10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

|X|	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934: For the Quarterly Period ended:  June 30, 2012
|_|	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
	For the transition period from             to

Commission File Number: 000-50029

CHINA HEALTH RESOURCE, INC.

(Name of Small Business Issuer in its Charter)

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

343 Sui Zhou Zhong Road

Suining, Sichuan Province, P.R. China

(Address of Principal Executive Offices)

+(86-825) 239-1788

(Issuer’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X|  No |_|

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes |X| No |_|

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer |_|	Accelerated filer |_|
Non-accelerated filer   |_|	Smaller Reporting Company |X|

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

Number of shares outstanding of each of the issuer’s classes of common equity, as June 30, 2012:  177,435,953 shares of Common Stock of par value US $0.001

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties.  The issuer’s actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “the Company believes,” “management believes” and similar language, including those set forth in the discussions under “Notes to Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as those discussed elsewhere in this Form 10-Q.  We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the “safe harbor” created by the Private Securities Litigation Reform Act of 1995.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		Page
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25
ITEM 4T.	CONTROLS AND PROCEDURES	25
PART II.  OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	26
ITEM 1A.	RISK FACTORS AFFECTING FUTURE RESULTS	26
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	26
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	26
ITEM 5.	OTHER INFORMATION	26
ITEM 6.	EXHIBITS	27
SIGNATURES		27
INDEX TO EXHIBITS		28

PART I.  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS 

		Page
ITEM 1.	FINANCIAL STATEMENTS
	Index to Financial Statements	1
	Unaudited Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011	2
	Unaudited Consolidated Statements of Operations for Three and Six Months ended June 30, 2012 and 2011	3
	Unaudited Consolidated Statements of Cash Flows for Six Months ended June 30, 2012 and 2011	4
	Unaudited Condensed Consolidated Statement of Equity (Deficit)	5
	Notes to Unaudited Consolidated Financial Statements for the Six Months ended June 30, 2012 and 2011	6

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the period ended Six Months ended June 30, 2012 are not necessarily indicative of the results that can be expected for the full year.

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China Health Resource, Inc. and Subsidiaries

Consolidated Balance Sheets

As of June 30, 2012 and December 31, 2011

ASSETS	June 30, 2012		December 31, 2011
Current Assets
Cash and Cash Equivalents	$	930,343	$	241,755
Accounts Receivable		4,973,360		5,386,455
Advance to Suppliers		1,008,346		32,231
Prepayment For Land Usage		3,506,775		3,520,131
Deferred Inventory Cost		3,942,113		3,079,930
Inventory		2,393,181		1,276,642
Total Current Assets		16,754,118		13,536,964
Fixed Assets
Property, Plant and Equipment, Net		794,291		831,341
Total Assets	$	17,548,408	$	14,368,305
LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities	$	904,008	$	875,080
Other Payable		165,888		201,271
Due to Shareholder		376,457		376,457
Taxes Payable		886,957		21,200
Notes Payable		-		1,206,177
Short-Term Loan Payable		1,422,947		-
Total Current Liabilities		3,756,258		2,680,185
Total Liabilities	$	3,756,258	$	2,680,185

STOCKHOLDERS' EQUITY
Common Stock Class A (500,000,000 shares authorized, 177,435,953 and 177,435,953 issued and outstanding, par value US $0.001) at June 30, 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		11,270,206		9,120,832
Accumulated Other Comprehensive Income		608,012		661,313
Total Stockholders’ Equity		13,792,150		11,688,120
Total Liabilities & Stockholders’ Equity	$	17,548,408	$	14,368,305

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

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China Health Resource, Inc. and Subsidiaries

Unaudited Consolidated Statement of Operations

	For the three months ended						For the six months ended
	June 30, 2012			June 30, 2011			June 30 2012			June 30, 2011
REVENUES
Sales	$	6,305,200		$	8,034,698		$	15,260,561		$	12,413,009
Cost of Sales		4,891,526			5,574,025			11,863,616			8,456,203
Gross Profit		1,413,674			2,460,673			3,396,945			3,956,806
Operating Expenses
Selling, General and Administrative Expense		293,054			173,259			492,859			453,931
Interest Expense		7,495			9,537			29,743			18,865
Total Operating Expenses		300,549			182,796			522,602			472,796
Operating Income		1,113,125			2,277,877			2,874,343			3,484,010
OTHER INCOME / (EXPENSES)
Other Expense		-			(10	)		(1	)		(10	)
Total Other Income/(Expense)		-			(10	)		(1	)		(10	)
Net Income (Loss) Before Taxes		1,113,124			2,277,867			2,874,341			3,484,000
Income Tax Expense		280,281			573,916			724,968			920,442
Net Income (Loss)		832,843			1,703,951			2,149,373			2,563,558
Other Comprehensive Income (Loss)
Foreign Currency Translation Gain (Loss)		(88,483	)		88,237			(72,495	)		140,093
Comprehensive Income (Loss)	$	744,631		$	1,792,188		$	2,076,879		$	2,703,651
Weighted Average Common Shares Outstanding
Basic		177,435,953			168,769,286			177,435,953			168,769,286
Fully diluted		177,453,953			168,769,286			177,453,953			168,769,286
Net Gain Per Common Share
Basic	$	0		$	0.01		$	0.01		$	0.02
Fully diluted	$	0		$	0.01		$	0.01		$	0.02

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

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China Health Resource, Inc. and Subsidiaries

Unaudited Consolidated Statement of Cash Flows

	For the six months ended
	June 30, 2012			June 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	2,149,373		$	2,563,558
Adjusted to reconcile net income to net cash used in operating activities
Depreciation		28,839			22,849
Stock-based compensation		7,958			15,916
Accounts Receivable		393,776			(398,390	)
Employee Advance and Other Receivable		(979,028	)		(38,209	)
Prepayment for land usage		(876,336	)		-
Inventory		(1,124,770	)		(2,685,329	)
Accounts Payable and Accrued Liabilities		53,225			182,683
Other Payable		(34,718	)		41,791
Others		5,153			4,967
Tax Payable		846,046			579,620
Net Cash Provided by (used in) Operating Activities		469,488			289,456
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		-			(519	)
Net Cash Provided by (used in) Investing Activities		-			(519	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceed on short-term Loan Payable		1,427,009			-
Payment From short-term Notes payment		(1,205,029	)
Net Cash Provided by Financing Activities		221,979			-
Foreign Currency Translation		(2,879	)		5,272
Net Increase (Decrease)in Cash and Equivalents		688,588			294,209
CASH AND CASH EQUIVALENTS:
Beginning of period		241,755			90,306
End of period	$	930,343		$	384,515

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

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China Health Resource, Inc. and Subsidiaries

Unaudited Consolidated Statement of Equity (Deficit)

For the six month ended June 30, 2012

										Accumulated Other Comprehensive Income	Total
	Common Stock				Preferred Stock		Additional Paid-in Capital		Retained Earnings (Deficit)
	Class A Shares	par value 0.001	Class B Shares	par value 0.01	Shares	Amount
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	$ 11,688,119
Balance at January 1, 2012	177,435,953	$ 177,436	-	-	-	-		$ 1,728,539	$ 9,120,832	$ 661,313	$ 11,688,119
Share-based compensation (option expenses)								7,958			7,958
Net Income(Loss) for the period									2,149,373		2,149,373
Other comprehensive income										(53,301)	(53,301)
Balance at June 30, 2012	177,435,953	$ 177,436	-	-	-	-		$ 1,736,497	$ 11,270,205	$ 608,012	$ 13,792,150

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

5

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

1. 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.

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.  

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.

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”)

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China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

2. 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.

(c) 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 return.

(e) Comprehensive Income (Loss)

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.

(f) 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.

(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.

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China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

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.

(h) 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.

(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.

(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 

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

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China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

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.

(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.

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China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

(q) Stock-Based Compensation

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

(r) Subsequent Events

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.

(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.

10

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 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.

3. Supplemental Cash Flow Information

Supplemental disclosures of cash flow information for the period ended June 30, 2012 and 2011 are summarized as follows:

Cash paid during the six-month period ended June 30, 2012 and 2011 for interest and income taxes:

	June 30, 2012		June 30, 2011
Income Taxes	$	724,968	$	920,442
Interest	$	29,743	$	18,865

11

4. 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 June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31 2011
Accounts receivable, gross	$	4,973,360	$	5,386,455
Less: allowance for doubtful accounts		—		—
Account receivable, net	$	4,973,360	$	5,386,455

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

5. ADVANCES TO SUPPLIERS

Due to the high demand of DAR product, the company advances money to third party suppliers to secure more DAR supply. These advances bear no interest and will be applied as the payment when purchases are received. The balance of advances to suppliers as of June 30, 2012 and December 31, 2011 are $1,008,346 and $32,231, respectively.

6. PREPAYMENT FOR LAND USAGE

In November 2011, the company entered land usage agreement with 12 local village unions for future raw material DAR production. Prepayment for land usage as of June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31, 2011
DAR production villages	$	3,506,775	$	3,520,131
Total	$	3,506,775	$	3,520,131

7. DEFERRED INVENTORY COSTS

The deferred inventory costs represented prepayment to suppliers for future inventory delivery. As of June 30, 2012 and December 31, 2011, the balances of deferred inventory costs are $3,942,113 and $3,079,930 respectively. These costs will be transferred to inventories at the time of inventory delivery.

8. INVENTORY

Inventories as of June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31, 2011
Raw Materials	$	2,393,181	$	1,276,462
Low Value Consumables		—		—
Finished Goods	$	2,393,181	$	1,276,462

12

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

As of June 30, 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.

9. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net as of June 30, 2012 and December 31, 2011 consists of the following:

	June 30, 2012			December 31, 2011
Property, Plant and Equipment	$	1,034,767		$	1,043,867
Less: accumulated depreciation		(240,477	)		(212,526	)
Property, Plant and Equipment, net	$	794,291		$	831,341

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31, 2011
Accounts payable	$	451,034	$	824,824
Accrued liabilities		452,974		50,256
Total accounts payable and accrued liabilities	$	904,008	$	875,080

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

11. OTHER PAYABLE

As of June 30, 2012 and December 31, 2011,other payable consist of the following:

	June 30, 2012		December 31, 2011
Labor Union Fee	$	9,217	$	7,251
Pension Fund		66,681		51,699
Social Insurance		88,436		139,763
Risk Fund		158		159
Other		1,396		2,399
Total	$	165,888	$	201,271

13

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

12. NOTES PAYABLE – CURRENT

As of June 30, 2012 and December 31, 2011, notes payable consist of the following:

	June 30, 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)		1,422,947
Total	$	1,422,947	$	1,206,177

13. SHORT TERM LOAN

As of June 30, 2012 and December 31, 2011, short term loan consist of the following:

Name	Due Date	Interest Rate		June 30, 2012		December 31, 2011
Zhang Rende	07/15/2012		36%	$	316,211	$	—
Wang Lijun	07/13/2012		24%		316,210		—
Zeng Changhua	08/12/2012		42%		790,526		—
Total	00/00/2012		00%	$	1,422,947	$	—

1) The loan provided by Zhang Rende was guaranteed by the Suining Yinfa Construction Co., Ltd. The borrower collateralized the loan with the Company’s subsidiary Suining Yinfa DAR Industry Co. Ltd’s intangible assets and net assets.

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

3) The loan provided by Zeng Changhua was guaranteed by the Suining Yinfa Construction Co., Ltd. The borrower collateralized the loan with the Company’s subsidiary Suining Yinfa DAR Industry Co. Ltd’s intangible assets and net assets.

14. CONVERTIBLE DEBT

On July 1, 2010, the company issued a convertible note in amount of $80,000 for the consulting services rendered by a consultant. Pursuant to the agreement, the 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 fees. In January, 2011, partial amount ($56,000) of convertible note was converted into 7,000,000 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 June 30, 2012.

14

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

15. 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 six months ended June 30, 2012 and June 30, 2011.

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

	June 30, 2012			June 30, 2011
Loss subject to U.S. operation	$	(25,457	)	$	(197,798	)
Income (loss) subject to PRC operation		2,899,799			3,681,798
Income (loss) before income taxes	$	2,874,341		$	3,484,000

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 six-month period ended June 30, 2012, the U.S. operation had $25,457 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.

15

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

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 six-month period ended June 30, 2012 and June 30, 2011 is as follows:

	June 30, 2012		June 30, 2011
Income (loss) before income taxes	$	2,899,799	$	3,681,799
Statutory income tax rate		25%		25%
		724,950		920,450
Expenses not deductible for tax purposes:
- Provisions		18		(8	)
Income tax expense	$	724,968	$	920,442

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

	June 30, 2012			June 30, 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	%

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 six-month period ended June 30, 2012 and June 30, 2011.

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

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 effect on the Company’s financial statements.

16

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

16. MAJOR CUSTOMER/VENDOR AND CONCENTRATION

(a) Sale breakdown

For the six-month period ended June 30, 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 six-months ended June 30, 2012, 38% of the total revenue is contributed by DAR, 36% of the total revenue is contributed by other TCM, and 26% of total revenue is contributed by Yishen 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.

17. 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) No 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:

i. 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.

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.

17

China Health Resource, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2012 and 2011

(Expressed in USD)

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 as additional paid-in capital from shareholder.

18. COMMITMENT AND CONTINGENCIES

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, 2012

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

Year ended December 31	Lease payment
2012	880,033
2013	1,765,346
2014	1,770,642
2015	1,775,954
2016	1,781,282
Total	7,973,257

For the six months period ended June 30, 2012 and 2011, rental expense was $4,202 and $Nil.

18

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto included in Item 1 of this report and is qualified in its entirety by the foregoing.

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 Dahurian Angelica Root and related products on a timely basis and in the prescribed condition, evolving standards in the Traditional Chinese Medicine industry, domestic and international regulatory matters, general economic and business conditions, the strength and financial resources of our competitors, our ability to raise sufficient capital in order to effectuate our business plan, our ability to find and retain skilled personnel and key executives, the political and economic climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed with the Securities and Exchange Commission (the “Commission”).

General

All references in this Quarterly Report on Form 10-Q 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.

We were incorporated in the State of Delaware on February 26, 2002. On June 13, 2006, we, as the acquirer, executed a Plan of Exchange with Yinfa (acquiree), the shareholders of Yinfa and the Company’s then majority shareholders, pursuant to which we issued 30,000,000 (pre-forward split) new shares of our Class A Common Stock to the Yinfa shareholders in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, in reliance upon Regulation S thereunder, in exchange for all of the shares of registered capital of Yinfa making Yinfa 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 changed our name to China Health Resource, Inc. to more accurately reflect our business operations. 

19

Our Business

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

In May 2005, we applied for and obtained Good Agricultural Practice (“GAP”) certification for DAR, in partnership with Sichuan Yinfa Resource Development Group Co. Ltd., (“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, use of pesticides, and use of fertilizers.  These standards were approved by the Chinese State Food and Drug Administration (the “SFDA”).  Our GAP farm production base includes approximately 133,334 square meters of experimental planting fields, and 1,333,340 square meters of contracted farm production 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 for DAR demonstrates the high quality standards of our DAR and DAR-related products.

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

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

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

The company’s TCM migraine medication called Toufeng Migraine tablet.  Results released in 2012 demonstrated an effective rate of 96.5% in clinical observations.  The new product was developed utilizing the company's proprietary Dahurian Angelica (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.

20

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

The planting of DAR is subject to seasonal fluctuations. DAR is planted during the winter months and is suitable for harvest in the summer. The prime season for harvest is typically from July through November, subject to climate conditions. As a result, we typically enter into contracts with 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 throughout the year. Therefore, our revenues occur throughout the year. 

Critical Accounting Policies

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.

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

21

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.

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification.  All other non-grandfathered, non-SEC accounting literature not included in the Codification has become non-authoritative.  The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database.  The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification.  There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the quarter ended June 30, 2010.

As a result of the Company’s implementation of the Codification during the quarter ended June 30, 2010, previous references to new accounting standards and literature are no longer applicable.  In the current quarter financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

Results of Operations for the Three Months Ended June 30, 2012

Balance Sheet

Our total assets increased by US $8,265,656 for month ending June 30, 2012 to US $17,548,408 compared to June 30, 2011 were US $9,282,752. Total liabilities increased by US $1,092,262 to US $3,756,258 for month ending June 30, 2012 from US $2,663,996 for the month ending June 30, 2012, principally due to an increase of cash and cash equivalents, accounts receivable, prepaid expenses, inventory, accounts payable, notes payable, taxes payable.

Balance Sheet	June 30,  2012		June  30,  2011
Total Assets	$	17,548,408	$	9,282,752
Total Liabilities		3,756,258		2,663,996
Net Assets	$	13,792,150	$	6,618,756

Results of Operations

Profit/Loss	For the Three Months Ended
	June 30,  2012			June 30,  2011
Operating Income (Loss)	$	1,113,124		$	2,277,877
Net Income (Loss) Before Tax		1,113,124			2,277,877
Corp. Income Tax		(280,281	)		(573,916	)
Net Income (Loss)	$	832,843		$	1,703.951

Revenues

Our revenues for the three months ended June 30, 2012 were US $ 6,305,200, a decrease of 22% over revenues of US $8,034,698 for the three months ended June 30, 2011. The decrease in sales revenues was due primarily to the decrease in demand for non-branded raw products and including the Yishen capsule. This reduction in sales is within a broader slowdown in demand for China’s TCM market. Management considers the long term trend remains intact but the softening of China’s market has had an effect in our sales. This softening in demand contributed to a significant reduction in the volume of sales raw TCM herbs and Yinshen capsules. The company also faced in period an increase in competition of non-branded products and in particular for raw non-branded products. Our sales arrangements are not subject to any warranties. In this period, TCM prices including DAR retail prices decreased slightly due to the macro TCM market condition.

22

Cost of Sales; Gross Profit

Cost of sales are expenses directly related to manufacturing and selling our products, including costs of raw materials purchased from farmers, product delivery and direct labor cost. The cost of sales for the three months ended June 30, 2012 were US $4,891,526, representing a decrease of 12% over the cost of sales of US $5,574,025 for the three months ended June 30, 2011. The increased costs of sales and comparatively lower gross profit rate for the three months ended June 30, 2012 were principally due to the decline in selling price.

Gross profit for the three months ended June 30, 2012 decreased by approximately 43% to US $1,413,674 from US $2,460,673 for the three months ended June 30, 2011.Gross profit margin for the three months ended June 30, 2012 was 22% compared to 31% for the three months ended June 30, 2011. This was primarily due to the changes in the price of raw materials.

Operating Expenses

The operating expenses for the three months ended June 30, 2012 were US $300,549, representing an increase of 69% over operating expenses of US $182,796 for the three months ended June 30, 2011. The interest costs for the three months ended June 30, 2012 were US $7,495, representing a decrease of 21% over interest costs of US $9,537 for the three months ended June 30, 2011. The operating expenses included selling, general and administrative (“SG&A”) expense and interest cost. SG&A expenses increased overall to US $293,054 for the three months ended June 30, 2012 compared to US $173,259 for the three months ended June 30, 2011. The increase of SG&A expenses for the recent quarter is primarily due to the increased competition in the market particularly in the non-branded products category; making operations relatively more expensive.

Other Comprehensive Income/Expense

For the three months ended June 30, 2012, we had a total Other Comprehensive Income of US $744,361, compared to other comprehensive income of US $1,792,188 for the three months ended June 30, 2011. This is primarily related to foreign currency translation between RMB and USD.

Impact of Inflation

We believe that inflation has had no significant effect on operations for the three months ended March 31, 2012. In the second quarter of 2012, the TCM market inflation was relatively in a stable condition.

23

Taxes

According to the Corporate Income Tax Law of China, companies without any tax abatement programs are charged at a 25% income tax rate. The income tax for the three months ended June 30, 2012 were US $280,281, a decrease of 51% compare to income tax of US $573,916 for the three months ended June 30, 2011. For the three months ended June 30, 2012, we accrued income taxes of US $886,957. For the three months ended June 30, 2011, we accrued income taxes of US $582,325.

Net Income

We had net income for the three months ended June 30, 2012 of US $832,843, a decrease of 51% compared to a net income for the three months ended June 30, 2011 of US $1,703,951. The decrease in our net income for the three months ended June 30, 2012 is attributable principally to an increased cost of operation, cost of good combined with the reduction in sales especially in the non-branded TCM raw products. However the company believes through advertisement, an increase in awareness, along with focus on branded product net income can be increased.

Liquidity and Capital Resources

At June 30, 2012, we had current assets of $16,754,118, current liabilities of $3,756,258, working capital of $12,997,860 and retained earnings of $11,270,206. For the six months ending June 30, 2012, we had net cash flows provided by operating activities of $469,489, and net cash flows provided by financing activities of $221,979. We had $930,343 cash on hand as of June 30, 2012.

24

Off-Balance Sheet Arrangements

For the three months ended June 30, 2012, we did not have any off-balance sheet arrangements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.   CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods.  Our Chief Executive Officer and our Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures.  The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

During the first quarter of 2012, our Certifying Officers evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

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

25

PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

None.

ITEM 1A.    RISK FACTORS

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

ITEM 2.   UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.   OTHER INFORMATION

None.

26

ITEM 6.    EXHIBITS

(1)    Exhibits: Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits following the signature page of this Form 10-Q, which is incorporated herein by reference.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHINA HEALTH RESOURCE, INC.
Dated:   August____ , 2012	By:  /s/   Wang, Jiayin
	Wang, Jiayin
	Chief Executive Officer and Director
	(Principal Executive Officer)
Dated:   August____ , 2012	By: /s/    Liu, Weihai
	Liu, Weihai
	Chief Financial Officer and Director (Principal Financial Officer)

27

INDEX TO EXHIBITS

Exhibit No.	Description	Incorporated Herein by Reference to	Filed Herewith
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X
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		X
			X
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document		X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document		X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document		X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document		X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document		X

28

EX-31

Exhibit 31.1

CERTIFICATIONS

I, Jiayin Wang, certify that;

(1) I have reviewed this quarterly report on Form 10-Q of China Health Resource, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(1) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August __, 2011

/s/       Jiayin Wang                                                             

By:     Jiayin Wang

Title:   Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATIONS

I, Weihai Liu, certify that;

(1) I have reviewed this quarterly report on Form 10-Q of China Health Resource, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(1) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August __, 2012

 /s/     Weihai Liu                                                                 

By:     Weihai Liu

Title:   Chief Financial Officer

EX-32

Exhibit 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

In connection with the accompanying Quarterly Report on Form 10-Q of China Health Resource, Inc. for the quarter ended June 30, 2012, I certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)    the Quarterly Report on Form 10-Q of China Health Resource, Inc.. for the quarter ended June 30, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    the information contained in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, fairly presents in all material respects, the financial condition and results of operations of China Health Resource, Inc.

By:	/s/   Jiayin Wang
Name:	Jiayin Wang
Title:	Principal Executive Officer
Date:	___________, 2012
By:	/s/   Weihai Liu
Name:	Weihai Liu
Title:	Principal Financial Officer
Date:	____________, 2012

XML

Supplemental Cash Flow Information - Supplemental Cash Flow Information (Details) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Notes to Financial Statements
Income Taxes	$ 724,968	$ 920,442
Interest	$ 29,743	$ 18,865

XML

Stockholders' Equity (Narrative Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Stockholders' Equity Textual [Abstract]
Annual net income	$ 2,149,373	$ 7,019,796	$ 2,707,286
Common Stock, per share value	$ 0.001	$ 0.001
Common Stock, Shares, issued	177,435,953	177,435,953
Stock Issued During Period, Value		$ 300,000

XML

Other Payable (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Labor union fee	$ 9,217	$ 7,251
Pension fund	66,681	51,699
Social insurance	88,436	139,763
Risk Fund	158	159
Other	1,396	2,399
TOTAL	$ 165,888	$ 201,271

XML

Income Taxes - Reconcile the U.S. statutory rate to the Company’s effective tax rate (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Notes to Financial Statements
U.S. Statutory rate	34.00%	34.00%
Foreign income not recognized in USA	(34.00%)	(34.00%)
China income taxes	25.00%	25.00%	25.00%	25.00%
Total provision for income taxes	25.00%	25.00%	25.00%	25.00%

XML

Property, Plant and Equipment, Net - Property, Plant and Equipment, Net (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Property, plant and equipment	$ 1,034,767	$ 1,043,867
Less: accumulated depreciation	240,477	212,526
Property, plant and equipment, net	$ 794,291	$ 831,341

XML

Notes Payable Current (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Notes Payable - Current

	June 30, 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)		1,422,947
Total	$	1,422,947	$	1,206,177

XML

Major Customer/Vendor and Concentration (Details Narrative)	3 Months Ended
	Jun. 30, 2012
PRC | Percent of Company Assets Located in PRC
Concentration percentage	100.00%
PRC | Percent of Revenues Derived from Customers in PRC
Concentration percentage	100.00%
Percent of Revenue Contributed by PRC
Concentration percentage	38.00%
Percent of Revenue Contributed by Other TCM
Concentration percentage	38.00%
Percent of Revenue Contributed by YishenCapsule
Concentration percentage	24.00%

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Basis of Presentation

Basis of Presentation

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

Basis of Consolidation

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.

Management’s Use of Estimates

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.

Revenue Recognition

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 return.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

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

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.

Company's Future Operations Are Dependent on Foreign Operations

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.

Cash and Cash Equivalents

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.

Accounts Receivable

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.

Advances to Suppliers

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.

Inventory

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.

Property, Plant, and Equipment

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 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.

Income Taxes

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.

Earnings (Loss) Per Common Share

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.  

Fair Value of Financial Instruments

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.

Impairment of Long-Lived Assets

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

Stock-Based Compensation

Employee stock-based compensation is accounted for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and the FASB interpretations thereof. Pursuant to those accounting pronouncements, compensation is recorded for share options granted to employees at the date of grant based on the difference between the exercise price of the options and 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

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.

Recently Issued Accounting Pronouncements

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.

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.

XML

Short Term Loan - Short term loan (Details) (USD $)		0 Months Ended		0 Months Ended		1 Months Ended
	Jun. 30, 2012	Jul. 15, 2012 Short Term Loan One	Jun. 30, 2012 Short Term Loan One	Jul. 13, 2012 Short Term Loan Two	Jun. 30, 2012 Short Term Loan Two	Aug. 12, 2012 Short Term Loan Three	Jun. 30, 2012 Short Term Loan Three
Lender		Zhang Rende		Wang Lijun		Zeng Changhua
Due Date		Jul. 15, 2012		Jul. 13, 2012		Aug. 12, 2012
Interest rate			36.00%		24.00%		42.00%
Amount of loan	$ 1,422,947		$ 316,211		$ 316,211		$ 790,526
Short term loan description		The loan provided by Zhang Rende was guaranteed by the Suining Yinfa Construction Co., Ltd. The borrower collateralized the loan with the Company’s subsidiary Suining Yinfa DAR Industry Co. Ltd’s intangible assets and net assets.		The loan provided by Wang Lijun was guaranteed by the CEO Mr. Jiayin’s Wang’s and Mrs. Sulan Deng’s household assets.		The loan provided by Zeng Changhua was guaranteed by the Suining Yinfa Construction Co., Ltd. The borrower collateralized the loan with the Company’s subsidiary Suining Yinfa DAR Industry Co. Ltd’s intangible assets and net assets.

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Prepayment for Land Usage - Prepayment for Land Usage (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
DAR production villages	$ 3,506,775	$ 3,520,131
Total	$ 3,506,775	$ 3,520,131

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Organization and Business Background (Narrative Details) (USD $)	3 Months Ended	2 Months Ended	12 Months Ended
	Aug. 22, 2006	Jul. 31, 2002	Dec. 31, 2011
Percent of the outstanding shares of Voice Diary Ltd. acquired		99.00%
New (pre-split) shares of common stock deposited in exchange for cash	$ 400,000
Settlement of all unpaid salaries and severance pay to Mr. Hinkis	100,000
Investment to establish an agricultural planting business entity			95,223
CommonClassAMember
New (pre-split) shares of common stock deposited in exchange for cash (in shares)	9,282,023
Post-split shares issued in exchange for all of the shares of registered capital of Yin Fa (in shares)	30,000,000
Class B Common Stock
New (pre-split) shares of common stock deposited in exchange for cash (in shares)	2,000
Retirement of Class B Common Stock owned Mr. Hinkis at closing	$ 74,000
Retirement of Class B Common Stock owned Mr. Hinkis at closing (in shares)	744

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Income Taxes - The components of (loss) income before income taxes separating U.S. and PRC operations (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Notes to Financial Statements
Loss subject to U.S. operation			$ (25,457)	$ (197,798)
Income (loss) subject to PRC operation			2,899,798	3,681,798
NET INCOME (LOSS) BEFORE TAXES	$ 1,113,124	$ 2,277,867	$ 2,874,341	$ 3,484,000

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Accounts Payable and Accrued Liabilities - Accounts Payable and Accrued Liabilities (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Accounts payable	$ 451,034	$ 824,824
Accrued liabilities	452,974	50,256
Total accounts payable and accrued liabilities	$ 904,008	$ 875,080

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Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Supplemental Cash Flow Information

3.     SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the period ended June 30, 2012 and 2011 are summarized as follows:

Cash paid during the six-month period ended June 30, 2012 and 2011 for interest and income taxes:

	June 30, 2012		June 30, 2011
Income Taxes		724,968		920,442
Interest		29,743		18,865

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Prepayment for Land Usage (Details Narrative)	1 Months Ended
	Nov. 30, 2011 Integer
Notes to Financial Statements
Number of village unions in land usage agreement	12

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Inventory (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Inventory

	June 30, 2012		December 31, 2011
Raw materials	$	2,393,181	$	1,276,462
Low value consumables		—		—
Finished goods		—		—
	$	2,393,181	$	1,276,462

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Prepayment for Land Usage (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Prepayment for Land Usage

	June 30, 2012		December 31, 2011
DAR production villages	$	3,506,775	$	3,520,131
Total		3,506,775		3,520,131

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Income Taxes (Details Narrative) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Notes to Financial Statements
New Enterprise Income Tax rate			25.00%	25.00%
Previous Enterprise Income Tax rate			33.00%	33.00%
Tax rate prior to 2008			33.00%	33.00%
State portion of income tax rate			30.00%	30.00%
Local portion of income tax rate			3.00%	3.00%
Unified corporate income tax rate	25.00%	25.00%	25.00%	25.00%
Net operating losses of U.S. operation			$ (25,457)	$ (197,798)
Provision for US income taxes			0	0
Deferred tax			$ 0	$ 0

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Deferred Inventory Costs (Details Narrative) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Deferred inventory costs	$ 3,942,113	$ 3,079,930

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Property, Plant and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Property, Plant and Equipment, Net

	June 30, 2012			December 31, 2011
Property, plant and equipment		1,034,767			1,043,867
Less: accumulated depreciation		(240,477	)		(212,526	)
Property, plant and equipment, net	$	794,291		$	831,341

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Accounts Payable and Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Accounts Payable and Accrued Liabilities

	June 30, 2012		December 31, 2011
Accounts payable		451,034		824,824
Accrued liabilities		452,974		50,256
Total accounts payable and accrued liabilities	$	904,008	$	875,080

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Summary of Significant Accounting Policies

2. 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.

(c) 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 return.

(e) Comprehensive Income (Loss)

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.

(f) 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.

(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.

(h) 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.

(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.

(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 

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 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.

(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.

(q) Stock-Based Compensation

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

(r) Subsequent Events

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.

(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.

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.

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Other Payable (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Notes payable

	June 30, 2012		December 31, 2011
Labor union fee	$	9,217	$	7,251
Pension fund		66,681		51,699
Social insurance		88,436		139,763
Risk Fund		158		159
Other		1,396		2,399
Total	$	165,888	$	201,271

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Accounts Receivable - Accounts receivable (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Accounts receivable, gross	$ 4,973,360	$ 5,386,455
Less: allowance for doubtful accounts
Account receivable, net	$ 4,973,360	$ 5,386,455

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Income Taxes - The reconciliation of income tax rate to the effective income tax rate based on income before income taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Notes to Financial Statements
Income (loss) before income taxes			$ 2,899,798	$ 3,681,798
Statutory income tax rate	25.00%	25.00%	25.00%	25.00%
Current income tax expense			724,950	920,450
Expenses not deductible for tax purposes:
- Provisions			18	(8)
Income tax expense	$ 280,281	$ 573,916	$ 724,968	$ 920,442

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Unaudited Condensed Consolidated Balance Sheets (USD $)	Jun. 30, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash and Cash Equivalents	$ 930,343	$ 241,755
Accounts Receivable	4,973,360	5,386,455
Advances to Suppliers	1,008,346	32,231
Prepayment for land usage	3,506,775	3,520,131
Deferred inventory cost	3,942,113	3,079,930
Inventory	2,393,181	1,276,462
TOTAL CURRENT ASSETS	16,754,118	13,536,964
FIXED ASSETS
Property, Plant, and Equipment	1,034,767	1,043,867
Accumulated Depreciation	240,477	212,526
TOTAL NET FIXED ASSETS	794,291	831,341
TOTAL ASSETS	17,548,408	14,368,305
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities	904,008	875,080
Other Payables	165,888	201,271
Due to Shareholder	376,457	376,457
Taxes Payable	886,957	21,200
Notes Payable	1,422,947	1,206,177
TOTAL CURRENT LIABILITIES	3,756,258	2,680,185
TOTAL LIABILITIES	3,756,258	2,680,185
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock Class A (500,000,000 shares authorized,177,435,953 and 159,935,953 issued and outstanding, par value $0.001)	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
Accumulated other comprehensive income	608,012	661,313
Retained earnings (deficit)	11,270,206	9,120,832
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	13,792,150	11,688,120
TOTAL LIABILITIES AND EQUITY	$ 17,548,408	$ 14,368,305

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Inventory - Inventories (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Raw materials	$ 2,393,181	$ 1,276,462
Low value consumables
Finished goods
Inventory	$ 2,393,181	$ 1,276,462

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Audited Consolidated Statement of Equity (Deficit) (USD $)	Class A Common Stock	Additional Paid-In Capital	Retained Earnings (Deficit)	Accumulated Other Comprehensive Income	Total
Beginning balance at Dec. 31, 2009		$ 1,145,832	$ (557,914)	$ 157,143	$ 887,350
Beginning balance (shares) at Dec. 31, 2009	142,288,894
Issuance for CEO's appointment and bonus (shares)	17,647,059
Issuance for CEO's appointment and bonus	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
Ending balance at Dec. 31, 2010	159,936	1,274,144	2,149,372	235,737	3,819,189
Ending balance (shares) at Dec. 31, 2010	159,935,953				159,935,953
Conversion of consulting service fee (shares)	10,000,000
Conversion of consulting service fee	10,000	70,000			80,000
Issuance for CEO's performance bonus payable (shares)	6,000,000
Issuance for CEO's performance bonus payable	6,000	294,000			300,000
Share-based compensation (option expenses)		31,831			31,831
Shares issued to investment banking service (shares)	1,500,000
Shares issued to investment banking service	1,500	28,500			30,000
Contribution from shareholder's loan imputed interest		30,063			30,063
Net income (loss) for the period			7,019,796		7,019,796
Other comprehensive income				425,277	425,277
Ending balance at Dec. 31, 2011	177,436	1,728,539	9,120,832	661,313	11,688,120
Ending balance (shares) at Dec. 31, 2011	177,435,953				177,435,953
Share-based compensation (option expenses)		7,958			7,958
Net income (loss) for the period			2,149,373		2,149,373
Other comprehensive income				(53,301)	(53,301)
Ending balance at Jun. 30, 2012	$ 177,436	$ 1,736,497	$ 11,270,205	$ 608,012	$ 13,792,150
Ending balance (shares) at Jun. 30, 2012	177,435,953				177,435,953

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Short Tem Loan (Tables)

3 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Short term loan

Name	Due Date	Interest Rate		June 30, 2012		December 31, 2011
Zhang Rende	07/15/2012		36%	$	316,210.53	$	—
Wang Lijun	07/13/2012		24%		316,210.53		—
Zeng Changhua	08/12/2012		42%		790,526.33		—
Total	00/00/2012		00%	$	1,422,947.39	$	—

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Major Customer/Vendor and Concentration

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Major Customer/Vendor and Concentration

16.     MAJOR CUSTOMER/VENDOR AND CONCENTRATION

(a)    Sale breakdown

For the six-month period ended June 30, 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 six-months ended June 30, 2012, 38% of the total revenue is contributed by DAR, 36% of the total revenue is contributed by other TCM, and 26% of total revenue is contributed by Yishen 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.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Future five years minimum rental payments

Year ended December 31	Lease payment
2012	880,033
2013	1,765,346
2014	1,770,642
2015	1,775,954
2016	1,781,282
Total	7,973,257

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Commitments and Contingencies

18.     COMMITMENT AND CONTINGENCIES

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, 2012

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

Year ended December 31	Lease payment
2012	$	880,033
2013		1,765,346
2014		1,770,642
2015		1,775,954
2016		1,781,282
Total	$	7,973,257

For the six-month period ended June 30, 2012 and 2011, rental expense was $4,202 and $Nil.

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Organization and Business Background

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Organization and Business Background

1.     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.

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.  

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.

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”).

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Unaudited Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized shares	500,000,000	500,000,000
Common stock, issued shares	177,435,953	177,435,953
Common stock, outstanding shares	177,435,953	177,435,953
Preferred stock, authorized shares	50,000,000	50,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0

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Other Payable

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Other Payable

11.     OTHER PAYABLE

As of June 30, 2012 and December 31, 2011, other payable consist of the following:

	June 30, 2012		December 31, 2011
Labor union fee	$	9,217	$	7,251
Pension fund		66,681		51,699
Social insurance		88,436		139,763
Risk Fund		158		159
Other		1,396		2,399
Total	$	165,888	$	201,271

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Document and Entity Information (USD $)	3 Months Ended
	Jun. 30, 2012
Document And Entity Information
Entity Registrant Name	China Health Resource, Inc.
Entity Central Index Key	0001173784
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	177,435,953
Entity Listing, Par Value Per Share	$ 0.001
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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Notes Payable Current

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Notes Payable Current

12.     NOTES PAYABLE – CURRENT

As of June 30, 2012 and December 31, 2011, notes payable consist of the following:

	June 30, 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)		1,422,947
Total	$	1,422,947	$	1,206,177

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Unaudited Condensed Consolidated Statement of Operations (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
REVENUES
Sales	$ 6,305,200	$ 8,034,698	$ 15,260,561	$ 12,413,009
Cost of Sales	4,891,526	5,574,025	11,863,616	8,456,203
GROSS PROFIT	1,413,674	2,460,673	3,396,945	3,956,806
OPERATING EXPENSES
Selling, General, and Administrative	293,054	173,259	492,859	453,931
Interest Expense	7,495	9,537	29,743	18,865
TOTAL OPERATING EXPENSES	300,549	182,796	522,602	472,796
OPERATING INCOME (LOSS)	1,113,124	2,277,877	2,874,342	3,484,010
OTHER INCOME / (EXPENSES)
Other		(10)	(1)	(10)
TOTAL OTHER INCOME / (EXPENSE)		(10)	(1)	(10)
NET INCOME (LOSS) BEFORE TAXES	1,113,124	2,277,867	2,874,341	3,484,000
INCOME TAX EXPENSE	280,281	573,916	724,968	920,442
NET INCOME (LOSS)	832,843	1,703,951	2,149,373	2,563,558
Foreign Currency Translation (Loss) Gain	(88,483)	88,237	(72,495)	140,093
COMPREHENSIVE INCOME (LOSS)	$ 744,361	$ 1,792,188	$ 2,076,879	$ 2,703,651
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	177,435,953	168,769,286	177,435,953	168,769,286
Fully diluted	177,435,953	168,769,286	177,435,953	168,769,286
NET LOSS PER COMMON SHARE
Basic	$ 0.00	$ 0.01	$ 0.01	$ 0.02
Fully diluted	$ 0.00	$ 0.01	$ 0.01	$ 0.02

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Prepayment for Land Usage

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Prepayment for Land Usage

6. PREPAYMENT FOR LAND USAGE

In November 2011, the company entered land usage agreement with 12 local village unions for future raw material DAR production. Prepayment for land usage as of June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31, 2011
DAR production villages	$	3,506,775	$	3,520,131
Total	$	3,506,775	$	3,520,131

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Advances to Suppliers

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Advances to Suppliers

5. ADVANCES TO SUPPLIERS

Due to the high demand of DAR product, the company advances money to third party suppliers to secure more DAR supply. These advances bear no interest and will be applied as the payment when purchases are received. The balance of advances to suppliers as of June 30, 2012 and December 31, 2011 are $1,008,346 and $32,231, respectively.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Stockholders' Equity

17.     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) No 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:

i. 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.

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.

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Short Tem Loan

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Short Tem Loan

13. SHORT TERM LOAN

As of June 30, 2012 and December 31, 2011, short term loan consist of the following:

Name	Due Date	Interest Rate		June 30, 2012		December 31, 2011
Zhang Rende	07/15/2012		36%	$	316,210.53	$	—
Wang Lijun	07/13/2012		24%		316,210.53		—
Zeng Changhua	08/12/2012		42%		790,526.33		—
Total	00/00/2012		00%	$	1,422,947.39	$	—

1) The loan provided by Zhang Rende was guaranteed by the Suining Yinfa Construction Co., Ltd. The borrower collateralized the loan with the Company’s subsidiary Suining Yinfa DAR Industry Co. Ltd’s intangible assets and net assets.

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

3) The loan provided by Zeng Changhua was guaranteed by the Suining Yinfa Construction Co., Ltd. The borrower collateralized the loan with the Company’s subsidiary Suining Yinfa DAR Industry Co. Ltd’s intangible assets and net assets.

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Property, Plant and Equipment, Net

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Property, Plant and Equipment, Net

9.     PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net as of June 30, 2012 and December 31, 2011 consists of the following:

	June 30, 2012			December 31, 2011
Property, plant and equipment		1,034,767			1,043,867
Less: accumulated depreciation		(240,477	)		(212,526	)
Property, plant and equipment, net	$	794,291		$	831,341

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Deferred Inventory Costs

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Deferred Inventory Costs

7.     DEFERRED INVENTORY COSTS

The deferred inventory costs represented prepayment to suppliers for future inventory delivery. As of June 30, 2012 and December 31, 2011, the balances of deferred inventory costs are $3,942,113 and $3,079,930 respectively. These costs will be transferred to inventories at the time of inventory delivery.

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Inventory

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Inventory

8.     INVENTORY

Inventories as of June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31, 2011
Raw materials	$	2,393,181	$	1,276,462
Low value consumables		—		—
Finished goods		—		—
	$	2,393,181	$	1,276,462

As of June 30, 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.

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Accounts Payable and Accrued Liabilities

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Accounts Payable and Accrued Liabilities

10.     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31, 2011
Accounts payable		451,034		824,824
Accrued liabilities		452,974		50,256
Total accounts payable and accrued liabilities	$	904,008	$	875,080

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

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

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

	June 30, 2012			June 30, 2011
Loss subject to U.S. operation	$	(25,457	)	$	(197,798	)
Income (loss) subject to PRC operation		2,899,799			3,681,798
Income (loss) before income taxes	$	2,874,341		$	3,484,000

The reconciliation of income tax rate to the effective income tax rate based on income before income taxes

	June 30, 2012		June 30, 2011
Income (loss) before income taxes	$	2,899,799	$	3,681,799
Statutory income tax rate		25%		25%
		724,950		920,450
Expenses not deductible for tax purposes:
- Provisions		18		(8	)
Income tax expense	$	724,968	$	920,442

Reconcile the U.S. statutory rate to the Company’s effective tax rate

	June 30, 2012			June 30, 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	%

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Convertible Debt (Details Narrative) (USD $)		5 Months Ended	8 Months Ended
	Jun. 30, 2012	Jan. 31, 2011 Convertible Note	May 04, 2011 Convertible Note	Jul. 01, 2010 Convertible Note
Convertible note for consulting services				$ 80,000
Annual interest rate				1.00%
Conversion price per share				$ 0.008
Amount of note converted		56,000	24,000
Shares converted		7,000,000	3,000,000
Convertible debt	$ 0

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Income Taxes

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Income Taxes

15.     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 six months ended June 30, 2012 and June 30, 2011.

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

	June 30, 2012			June 30, 2011
Loss subject to U.S. operation	$	(25,457	)	$	(197,798	)
Income (loss) subject to PRC operation		2,899,799			3,681,798
Income (loss) before income taxes	$	2,874,341		$	3,484,000

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 six-month period ended June 30, 2012, the U.S. operation had $25,457 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 six-month period ended June 30, 2012 and June 30, 2011 is as follows:

	June 30, 2012		June 30, 2011
Income (loss) before income taxes	$	2,899,799	$	3,681,799
Statutory income tax rate		25%		25%
		724,950		920,450
Expenses not deductible for tax purposes:
- Provisions		18		(8	)
Income tax expense	$	724,968	$	920,442

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

	June 30, 2012			June 30, 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

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 six-month period ended June 30, 2012 and June 30, 2011.

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

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 effect on the Company’s financial statements.

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Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Supplemental Cash Flow Information

	June 30, 2012		June 30, 2011
Income Taxes		724,968		920,442
Interest		29,743		18,865

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Notes Payable Current - Notes Payable - Current (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Secured Bank Loan Bearing 6.475% Interest Due 2012-11-03	Dec. 31, 2011 Secured Bank Loan Bearing 6.475% Interest Due 2012-11-03	Jun. 30, 2012 Secured Bank Loan Bearing 6.875% Interest Due 2012-10-12	Dec. 31, 2011 Secured Bank Loan Bearing 6.875% Interest Due 2012-10-12	Jun. 30, 2012 Non-Secured Note Payable to Related Party Bearing No Interest Due 2012-12-28	Dec. 31, 2011 Non-Secured Note Payable to Related Party Bearing No Interest Due 2012-12-28	Dec. 31, 2012 Short Term Debt	Jun. 30, 2012 Short Term Debt
Notes payable	$ 1,422,947	$ 1,206,177		$ 476,122		$ 253,932		$ 476,123		$ 1,422,947

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Advances to Suppliers (Details Narrative) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Notes to Financial Statements
Advances to suppliers	$ 1,008,346	$ 32,321

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Unaudited Condensed Consolidated Statement of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 2,149,373	$ 2,563,558
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	28,839	22,849
Stock-based compensation	7,958	15,916
Accounts receivable	393,776	(398,390)
Employee Advances and Other Receivable	(979,028)	(38,209)
Prepayment for land usage and inventory	(876,366)
Inventory	(1,124,770)	(2,685,329)
Accounts payable and accrued liabilities	53,225	182,683
Other payable	(34,718)	41,791
Others	5,153	4,967
Tax payable	846,046	579,620
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	469,488	289,456
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		(519)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(519)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term-note payable	1,427,009
Payments to short-term-note payable	(1,205,029)
NET CASH PROVIDED BY FINANCING ACTIVITIES	221,979
FOREIGN CURRENCY TRANSLATION	(2,879)	5,272
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	688,588	294,209
CASH AND CASH EQUIVALENTS:
Beginning of period	241,755	90,306
End of period	$ 930,343	$ 384,515

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Accounts Receivable

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Accounts Receivable

4.     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 June 30, 2012 and December 31, 2011 consist of the following:

	June 30, 2012		December 31, 2011
Accounts receivable, gross	$	4,973,360	$	5,386,455
Less: allowance for doubtful accounts		—		—
Account receivable, net		4,973,360		5,386,455

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

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Commitments and Contingencies - Future five years minimum rental payments (Details) (USD $)	Dec. 31, 2011
Notes to Financial Statements
2012	$ 1,320,050
2013	1,765,346
2014	1,770,642
2015	1,775,954
2016	1,781,282
Total	$ 8,413,274

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Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Accounts receivable

	June 30, 2012		December 31, 2011
Accounts receivable, gross	$	4,973,360	$	5,386,455
Less: allowance for doubtful accounts		—		—
Account receivable, net		4,973,360		5,386,455

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Summary of Significant Accounting Policies (Narrative Details)	6 Months Ended
	Jun. 30, 2012 Integer
Equipment
Minimum estimated useful lives (in years)	5
Salvage value	3.00%
Building
Minimum estimated useful lives (in years)	20
Maximum estimated useful lives (in years)	20
Salvage value	5.00%
Inventory
Low-value consumables percent amortized upon application	50.00%
Low-value consumables percent amortized upon obsolescence	50.00%
FinanceReceivablesMember
Bad debt provision allowance period (in days)	90

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Convertible Debt

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Convertible Debt

14.     CONVERTIBLE DEBT

On July 1, 2010, the company issued a convertible note in amount of $80,000 for the consulting services rendered by a consultant. Pursuant to the agreement, the 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 fees. In January, 2011, partial amount ($56,000) of convertible note was converted into 7,000,000 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 June 30, 2012.