrial Co, Ltd. 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.

CHRI and its wholly owned subsidiaries, Suining Yinfa DAR Industrial Co, Ltd. and Suining Yinfa DAR Planting Co, Ltd, are hereafter referred to as (the “Company”).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.

(b) Basis of Consolidation

The 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.

~~All~~(c) ~~significant~~Management’s ~~inter-company~~Use ~~balances~~of ~~and transactions within the Company and subsidiary have been eliminated upon consolidation.~~Estimates

Cash and Cash Equivalents

For purposes 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.

Management’s Use of Estimates

The preparation 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.

(d) Revenue Recognition

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 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 ~~returns~~return.

~~Comprehensive Income (Loss)~~37

The Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 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.

Foreign Currencies

Assets and liabilities denominated in respective functional currencies are translated into United States Dollars at the exchange rate as of the balance sheet date. The share 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.

F-8

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

~~Company’s~~(e) ~~Future~~Comprehensive ~~Operations~~Income ~~Are Dependent on Foreign Operations~~(Loss)

(f)

Foreign Currencies

(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. 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.

Also, the success of the Company’s operations will be subject to numerous contingencies, some of which are beyond management’s control. These contingencies 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.

~~Accounts~~(h) ~~Receivable~~Cash and Cash Equivalents

For purposes 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.

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the Year ended December, 2012 and 2011

(Expressed in USD)

(i)

Accounts Receivable

Accounts receivable 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 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.

~~Inventory~~(j) Advances to Suppliers

Advances to suppliers represent the cash paid in advance for purchasing raw materials. The advances to suppliers are interest free and unsecured.

(k)

Inventory

Inventory 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.

(l) Property, Plant, and Equipment

	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 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.39

F-9

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

~~Income~~The ~~Taxes~~Company recognizes an 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

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

Deferred tax assets are reduced by a 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.

(n) Earnings (Loss) Per Common Share

Basic 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.

(o) Fair Value of Financial Instruments

The carrying amounts reported in the consolidated balance sheet for cash, accounts receivable, accounts payable, and loans payable approximate fair value based 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.

(p) Impairment of Long-Lived Assets

The Company evaluated the recoverability of its property and equipment, and other assets in 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.

~~Stock-Based Compensation~~40

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 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.

Subsequent Events

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, 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 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.

F-10

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

~~Recently~~(q) ~~Issued~~Stock-Based ~~Accounting Pronouncements~~Compensation

(r)

Subsequent Events

(s)

Recently Issued Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, 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.

In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). 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.

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the Year ended December, 2012 and 2011

(Expressed in USD)

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.

In September 2011, 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. 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.

In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures 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.

3In July 2012, the FASB issued ASU No. ~~SUPPLEMENTAL~~ 2012-02, ~~CASH~~“Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to ~~FLOW~~perform ~~INFORMATION~~a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.

~~Supplemental~~ASU ~~disclosures~~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 ~~cash~~an ~~flow~~indefinite-lived ~~information~~intangible ~~for~~asset and perform the ~~year~~quantitative ~~ended~~impairment test unless the entity determines ~~December~~that 31it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, ~~2011~~or ~~and~~all ~~2010~~of ~~are~~its ~~summarized~~indefinite-lived asintangible ~~follows:~~assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.

~~Cash paid during the year ended December 31, 2011 and 2010 for interest and income taxes:~~42

	December 31, 2011		December 31, 2010
Income Taxes		2,426,516		1,038,578
Interest		45,567		18,222

F-11

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

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.

In August 2012, 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. 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.

In 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 Accounting Standards Codification and 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.

Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by 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.

Supplemental Cash Flow Information

Supplemental disclosures of cash flow information for the year ended December 31, 2012 and 2011 are summarized as follows:

Cash paid during the year ended December 31, 2012 and 2011 for interest and income taxes:

	December 31, 2012		December 31, 2011
Income Taxes	$	578,906	$	2,426,516
Interest	$	270,752	$	75,630

ACCOUNTS RECEIVABLE

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 December 31, ~~2011~~2012 and December 31, ~~2010~~2011 consist of the following:

	December 31, 2011		December 31, 2010
Accounts receivable, gross	$	5,386,455	$	1,071,812
Less: allowance for doubtful accounts		—		—
Account receivable, net		5,386,455		1,071,812

All accounts receivables are aging within 30 days. No provision of bad debt was accrued as of year end.

5. INVENTORIES

Inventories as of December 31, 2011 and December 31, 2010 consist of the following:

	December 31, 2011		December 31, 2010
Raw materials	$	1,276,462	$	653,695
Low value consumables		0		0
Finished goods		0		0
	$	1,276,462	$	653,695

As of December 31, 2011 and December 31, 2010, 95% of the total inventory is accounted by DAR and 5% for other TCM herbs. And 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 year 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 2011, 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.

6. DEFERRED INVENTORY COSTS

The deferred inventory costs represented prepayment to suppliers for future inventory delivery. As of December 31, 2011 and 2010, the balances of deferred inventory costs are $3,079,930 and 2,453,892 respectively. These costs will be transferred to inventories at the time of inventory delivery.

F-12

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

7. PREPAYMENT FOR LAND USAGE

	December 31, 2012		December 31 , 2011
Accounts receivable, gross	$	6,036,252	$	5,386,455
Less: allowance for doubtful accounts		-		-
Account receivable, net	$	6,036,252	$	5,386,455

~~In November~~All ~~2011,~~Accounts ~~the~~receivables ~~company~~are ~~entered~~aging ~~land~~within ~~usage~~30 ~~agreement with 12 local village unions for future raw material DAR production~~days. ~~Prepayment~~ ~~for~~No ~~land~~provision ~~usage as~~ of ~~December~~bad ~~31,~~debt ~~2011~~was ~~and~~accrued ~~December~~as ~~31, 2010 consist~~ of ~~the following:~~year-end.

	December 31, 2011		December 31, 2010
DAR production villages		3,520,131		-
Total	$	3,520,131	$	-

ADVANCES TO SUPPLIERS

~~8. PROPERTY~~Due to the high demand of DAR product, ~~PLANT~~the ~~AND~~company advances money to third party suppliers to secure more DAR supply. These advances ~~EQUIPMENT~~bear no interest and will be applied as the payment when purchases are received. The balance of advances to suppliers as of December 31, ~~NET~~2012 and December 31, 2011 are $4,291,635 and $32,231, respectively.

~~Property,~~6. ~~plant~~PREPAYMENT ~~and~~FOR ~~equipment,~~LAND ~~net as of December 31, 2011 and December 31, 2010 consists of the following:~~USAGE

	December 31, 2011			December 31, 2010
Property, plant and equipment		1,043,867			991,883
Less: accumulated depreciation		(212,526	)		(163,928	)
Property, plant and equipment, net	$	831,341		$	827,955

In November 2011, the company entered land usage agreement with 12 local village unions for future raw material DAR production. The Company and the villages have agreed that the rent will be recorded when the land is used for raw DAR planting and production. Due to the slowdown of TCM market in 2012, the raw DAR planting and production described in the agreement was postponed for another year. Prepayment for land usage as of December 31, 2012 and December 31, 2011 consist of the following:

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	December 31, 2012		December 31, 2011
DAR production villages	$	3,520,020	$	3,520,131
Total	$	3,520,020	$	3,520,131

~~Accounts~~7. ~~payable~~DEFERRED ~~and~~INVENTORY ~~accrued liabilities as of December 31, 2011 and December 31, 2010 consist of the following:~~COSTS

	December 31, 2011		December 31, 2010
Accounts payable		824,824		421,258
Accrued liabilities		50,256		14,757
Total accounts payable and accrued liabilities	$	875,080	$	436,015

The deferred inventory costs represented prepayment to suppliers for future inventory delivery. As of December 31, 2012 and December 31, 2011, the balances of deferred inventory costs are $8,253,292 and $3,079,930 respectively. These costs will be transferred to inventories at the time of inventory delivery.

INVENTORY

Inventories as of December 31, 2012 and December 31, 2011 consist of the following:

	December 31, 2012		December 31, 2011

Raw Materials	$	1,648,759	$	1,276,462
Low Value Consumables		-		-
Finished Goods	$	1,648,759	$	1,276,462

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the Year ended December, 2012 and 2011

(Expressed in USD)

As of December 31, 2012 and December 31, 2011, 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 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 2011, 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.

PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net as of December 31, 2012 and December 31, 2011 consists of the following:

	December 31, 2012			December 31, 2011

Property, Plant and Equipment	$	1,039,950		$	1,043,867
Less: accumulated depreciation		(253,853	)		(212,526	)
Property, Plant and Equipment, net	$	786,097		$	831,341

10.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of December 31, 2012 and December 31, 2011 consist of the following:

	December 31, 2012		December 31, 2011
Accounts payable	$	2,984,811	$	824,824
Accrued liabilities		2,681,175		50,256
Total accounts payable and accrued liabilities	$	5,665,986	$	875,080

Accrued liabilities include accrued wage payable, accrued welfare payable, other taxes payable, and receipt in advance.

~~10. NOTES PAYABLE - CURRENT~~45

As of December 31, 2011 and December 31, 2010, notes payable consist of the following:

	December 31, 2011		December 31, 2010
Secured bank loan to an unrelated party. Bearing 8.6625 % interest Principal payments due 12/26/2011	$		$	452,987
Secured bank loan to an unrelated party. Bearing 6.475% interest Principal payments due 11/03/2012		476,122
Secured bank loan to an unrelated party. Bearing 6.875% interest Principal payments due 10/12/2012		253,932
Non-secured note payable to a related party, bearing no interest Principal payments due 12/28/2012		476,123		452,987
TOTAL	$	1,206,177	$	905,974

F-13

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

11.

OTHER PAYABLE

As of December 31, ~~2011~~2012 and December 31, ~~2010~~2011, ~~notes~~other payable consist of the following:

	December 31, 2011		December 31, 2010
	December 31, 2012		December 31, 2011
Labor union fee	$	7,251	$	6,898
Labor Union Fee	$	10,907	$	7,251
Pension fund		51,699		22,263
Pension Fund		28,337		51,699
Social insurance		139,763		81,204
Social Insurance		90,175		139,763
Risk Fund		159		~~151~~159
Other		2197,~~399~~203		2,399
TOTAL	$	201,271	$	110,516
Total	$	326,781	$	201,271

12. ~~CONVERTIBLE~~NOTES ~~DEBT~~PAYABLE – CURRENT

OnAs ~~July 1, 2010, the company issued a convertible note in amount~~ of ~~$80,000~~December ~~for the consulting services rendered by a consultant. Pursuant to the agreement~~31, ~~the~~2012 ~~note bears 1% annual interest~~ and ~~convertible at $0.008 per share after September 1, 2010 per all outstanding principal amount and accrued interest~~ ~~and~~December ~~fees. In January~~31, 2011, ~~partial~~notes ~~amount~~payable ~~($56,000)~~consist of ~~convertible~~the note was converted into7, 000,000 shares. The remaining balance of convertible debt was $24,000, which was converted into 3,000,000 shares on May 4, 2011. There was no balance of convertible debt as of December 31, 2011.following:

13. INCOME TAXES

	December 31, 2012		December 31, 2011
Secured bank loan to an unrelated party. Bearing 6.475% interest Principal payments due 07/12/2012	$	-	$	476,122
Secured bank loan to an unrelated party. Bearing 6.875% interest Principal payments due 10/12/2012		-		253,932
Non-secured note payable to a related party, bearing no interest Principal payments due 12/28/2012		-		476,123
Short-Term Loan (See Note 13)		5,395,883
Total	$	5,395,883	$	1,206,177

13.

SHORT TERM LOAN

As of December 31, 2012 and December 31, 2011, short term loan consist of the following:

Name	Due Date	Interest Rate			December 30, 2012		December 31, 2011
Wang Li	10/1/2013		24	%	$	317,405	$	-
Wang Lijun	5/13/2014		24	%		317,405		-
SPD Bank	07/12/2013		6.48	%		1,587,024		-
SPD Bank	09/18/2013		6.6	%		1,587,024
SPD Bank	08/16/2013		6.6	%		1,587,024
Total					$	5,395,883	$	-

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the Year ended December, 2012 and 2011

(Expressed in USD)

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

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

14.

INCOME TAXES

The 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.

The 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.

Prior to 2008, 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 domestic enterprises. The unified corporate income tax rate is 25%.

The Company generated substantially its net income from its PRC operation and has recorded income tax provision for the year ended December 31, ~~2011~~2012 and ~~2010~~December 31, 2011.

~~F-14~~The components of (loss) income before income taxes separating U.S. and PRC operations are as follows:

	December 31, 2012			December 31, 2011
Loss subject to U.S. operation	$	(68,458	)	$	(289,754	)
Income (loss) subject to PRC operation		2,331,932			9,687,730
Income (loss) before income taxes	$	2,263,474		$	9,397,976

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

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

	December 31, 2011			December 31, 2010
Loss subject to U.S. operation	$	(289,753	)	$	(407,908	)
Income (loss) subject to PRC operation		9,687,730			4,153,771
Income (loss) before income taxes	$	9,397,977		$	3,745,863

United States of America

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

For the year ended December 31, ~~2011~~2012, the U.S. operation had $~~289~~68,~~753~~458 of 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 PRC

The reconciliation of income tax rate to the effective income tax rate based on income before income taxes stated in the consolidated statement of operations for ~~the~~ year ended December 31, ~~2011~~2012 and ~~September~~December 3031, ~~2010~~2011 is as follows:

	December 31, 2011			December 31, 2010
	December 31, 2012			December 31, 2011
Income (loss) before income taxes	$	92,~~687~~255,~~730~~099		$	49,~~153~~687,~~771~~730
Non-taxable deductions		~~18,335~~			18,335
Taxable income	$	92,~~706~~255,~~065~~099		$	49,~~153~~706,~~771~~065
Statutory income tax rate		25%	%		25%	%
		2,426,516			1,038,578
		563,775			2,426,516
Expenses not deductible for tax purposes:
- Provisions		-			-
Effect of tax losses		-			-
Income tax expense	$	563,775		$	2,426,516
Income tax expense	$	2,426,516		$	1,038,578

The following table reconciles the U.S. statutory rate to the Company’s effective tax rate:

	December 31, 2011			December 31, 2010
	December 31, 2012			December 31, 2011
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	%

~~F-15~~48

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

The Company 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 year ended December 31, ~~2011~~2012 and December 31, ~~2010~~ 2011.

The charge for taxation is based on the results for the ~~year~~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.

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”), 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 ~~affect~~effect on the Company’s financial statements.

~~14. MAJOR CUSTOMER/VENDOR AND CONCENTRATION~~49

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the Year ended December, 2012 and 2011

(Expressed in USD)

15.

MAJOR CUSTOMER/VENDOR AND CONCENTRATION

(a)

Sale breakdown

For the year period ended December 31, ~~2011~~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.

All customers 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 year period ended December 31, 41% of the total revenue is contributed by DAR, 29% of the total revenue is contributed by other TCM, and 30% of total revenue is contributed by Yishen Capsule.

For the year ended December 31, 2012, major customers and vendors with their revenues are presented as follows:

Customers	Revenues		%			AR		%
Customer A	$	4,805,096		21	%		1,823,429		30	%
Customer B		3,069,811		13	%		877,064		15	%
Customer C		2,639,667		12	%		37,963		1	%
Customer D		2,475,562		11	%		167,357		3	%
Total	$	12,990,136		57	%		2,905,813		49	%

For the year ended December 31, 2011, major customers and vendors with their revenues are presented as follows:

Customers	Revenues		%			AR		%
Customer A	$	8,886,926		26%	%		1,631,023		30%	%
Customer B		6,524,401		19%	%		735,531		14%	%
Customer C		4,189,355		12%	%		692,~~711~~712		13%	%
Customer D		3,440,765		10%	%		522,999		10%	%
Customer E		3,334,314		10%	%		516,206		10%	%
Customer F		2,468,972		7%	%		481,042		8%	%
Total	$	28,844,733		84%	%		4,579,~~512~~514		85%	%

~~F-16~~50

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

For the year ended December 31, 2010, major customers with their revenues are presented as follows:

Customers		Revenues	%	AR	%
Customer A	$	4,240,403	41%	602,412	35%
Customer B		1,258,363	13%	264,243	16%
Customer C		1,177,696	11%	235,953	14%
Customer D		608,154	6%	133,443	8%
Customer E		424,671	4%	193,184	11%
Customer F		393,402	4%	227,279	13%
Customer G		285,140	3%	45,299	3%
Total	$	8,398,324	82%	1,701,812	100%

All customers 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 year ended December 31, 2011, 45% of the total revenue is contributed by DAR, 40% of the total revenue is contributed by other TCM, and 15% of total revenue is contributed byYishen Capsule.

(b)

Credit risk

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.

1516. Stockholders’ equity

Effective August 20, 2010, the Company’s 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:

(a) noNo annual base 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;

(b)

A signing bonus totaling $50,000, payable on August 20, 2010 in shares of the Company's Class A common stock (the "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 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)

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 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

(d)

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

If the Company achieves $500,000 in net income for the three-month period ended September 30, 2010 as shown in the Company's financial statements contained in the Quarterly Report on Form 10-Q for such period, Mr. Wang will receive a bonus of $40,000 payable in shares of Common Stock valued at $0.02 per share.

ii.

If the Company achieves $1,000,000 in net income for the six-month period ended December 31, 2010, Mr. Wang will receive a bonus of $100,000 payable in shares of Common Stock valued at $0.05 per share.

~~F-17~~51

China Health Resource, Inc. and Subsidiaries

Notes to Audited Consolidated Financial Statements

For the ~~Twelve~~Year ~~Months~~ended ~~Ended~~ December 31, ~~2011~~ ~~and~~2012 ~~2010~~and 2011

(Expressed in USD)

iii.

If the Company achieves $1,500,000 in net income for the nine-month period ended March 31, 2011, Mr. Wang will receive a bonus of $160,000 payable in shares of Common Stock valued at $0.08 per share.

Mr. Wang will also be eligible to receive periodic stock grants and participate in the Company's incentive plans and benefit plans for which he is eligible.

In recognition of Mr. Wang's contributions to the Company's achievement of various corporate and financial milestones, effective August 20, 2010, the Board of Directors 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.

For 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.

On July 15, 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 therefore was awarded accordingly.

On October 30, 2011, the Company 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 year ended December 31, 2011, the company recognized $31,831 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.

~~16. COMMITMENT~~For ~~AND~~the ~~CONTINGENCIES~~year ended December 31, 2012, the company recognized $7,985 as option expenses for vested option (see above (c)).

On November 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, 201252

~~The~~China ~~Company~~Health ~~rented~~Resource, ~~land~~Inc. ~~(note 7)~~ 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:~~Subsidiaries

Year ended December 31	Lease payment
2012	1,760,066
2013	1,765,346
2014	1,770,642
2015	1,775,954
2016	1,781,282
Total	8,853,290

Notes to Audited Consolidated Financial Statements

For the ~~years~~Year ended December 31, ~~2011~~2012 and ~~2010,~~ ~~rental expense was $5,443 and $2,422.~~2011

~~17. RECLASSIFICATION~~(Expressed in USD)

~~Certain prior period amounts have been reclassified to conform to the current presentation~~17. ~~Such~~COMMITMENT ~~reclassifications~~AND were limited to the Consolidated Balance Sheet presentation and did not impact the Consolidated Statement of Operations and Comprehensive Income, Consolidated Statement of Equity, and Consolidated Statement of Cash Flows.CONTINGENCIES

~~For~~On November 3, 2011, the Company’s ~~year~~wholly ~~ended~~owned ~~December~~subsidiary ~~31,~~Suining ~~2010,~~Yinfa $2DAR Industrial Co,~~453,892~~ ~~was~~Ltd. ~~reclassified~~received to7 ~~“Deferred~~separated ~~inventory~~purchasing ~~cost”~~letters ~~out~~of intent totaling of ~~“Prepayment”~~over to7.5 ~~conform~~million USD with the time period from November 4, 2011 to ~~current~~November ~~year’s~~3, ~~presentation~~2012.

FThe Company rented land (note 6) and warehouse space under a non-18cancelable operating lease agreement. The Company and the villages have agreed that the rent will be recorded when the land is used for raw DAR planting and production. Due to the slowdown of TCM market in 2012, the raw DAR planting and production described in the agreement was postponed for another year. Therefore, no rental expense for land usage of DAR planting and production is recorded in 2012. Based on the current rental lease agreement, the future five years minimum rental payments required as of December 31 are as follows:

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

For the year period ended December 31, 2012 and 2011, rental expense was $4,203 and $5,443.

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) 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 on the 30^th day of April, 2013.

	CHINA HEALTH RESOURCE, INC.

	By:	s/ Wang, Jiayin
		Wang, Jiayin
		President and Chief Executive Officer

Signature	Title	Date

/s/ Wang, Jiayin	Chief Executive Officer, President, and Director	April 30, 2013
Wang, Jiayin	(Principal Executive Officer)

/s/ Liu, Weihai	Chief Financial Officer and Director	April 30, 2013
Liu, Weihai	(Principal Financial Officer)

/s/ Ping Gao	Director	April 30, 2013
Ping, Gao

/s/ Wang, Bing	Director	April 30, 2013
Wang, Bing

CHINA HEALTH RESOURCE, INC.

EXHIBIT INDEX

2012 ANNUAL REPORT ON FORM 10-K

Exhibit Number		Description

3.1		Certificate of Incorporation, as adopted on February 26, 2002 and as amended on May 14, 2003, October 13, 2006, April 23, 2007 and May 8, 2007.(1)
3.2		Amended and Restated By-laws, as adopted on February 17, 2009.(1)
7.1		Bank Loan documents between Suining Shi Yinfa Bai Zhi Chan Ye You Xiam Gog Si and Suining City Commercial National Bank dated December 27, 2010 and related Bank Collateral Agreement. (2)
7.2		Unsecured promissory note agreement with Mr. Jiayin Wang, Company’s Chairman, President and Chief Executive Officer dated December 27, 2010.(2)
10.1		License Agreement Relating to the Exclusive Right to Use “Suining Sichuan Angelica” Certified Trademark, by and between Sichuan Province Suining City DAR Association and Yinfa, dated March 16, 2004.(3)
10.2		Import-Export Agent Executive Agreement, by and between Suining Yinfa DAR Industrial Co. and Korean DongUi Cosmetics Co., dated March 5, 2007. (4)
10.3		Sichuan DAR Purchase and Processing Contract, by and between Suining Yinfa DAR Industrial Co. and Chengdu Derentang Pharmacy Company Medicine Branch, dated April 18, 2007.(5)
10.4		Debt Transfer and Assumption Agreement by and among Yinfa, Suining Yinfa Building Construction and Development Co., Ltd., Chengdu Lianqiang Investment Co. and Yinfa Resource, dated September 20, 2008.(6)
14.1		Code of Ethics.(7)
21.1		Subsidiaries of Registrant. (8)
31.1		Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer.(9)
31.2		9Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer.(8)
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(9)

(1)

Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

(2)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2010.

(3)

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.

(4)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 6, 2007.

(5)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2007.

(6)

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.

(7)

Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006.

(8)

Incorporated by reference to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011.

(9)

Filed herewith.

Filing Compare · CHINA HEALTH RESOURCE, INC.