As filed with the Securities and Exchange Commission on July 11, 2008

                              Registration No.333-

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM S-1

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                           China Pharma Holdings, Inc.
             (Exact name of registrant as specified in its charter)


            Delaware                                         73-1564807
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                         Identification Number)
                                      4953
                          (Primary Standard Industrial
                           Classification Code Number)



                         2nd Floor, No. 17, Jinpan Road
                         Haikou, Hainan Province, China
                       Telephone: 86-898-66811730 (China)
    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)

                                  Ms. Zhilin Li
                                CEO and President
                           China Pharma Holdings, Inc.
                         2nd Floor, No. 17, Jinpan Road
                         Haikou, Hainan Province, China
                       Telephone: 86-898-66811730 (China)
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                                   Copies to:

                                   Charles Law
                                King and Wood LLP
                        125 S. Market Street, Suite 1175,
                               San Jose, CA 95113

Approximate  date of commencement  of proposed sale to the public:  From time to
time after this Registration Statement becomes effective.



                                       1



If any of the  securities  being  registered on this form are to be offered on a
delayed or continuous  basis  pursuant to Rule 415 under the  Securities  Act of
1933, check the following box. |X|

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the  Securities  Act  registration  statement  number of the  earlier  effective
registration statement for the same offering. |_|

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. |_|

If this Form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  Registration  Statement
for the same offering. |_|

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|
 (Do not check if a smaller reporting company)

















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                         CALCULATION OF REGISTRATION FEE

                                                                                                
----------------------------- ----------------------- ------------------------- --------------------------- --------------------
   Title of each class of          Amount to be           Proposed maximum           Proposed maximum            Amount of
securities to be registered         registered        offering price per unit    aggregate offering price    registration fee
                                                                 *
----------------------------- ----------------------- ------------------------- --------------------------- --------------------
  Common Stock, $0.001 par       5,000,000 shares              $1.92                  $9,600,000.00               $377.28
         value (1)
----------------------------- ----------------------- ------------------------- --------------------------- --------------------
       Common Stock,             1,325,000 shares              $2.80                  $3,710,000.00               $145.80
    $0.001 par value (2)
----------------------------- ----------------------- ------------------------- --------------------------- --------------------
       Common Stock,              25,000 shares                $3.00                    $75,000.00                 $2.95
    $0.001 par value (3)
----------------------------- ----------------------- ------------------------- --------------------------- --------------------
       Common Stock,              25,000 shares                $3.50                    $87,500.00                 $3.44
    $0.001 par value (4)
----------------------------- ----------------------- ------------------------- --------------------------- --------------------
       Common Stock,              75,000 shares                $3.60                   $270,000.00                $10.61
    $0.001 par value (5)
----------------------------- ----------------------- ------------------------- --------------------------- --------------------
           Total                 6,450,000 Shares                                     $13,742,500.00              $540.08
----------------------------- ----------------------- ------------------------- --------------------------- --------------------


   *  Estimated solely for purposes of calculating the registration fee pursuant
      to Rule  457(c)  and Rule  457(g)  under the  Securities  Act of 1933,  as
      amended.  The  average  of  the  high  and  low  price  per  share  of the
      Registrant's  common  stock on the Over the Counter  Bulletin  Board as of
      July 7, 2008 was $1.92 per share.

(1)  Represents  currently  outstanding shares of the registrant's common stock,
     $0.001  par  value  per  share,  which  may be  offered  pursuant  to  this
     registration statement.
(2)  Represents  shares of common stock  issuable upon exercise of warrants at a
     price equal to $2.80 per share.
(3)  Represents  shares of common stock  issuable upon exercise of warrants at a
     price equal to $3.00 per share.
(4)  Represents  shares of common stock  issuable upon exercise of warrants at a
     price equal to $3.50 per share.
(5)  Represents  shares of common stock  issuable upon exercise of warrants at a
     price equal to $3.60 per share.

To the extent  permitted by Rule 416, this  registration  statement  also covers
such additional  number of shares of common stock as may be issuable as a result
of the  anti-dilution  provisions  of the warrants in the event of stock splits,
stock dividends or similar transactions.

The registrant hereby amends this  registration  statement on such date or dates
as may be necessary to delay its effective date until the registrant  shall file
a further amendment which specifically  states that this registration  statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933  or  until  the  registration  statement  shall  become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAYNOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES



                                       3


AND EXCHANGE  COMMISSION IS EFFECTIVE.  THIS  PROSPECTUS IS NOT AN OFFER TO SELL
THESE  SECURITIES,  AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.


                   SUBJECT TO COMPLETION, DATED July [ ], 2007

                           China Pharma Holdings, Inc.

                        6,450,000 Shares of Common Stock

This  Prospectus  is an  offering  of  6,450,000  shares  of our  common  stock,
including 1,450,000 shares of common stock issuable upon exercise of outstanding
warrants.

These  securities  are more fully  described  in the section of this  Prospectus
titled "Description of Securities."

These securities are being registered to permit public secondary  trading of the
securities offered by the selling stockholders named in this Prospectus. We will
not receive any of the proceeds  from the sale of the  securities by the selling
stockholders.  To the extent the warrants are exercised on a cash basis, we will
receive the exercise price of those warrants.

The selling  stockholders  may, but are not  obligated  to, offer all or part of
their  shares of common  stock for resale  from time to time  through  public or
private  transactions,  at  either  prevailing  market  prices  or at  privately
negotiated prices. See "Plan of Distribution."

Our common  stock is currently  quoted on the  Over-the-Counter  Bulletin  Board
("OTCBB")  under the symbol  "CPHI.OB".  On July 7, 2008, the last reported sale
price of our common stock was $1.92 per share.

Investing in our stock involves risks.  You should  carefully  consider the Risk
Factors beginning on page 7 of this prospectus.

Neither  the  Securities  and  Exchange  Commission  nor  any  state  securities
commission has approved or  disapproved  of these  securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                The date of this Prospectus is [       ], 2008





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                           China Pharma Holdings, Inc.

                                TABLE OF CONTENTS


                                                                            Page
Prospectus Summary                                                             1
Risk Factors                                                                   7
Use of Proceeds                                                               21
Market for Common Equity and Related Stockholder Matters                      21
Management's Discussion and Analysis or Plan of Operation                     22
Business                                                                      33
Management                                                                    39
Director and Executive Compensation                                           42
Certain Relationships and Related Transactions                                43
Security Ownership of Certain Beneficial Owners and Management                43
Selling Security Holders                                                      44
Description of Securities                                                     48
Plan of Distribution                                                          50
Legal Matters                                                                 51
Experts                                                                       51
Changes In and Disagreements With Accountants on Accounting and
  Financial Disclosure                                                        51
Where You Can Find Additional Information                                     51
Financial Statements                                                      F1-F25


You may only rely on the  information  contained in this  Prospectus in deciding
whether to purchase the  securities.  We have not  authorized  anyone to provide
information  different from that contained in this  Prospectus.  The information
contained in the Prospectus is accurate only as of the date of this  Prospectus,
regardless  of the  time  of  delivery  of  this  Prospectus  or of any  sale of
securities.  Our  business,  financial  condition,  results of  operations,  and
prospects may have changed since that date.

The  information  contained in this Prospectus is not complete and is subject to
change. The selling  stockholders are not permitted to sell securities until the
registration  statement  filed with the  Securities  and Exchange  Commission is
effective. This Prospectus is not an offer to sell these securities, nor is it a
solicitation of an offer to buy these securities in any state where the offer or
sale is not permitted.







                                       i


                               PROSPECTUS SUMMARY

This summary highlights selected information about China Pharma Holdings,  Inc.,
its direct and indirect  wholly-owned  subsidiaries,  and the  offering  that is
contained  elsewhere in this Prospectus.  You should read the entire  Prospectus
before making an investment decision, especially the information presented under
the heading "Risk  Factors" on page 7 and the financial  statements  and related
notes included  elsewhere in this Prospectus,  as well as any other documents to
which we refer you. Except as otherwise indicated by context, references in this
Prospectus to "we," "us," "our" or the "Company" are to the combined business of
China Pharma Holdings,  Inc., Onny Investment  Limited ("Onny"),  Hainan Helpson
Medicine  and  Bio-Technology  Co.  Ltd.  ("Helpson"),  and in each  case do not
include  the  selling  stockholders.  References  to "China" or to the "PRC" are
references  to  the  People's  Republic  of  China.  This  Prospectus   contains
forward-looking  statements  and  information  about us.  (See  "Forward-Looking
Statements" on page 22.)


                                   OUR COMPANY

Overview

China Pharma Holdings, Inc. (formerly,  TS Electronics,  Inc. and prior thereto,
Softstone,  Inc.)  was  incorporated  on  January  28,  1999,  pursuant  to  the
provisions of the General  Corporation Act of the State of Delaware.  On May 31,
1999, we merged with Soft Stone Building Products, Inc., an Oklahoma corporation
that  was  a  predecessor  to  our  Company's  business.  Our  initial  business
operations were conducted at 620 Dallas Drive,  Denton TX, 76205. On February 1,
2000, we moved our offices and facilities to Ardmore, OK. In June 2002, we moved
our office facilities to Pottsboro,  TX. On August 13, 2003, we changed our name
to TS  Electronics,  Inc.  On March  15,  2006,  we  changed  our  name  from TS
Electronics, Inc. to China Pharma Holdings, Inc.

Our focus initially was solely on realizing the commercial benefits of a process
developed and patented by our first president,  Frederick  Parker.  This process
converted waste tires into useful products.  We were not successful in promoting
this business, wrote off all assets associated with the business and shifted our
attention  to  the  commercial   possibilities   of  a  then,  newly  discovered
devulcanization  process to which we acquired a 5.5 year  exclusive  license for
the Western Hemisphere.  In addition,  we entered into the business of importing
hard-to-find  and specialty  crumb rubber.  We were also not successful in these
endeavors and have abandoned all efforts regarding these pursuits.

Effective  August 11, 2004, the Company entered into a Stock Exchange  Agreement
with Hou Xiao,  the sole  stockholder  of China ESCO  Holdings  Limited  ("China
ESCO"), a company  organized in the Hong Kong Special  Administration  Region in
the  People's  Republic  of China (the  "PRC") and its  wholly  owned  operating
subsidiary,   AsiaNet  PE  Systems  Limited.  China  ESCO  was  engaged  in  the
development and  manufacturing of electrical  energy saving systems and products
in the PRC.



                                       1



The  consummation of the transaction  with China ESCO was subject to a number of
conditions,  including  receipt by us of financial  statements  of China ESCO as
required  under  applicable  regulations,  and  satisfaction  of all  applicable
regulatory  requirements.  In  January  2005,  we  declared  China ESCO to be in
material breach of the agreement and rescinded the agreement.

Effective  February 8, 2005,  we  executed a Letter of Intent with Osage  Energy
Company,  LLC ("Osage")  whereby Osage would acquire 90% of the equity interests
of the Company.  This  transaction  was never  consummated  by the parties.  The
Company had no operations or significant  assets from the quarter ended December
31, 2004 until May 2005.

On May  11,  2005,  we  sold to  Halter  Financial  Group,  Inc.,  in a  private
placement,  1,875,045  shares of common stock at a purchase  price of $0.1066641
per share,  pursuant to the terms of a Stock  Purchase  Agreement (the "Purchase
Agreement"). The private placement was exempt from the registration requirements
of the Securities Act, in reliance upon Section 4(2) thereunder.  As a result of
the purchase,  Halter Financial Group, Inc. became our controlling  stockholder,
owning approximately 75% of our issued and outstanding shares of common stock.

Immediately  subsequent to, and as a result of, the closing of the  transactions
contemplated by the Purchase Agreement, Gene F. Boyd, Keith P. Boyd, Fredrick W.
Parker and Leo G. Templer resigned as officers and directors, as applicable,  of
the  Company.  Timothy P. Halter was  concurrently  appointed as a member of the
Board of Directors,  and Mr. Halter was elected as President,  Chief  Accounting
Officer and Secretary of the Company.

On October  19,  2005 we  entered  into a  Securities  Exchange  Agreement  (the
"Exchange  Agreement") with Onny Investment  Limited ("Onny"),  a British Virgin
Islands company, and its original stockholders pursuant to which we acquired all
of the issued and outstanding  shares of Onny from said stockholders in exchange
for  27,499,940  shares of our common  stock.  Upon the closing of the  exchange
transaction  (the  "Exchange   Transaction"),   Onny  became  the  wholly  owned
subsidiary of our Company.  The Exchange  Agreement also provides that, upon the
effectiveness  of an amendment to the Company's  Certificate of Incorporation to
increase its  authorized  capital  stock,  the Company  shall issue to Heung Mei
Tsui,  the principal  stockholder  of Onny, an  additional  4,723,056  shares of
common stock (the "Post Closing  Shares") to which she would otherwise have been
entitled if the Company  had enough  authorized  shares as of the closing of the
Exchange Transaction.

Immediately prior to the closing of the Exchange  Transaction,  Onny completed a
private placement (the "Onny Offering") of its convertible preferred stock to 46
accredited  investors.  The Onny Offering  raised gross  proceeds of $5,000,000.
Additionally, immediately prior to the Exchange Transaction, participants in the
Onny Offering exchanged their preferred shares for an aggregate of 10,000 shares
of Onny's common stock.  Participants in the Onny Offering then  participated in
the Exchange  Transaction  by exchanging  such 10,000 shares of common stock for
6,944,619 shares of our common stock.

On March 15, 2006,  the Company  amended its  Certificate  of  Incorporation  to
increase its authorized  capital stock from 30,000,000 to 60,000,000  shares and
filed the  Information  Statement in accordance  with Section 14 of the Exchange
Act.  On May 16,  2006,  the  Company  issued  to Heung  Mei Tsui an  additional



                                       2


4,723,056 shares of common stock as provided in the Exchange Agreement. Upon the
issuance  of the Post  Closing  Shares,  Ms.  Tsui  holds  25,278,385  shares or
approximately 72.8% of the issued and outstanding common stock of the Company.

On July 24, 2006,  Zhilin Li,  Heung Mei Tsui and the Company  entered into that
certain Stock Transfer  Agreement,  as amended on November 24, 2006, pursuant to
which Heung Mei Tsui transferred  10,000,000  shares of her personal holdings of
the Company's common stock to Zhilin Li in exchange for a sublicense to a patent
held by a third  party,  which is licensed to Ms. Li.  After the  aforementioned
stock  transfer,  Ms.  Tsui  holds  15,278,385  shares  or  44.0%  of the  total
outstanding  shares of our common stock. Ms. Li holds 10,000,000 shares or 28.8%
of the total outstanding shares of our common stock.

On February 1, 2007,  we completed an offering  pursuant to a  Subscription  and
Registration  Rights  Agreement  ("Agreement")  with 17 accredited  investors in
connection with a private  placement of 2,505,882 shares of the Company's common
stock at $1.70  per  share  (the  "2007  Private  Placement").  Pursuant  to the
Agreement,  the  investors  also  received  three-year  warrants  to purchase an
aggregate  of  1,252,941  shares of  Company's  common stock at $2.38 per share.
Pursuant to the  transaction  on February 1, 2007, we received the  subscription
proceeds  in the  aggregate  amount  of  $4,259,900.  The  net  proceeds,  after
deduction of related offering expenses of $ 462,717,  amounted to $3,797,183. In
December  2007, the Company  received  proceeds of $119,000 upon the exercise of
warrants to purchase  50,000  shares of common  stock.  The  remaining  warrants
issued in conjunction  with the offering to buy 1,202,941 shares of common stock
have not been exercised at December 31, 2007.

On September  27, 2007,  Heung Mei Tsui and the Company  entered into four Stock
Transfer  Agreements  with  Chipiu  Wong,  Ruofeng  Xu,  Yao Huang and Jian Yang
respectively,  pursuant  to  which,  Heung  Mei Tsui  transferred  in  aggregate
4,465,734  shares of the Company's  common stock at the price of $1.52 per share
to the four individuals. After the aforementioned stock transfer, Ms. Tsui holds
10,812,651 shares or 29.0% of the total outstanding shares of our common stock.

In May 2008, the Company completed an offering of units priced at $2.00 per unit
consisting of one share of the Company's  common stock and a warrant to purchase
one-quarter  of a share of the Company's  common stock with an exercise price of
$2.80 per share ("2008 Private  Placement").  The Company issued an aggregate of
5,000,000 shares of common stock and issued  three-year  warrants to purchase an
aggregate  of  1,250,000  shares  of  Company's  common  stock to 17  accredited
investors.  We received the  subscription  proceeds in the  aggregate  amount of
$10,000,000.  The net proceeds,  after deduction of related offering expenses of
731,061.70, amounted to $ 9,268,938.30.

On June 24,  2008,  the  Company  issued to  FirsTrust  Group,  Inc.  three-year
warrants to purchase  75,000 shares of the  Company's  common stock at $2.80 per
share and three-year  warrants to purchase 75,000 shares of the Company's common
stock at $3.60 per  share.  The  Company  issued  the above  warrants  as equity
compensation  under the  Consulting  Agreement and the  Supplementary  Agreement
entered  into between the Company and  FirsTrust  China Ltd.  (the  wholly-owned
subsidiary of FirsTrust Group, Inc.).



                                       3



On the same date,  the Company  issued to Hayden  Communications  International,
Inc. three-year warrants to purchase 25,000 shares of the Company's common stock
at $3.00 per share and  three-year  warrants  to purchase  25,000  shares of the
Company's common stock at $3.50 per share. The Company issued the above warrants
as equity compensation under the Investor Relations Consulting Agreement entered
into between the Company and Hayden Communications International, Inc.

Onny
----

Onny Investment  Limited ("Onny") was incorporated on January 12, 2005 under the
laws of the British Virgin  Islands.  At the time of its  incorporation,  Onny's
authorized capital was $50,000 and there were 50,000 shares of one class and one
series of capital stock, $1.00 par value, issued and outstanding. Heung Mei Tsui
was, at the time of incorporation, the sole stockholder and director of Onny. On
August 18, 2005,  Onny  increased its authorized  capital to $5,000,000  divided
into 40,000  ordinary  shares of capital  stock,  $100.00 par value,  and 10,000
preferred  shares,  $100.00 par value. As of the date of this Prospectus,  there
are 39,700 ordinary shares issued and outstanding,  all of which are held by the
Company. No preferred shares of Onny are currently issued and outstanding.

On May 25,  2005,  Onny  acquired  all the equity  interests  in Hainan  Helpson
Medicine  and  Bio-Technology  Co.  Ltd.  in  exchange  for  the  assumption  of
obligations  to make cash  payments to the Helpson  shareholders  in the form of
common stock dividends from Helpson of $4,154,041,  the assumption of $4,646,409
of other liabilities and the issuance of non-interest  bearing  promissory notes
totaling  $3,413,265  payable  three  months  after  Helpson  obtains a business
license in the PRC as a wholly  foreign owned  entity.  Effective as of June 21,
2005, Onny became the sole  stockholder of Helpson,  and Helpson became a wholly
foreign-owned enterprise as defined by PRC laws.

On October 19, 2005,  Onny completed the Onny  Offering.  Under the terms of the
Onny Offering, Heung Mei Tsui agreed to escrow 6,944,611 shares of the Company's
common stock that she received as a result of the  Exchange  Transaction.  These
shares  represent  20% of the  Company's  issued and  outstanding  common  stock
immediately  following the closing of the Exchange  Transaction  (the "Make Good
Shares"),  so  that in the  event  that  actual  net  income  set  forth  in the
consolidated  financial  statements  of the  Company  for the fiscal year ending
December  31,  2006  ("NI")  does not  reflect $8  million  of net  income  (the
"Guaranteed NI"), the Make Good Shares can be distributed on a pro rata basis to
the participants of the Onny Offering in accordance with the following formula:

Make Good Shares = ((Guaranteed NI - NI) / $8m) X Make Good Pool

If required,  the Make Good Shares will be delivered to participants in the Onny
Offering  within  ten (10)  business  days of the date the audit  report for the
period is filed with the SEC.

Additionally,  in  connection  with the Onny  Offering,  Heung Mei Tsui escrowed
277,785  shares of the  Company's  common stock that she received as a result of
the Exchange  Transaction,  which shares  represent 0.8% of the Company's issued
and outstanding  common stock immediately  following the closing of the Exchange



                                       4


Transaction  (the "HFG Make Good  Pool"),  so that in the event the Company does
not achieve the  Guaranteed  NI, the HFG Make Good Shares will be distributed to
HFG  International,  Limited,  an affiliate of Halter Financial Group,  Inc., in
accordance with the following formula:

HFG Make Good Shares = ((Guaranteed NI - NI) / $8m) X HFG Make Good Pool

If required, the HFG Make Good Shares will be delivered within ten (10) business
days of the date the audit report for the period is filed with the SEC.

According  to the audited  consolidated  financial  statement of Company for the
fiscal year ending  December 31, 2006,  the net income was  $8,587,086  which is
more than the Guaranteed NI.  Therefore,  7,222,396  shares of Company's  common
stock which was  escrowed  shall be reverted  back to Heung Mei Tsui.  As of the
date of this Prospectus, Heung Mei Tsui holds 10,812,651 shares or 29.00% of the
total outstanding shares of our common stock.

Helpson
-------

Hainan  Helpson  Medicine  and   Bio-Technology   Co.  Ltd.   ("Helpson")  is  a
foreign-invested  enterprise  established  in Haikou,  Hainan  Province,  PRC on
February 25, 1993.  Initially,  its name was Hainan Fulin  Biomedical Co., Ltd.,
which was changed to "Helpson" in 1999.  The company was  originally  an "equity
joint venture" as defined by PRC laws on foreign invested  enterprises.  The two
joint  venturers  were  Haikou   Biomedical   Engineering  Co.,  Ltd.   ("Haikou
Biomedical"),  a  PRC  company,  and  Hong  Kong  Fudao  Development  Co.,  Ltd.
("Fudao"),  a Hong Kong company.  Haikou Biomedical invested RMB 2,100,000 for a
70% share of Helpson, and Fudao invested $150,000 for a 30% share of Helpson.

On June 16, 2001, Fudao entered into an Equity Interest Transfer  Agreement with
Hainan Kaidi  Science and  Technology  Co.,  Ltd., a PRC company  ("Kaidi").  In
accordance with the Equity Interest Transfer Agreement, Fudao transferred all of
its 30%  capital  contribution  in  Helpson  to  Kaidi in  consideration  of RMB
2,780,000.  As a result of the transfer,  Haikou Biomedical  continued to hold a
70%  equity  interest  in  Helpson,  while  Kaidi had a 30% equity  interest  in
Helpson.  Therefore,  Helpson  became  a PRC  domestic  company,  rather  than a
foreign-invested company.

Effective  on December  26, 2003,  Helpson  issued new capital  stock to Chengdu
Huineng  Biomedical Co., Ltd.  ("Chengdu Bio") and Chongqing  Chemical  Medicine
Holding Group ("Chongqing Chemical").  Chengdu Bio contributed RMB 3,000,000 for
a 10.71%  equity  interest  in  Helpson  and an  additional  RMB  3,000,000  for
Helpson's  capital common reserve fund, and Chongqing  Chemical  contributed RMB
5,000,000  for a  17.86%  equity  interest  in  Helpson  and an  additional  RMB
5,000,000  for Helpson's  capital  common  reserve  fund.  After the issuance of
shares, Helpson had four equity holders:  Haikou Biomedical,  holding 50% equity
interest;  Kaidi,  holding 21.43% equity  interest;  Chengdu Bio, holding 10.71%
equity interest; and Chongqing Chemical, holding 17.86% equity interest.

On March 8, 2005,  Chongqing  Chemical entered into an equity interest  transfer



                                       5


agreement  with  Haikou  Biomedical  to transfer  all of its equity  interest in
Helpson to Haikou  Biomedical.  Upon completion of the transfer,  there remained
only three equity holders of Helpson:  Haikou Biomedical,  holding 67.86% equity
interest; Kaidi, holding 21.43% equity interest, and Chengdu Bio, holding 10.71%
equity interest.

As set forth above, on May 25, 2005,  Haikou  Biomedical,  Kaidi and Chengdu Bio
entered into an equity  interest  transfer  agreement  with Onny to transfer all
their equity  interests in Helpson to Onny.  Effective as of June 21, 2005, Onny
became  the  sole   stockholder   of  Helpson,   and  Helpson  became  a  wholly
foreign-owned enterprise as defined by PRC laws.

Upon the closing of the Exchange  Transaction  on October 19, 2005,  we acquired
all of the issued and  outstanding  shares of Onny in  exchange  for  27,499,940
shares of our common stock and became Onny's sole  stockholder.  As a result, as
of October 19, 2005, Helpson became our wholly owned subsidiary.

As of July 4, 2006, Helpson increased its registered capital from RMB 28,000,000
to RMB 60,000,000 and changed its registered address from Unit 8, D Area, Office
Hall, Haikou Bonded Zone, Haikou, Hainan Province, China to C09-2, Haikou Bonded
Zone, Haikou, Hainan Province, PRC.

Since  its  establishment,  Helpson  has  positioned  itself  in  the  research,
development,   manufacturing,  and  sales  of  a  series  of  bio-pharmaceutical
products.   Helpson  now  has  eight  different  production  lines,  developing,
manufacturing and marketing Western and Chinese medicines. It has a portfolio of
therapeutics that primarily  targets CNS,  cardiovascular,  wound recovery,  and
infectious diseases. It has a robust portfolio,  a segmented market, a promising
pipeline  with high margin which  addresses  large  patient  populations,  and a
highly professional and experienced management team.


                                  THE OFFERING

Common stock outstanding before the          42,278,938 shares
offering

Common stock offered by the selling          6,450,000  shares,  which  includes
stockholders                                 1,450,000   shares   issuable  upon
                                             exercise of outstanding warrants.

Use of Proceeds                              We will not  receive  any  proceeds
                                             from the sale of the  common  stock
                                             hereunder.   To  the   extent   the
                                             warrants  are  exercised  on a cash
                                             basis, we will receive the exercise
                                             price of those warrants.  We intend
                                             to use such  proceeds,  if any, for
                                             working    capital    and   general
                                             corporate purposes.



                                       6



OTCBB Trading Symbol                         CPHI.OB


AN  INVESTMENT  IN OUR COMMON  STOCK IS HIGHLY  SPECULATIVE  AND INVOLVES A HIGH
DEGREE OF RISK. SEE RISK FACTORS BEGINNING ON PAGE 7.


                                  RISK FACTORS

The securities  being offered  hereby are highly  speculative,  and  prospective
investors should carefully consider, among others, the following factors related
to our business,  operations  and financial  position,  in addition to the other
information in this Prospectus:


                   RISKS RELATED TO OUR BUSINESS AND INDUSTRY
                   ------------------------------------------

WE RELY ON A FEW SUPPLIERS  AND ANY  DISRUPTION  WITH OUR SUPPLIERS  COULD DELAY
PRODUCT  SHIPMENTS AND MATERIALLY  ADVERSELY AFFECT OUR BUSINESS  OPERATIONS AND
PROFITABILITY

We have developed relationships with a single or limited number of suppliers for
materials  that are  otherwise  generally  available.  Purchases  from our three
largest  suppliers,  Hainan  Xinxin  Bio-Technology  Company,  Sichuan  Chengxin
Pharmaceutical  Company and Anhui Fuyang Xinte Pharmaceutical  Company as of May
31, 2008, accounted for approximately  15.36%, 14.29% and 14.09% respectively of
the total purchases of Helpson.  Although we believe that alternative  suppliers
are available to supply  materials,  should either of these suppliers  terminate
their  business  arrangements  with us or  increase  their  prices of  materials
supplied,  it could delay product shipments and materially  adversely affect our
business operations and profitability.

IF ALL OR A SIGNIFICANT  PORTION OF OUR TRADE  RECIEVABLES  ARE NOT COLLECTED OR
COLLECTION IS DELAYED,  OUR NET INCOME WILL DECREASE AND OUR PROFITABILITY  WILL
BE MATERIALLY ADVERSELY AFFECTED

We  had  trade  receivables,   net  of  allowance  for  doubtful  accounts,   of
approximately  $12,101,979  ($1,562,494  for doubtful  accounts) and $18,572,976
($2,440,852   for  doubtful   accounts)  as  of  December  31,  2006  and  2007,
respectively.

It is usual  commercial  practice  that certain  customers may repay their debts
beyond  credit  periods  granted or may repay  slowly  when  transaction  volume
increases. There is no assurance that our trade receivables will be fully repaid
on a timely basis.  The percentage of a trade receivable that is deemed doubtful
is as follows: 100% after 720 days; 50% after 360 days; and 7.5% up to 360 days.

If all or a significant  portion of our customers with trade receivables fail to
pay all or part of the  trade  receivables  or delay the  payment  due to us for
whatever  reason,  our net profit will  decrease and our  profitability  will be
materially adversely affected.



                                       7


THE FAILURE TO MANAGE  GROWTH  EFFECTIVELY  COULD HAVE AN ADVERSE  EFFECT ON OUR
BUSINESS, FINANCIAL CONDITION, AND RESULTS OF OUR OPERATIONS

The rapid market growth of our  pharmaceutical  products may require our Company
to expand our employee base for managerial,  operational,  financial,  and other
purposes.  As of May 31,  2008,  we had 310  employees in total.  The  continued
future  growth  will  impose  significant  responsibilities  upon the members of
management  to  identify,   recruit,  maintain,   integrate,  and  motivate  new
employees.  Aside  from  increased  difficulties  in  the  management  of  human
resources,  we may also encounter  working capital issues,  as we need increased
liquidity to finance the purchases of raw  materials and supplies,  research and
development of new products, acquisition of new businesses and technologies, and
the hiring of additional employees. For effective growth management,  we will be
required to continue improving our operations, management, and financial systems
and control.  Our failure to manage growth  effectively  may lead to operational
and financial  inefficiencies  that will have a negative effect on the Company's
profitability.

WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL AND LOSS OF THESE KEY PERSONNEL  COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FIANANCIAL CONDITION AND RESULTS
OF OPERATIONS

Our Company's  success is, to a certain extent,  attributable to the management,
sales and marketing,  and pharmaceutical  factory  operational  expertise of key
personnel.  Zhilin Li,  Heqi Cai,  and Yao Huang  perform key  functions  in the
operation  of our  Company.  Ms. Li entered into an  Employment  Agreement  with
Helpson,  which  provides  that  she  shall  act as its  CEO.  The  term  of her
Employment  Agreement is from July 1, 2005,  to June 30,  2010.  Mr. Cai entered
into an Employment  Agreement with Helpson to act as its Director of Development
Department  for a term from July 1, 2005,  to June 30, 2010.  Ms. Huang  entered
into an Employment  Agreement with Helpson to act as its Head of  Pharmaceutical
Plant for a term from July 1, 2005, to June 30, 2010.  There can be no assurance
that we will be able to retain these officers after the term of their employment
or after their  contracts  expire.  The loss of  officers  could have a material
adverse  effect  upon  our  business,   financial  condition,   and  results  of
operations.  We must  attract,  recruit  and  retain  a  sizeable  workforce  of
technically  competent  employees.  Our  ability to  effectively  implement  our
business  strategy  will  depend  upon,  among  other  factors,  the  successful
recruitment and retention of additional highly skilled,  experienced  management
and other key personnel. We cannot assure that we will be able to hire or retain
such employees.

IF WE FAIL TO DEVELOP NEW PRODUCTS WITH HIGH PROFIT  MARGINS AND OUR HIGH PROFIT
MARGIN  PRODUCTS ARE REPLACED BY COMPETITOR'S  PRODUCTS,  THEN OUR GROSS AND NET
PROFIT MARGINS WILL BE ADVERSELY AFFECTED

In the years ended  December 31, 2006 and 2007,  the gross profit margin for our
Company was 46.2% and 46.91% respectively.  However,  there is no assurance that



                                       8


we will be able to sustain such profit margins in the future. The pharmaceutical
market in the PRC is very competitive,  and there may be pressure to reduce sale
prices  of  products  without  a  corresponding  decrease  in the  price  of raw
materials.  To the extent that we fail to develop new products  with high profit
margins and our high profit  margin  products are  substituted  by  competitors'
products, gross profit margins will be adversely affected.

WE FACE COMPETITION IN THE PHARMACEUTICAL MARKET IN THE PRC AND SUCH COMPETITION
COULD CAUSE OUR SALES REVENUE AND PROFITS TO DECLINE

According to the State Food and Drug Administration of China (the "SFDA"), there
were approximately 5,071 pharmaceutical manufacturing companies in the PRC as of
the end of June  2004,  of  which  approximately  3,237  manufacturers  obtained
certificates   of   Good    Manufacturing    Practices    Certification    ("GMP
certification").  After GMP certification became a mandatory requirement on July
1, 2004,  approximately 1,834 pharmaceutical  manufacturers were forced to cease
production. Only the 3,237 pharmaceutical  manufacturers with GMP certifications
may continue their  manufacturing  operations.  As of the end of 2006, there are
4682  enterprises   manufacturing   medicines  and  formulation  in  China.  The
certificates, permits, and licenses required for pharmaceutical operation in the
PRC  create  a  potentially  significant  barrier  for new  competitors  seeking
entrance into the market. Despite these obstacles, we face competitors that will
attempt  to  create,  or are  already  marketing,  products  in the PRC that are
similar to ours. There can be no assurance that our products will be either more
effective in their therapeutic abilities and/or be able to compete in price with
that of our  competitors.  Failure to do either of these may result in decreased
profits for our Company.

OUR SUCCESS IS HIGHLY  DEPENDENT  ON  CONTINUALLY  DEVELOPING  NEW AND  ADVANCED
PRODUCTS,  TECHNOLOGIES, AND PROCESSES AND FAILURE TO DO SO MAY CAUSE US TO LOSE
OUR COMPETITIVENESS IN THE PHARMACEUTICAL  INDUSTRY AND MAY CAUSE OUR PROFITS TO
DECLINE

To  remain  competitive  in the  pharmaceutical  industry,  it is  important  to
continually develop new and advanced products, technologies and processes. There
is no assurance that our competitors'  new products,  technologies and processes
will not render our Company's existing products obsolete or non-competitive. Our
Company's competitiveness in the pharmaceutical market therefore relies upon our
ability to enhance our current products, introduce new products, and develop and
implement  new   technologies   and   processes.   Our   Company's   failure  to
technologically  evolve and/or develop new or enhanced  products may cause us to
lose our  competitiveness  in the  pharmaceutical  industry  and may  cause  our
profits to decline.

THE  COMMERCIAL  SUCCESS  OF OUR  PRODUCTS  DEPENDS  UPON THE  DEGREE  OF MARKET
ACCEPTANCE AMONG THE MEDICAL  COMMUNITY AND FAILURE TO ATTAIN MARKET  ACCEPTANCE
AMONG THE MEDICAL  COMMUNICTY  MAY HAVE AN ADVERSE  IMPACT ON OUR OPERATIONS AND
PROFITABILITY

The  commercial  success  of our  products  depends  upon the  degree  of market
acceptance among the medical community. Even if our products are approved by the
SFDA,  there is no assurance  that  physicians  will  prescribe or recommend our



                                       9


products to patients.  Furthermore,  a product's prevalence and use at hospitals
may be  contingent  upon  our  relationship  with  the  medical  community.  The
acceptance of our products  among the medical  community may depend upon several
factors  including,  but not limited to, the product's  acceptance by physicians
and patients as a safe and effective  treatment,  cost effectiveness,  potential
advantages over alternative treatments,  and the prevalence and severity of side
effects.  Failure to attain market  acceptance  among the medical  community may
have an adverse impact on our operations and profitability.

THE  DISCONTINUATION  OF ANY  PREFERENTIAL  TAX  TREATMENTS OR OTHER  INCENTIVES
CURRENTLY  AVAILABLE TO US IN THE PRC COULD  MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pursuant to the original Income Tax Law of the PRC for Enterprises  with Foreign
Investment  and Foreign  Enterprises  and its  implementation  rules,  a foreign
invested enterprise as defined under PRC laws shall pay 30% corporate income tax
and 3% local income tax; an enterprise  with foreign  investment of a production
nature scheduled to operate for a period of not less than ten years shall,  from
the year of making profits,  be exempt from  enterprise  income tax in the first
and second  years and allowed a fifty  percent  reduction  in the third to fifth
years. Pursuant to the State Council's Regulations on Encouraging  Investment in
and Development of Hainan Island  promulgated in May, 1988, the corporate income
tax for all  companies  incorporated  in  Hainan  Province  is  reduced  to 15%.
Pursuant to the  Regulations on Foreign  Investment in Hainan  Special  Economic
Zone  promulgated by Hainan Province in March,  1991 (the "Regulation on Foreign
Investment"),  all foreign invested enterprises  incorporated in Hainan Province
are exempt from the local income tax.

Helpson  has  obtained  the  approval  for  preferential  enterprise  income tax
treatment  from Hainan State  Administration  of Taxation at the end of 2006 and
has begun to enjoy the preferential tax treatment.  Therefore,  Helpson shall be
exempt from enterprise  income tax in the first and second years after it begins
to make profit, and shall pay enterprise income tax at the rate of 7.5% from the
third to the fifth year after it begins to make profit.

However,  on March 16, 2007,  China's national  congress approved the Enterprise
Income Tax Law of the PRC ("New  Income  Tax  Law"),  which  takes  effect  from
January 1, 2008. The New Income Tax Law unifies the enterprise  income tax rate,
cost deduction and tax incentive policies for both domestic and foreign invested
enterprises. Under the New Income Tax Law, enterprises that were established and
already  enjoyed  preferential  tax rates or tax holidays  before March 16, 2007
will (i) in case of preferential  tax rates,  gradually  increase to the rate of
25% for a period of 5 years,  (ii) in case of tax  holidays,  continue  to enjoy
them until the expiration of such term.

Therefore,  Helpson will continue to enjoy  preferential tax treatment until the
expiration of the preferential term. There can be no assurance that Helpson will
continue to be entitled to any  preferential tax treatment or tax holidays after
the  transitional  period expires.  The  discontinuation  of any such special or
preferential  tax treatment or other  incentives could have an adverse effect on
our business, financial condition and results of operations.



                                       10


WE MAY BE  SUBJECT  TO THE  PRC'S  PRICE  CONTROL  OF DRUGS  WHICH MAY LIMIT OUR
PROFITABILITY AND EVEN CAUSE US TO STOP MANUFACTURING CERTAIN PRODUCTS

The State  Development and Reform  Commission  ("SDRC") of the PRC and the price
administration  bureaus  of the  relevant  provinces  of the  PRC in  which  the
pharmaceutical  products are  manufactured  are responsible for the retail price
control over our pharmaceutical  products.  The SDRC sets the price ceilings for
certain pharmaceutical  products in the PRC. Although our products have not been
subject to such price  controls as of the date of this  Prospectus,  there is no
assurance that our products will remain unaffected by it. Where our products are
subject to a price ceiling, we will need to adjust the product price to meet the
requirement and to accommodate for the pricing of competitors in the competition
for  market  shares.   The  price  ceilings  set  by  the  SDRC  may  limit  our
profitability,  and in some instances,  such as where the price ceiling is below
production costs, may cause us to stop manufacturing  certain products which may
adversely affect our results of operations.

OUR CERTIFICATES,  PERMITS, AND LICENSES ARE SUBJECT TO GOVERNMENTAL CONTROL AND
RENEWAL,  AND THE  FAILURE  TO  OBTAIN  RENEWAL  WOULD  CAUSE ALL OR PART OF OUR
OPERATIONS TO BE SUSPENDED AND HAVE A MATERIAL  ADVERSE  EFFECT ON OUR FINANCIAL
CONDITION

Our Company is subject to various  PRC laws and  regulations  pertaining  to the
pharmaceutical industry. Our Company has attained certain certificates, permits,
and licenses  required for the operation of a pharmaceutical  enterprise and the
manufacturing  of  pharmaceutical  products in the PRC. We obtained the Medicine
Production Permit in December 2005, which is valid through December 31, 2010. We
also obtained five GMP certificates  which are effective  through July 17, 2008,
December  2,  2009,  February  2,  2010,  May  19,  2010  and  April  17,  2011,
respectively.  The  pharmaceutical  production  permits and GMP certificates are
each valid for a term of five years and must be renewed before their expiration.
During  the  renewal  process,  we  will  be  re-evaluated  by  the  appropriate
governmental  authorities  and must comply  with the  prevailing  standards  and
regulations,  which may change  from time to time.  In the event that we are not
able  to  renew  the  certificates,  permits  and  licenses,  all or part of our
operations  may be  suspended  by the  government,  which  would have a material
adverse effect on our financial condition. Furthermore, if escalating compliance
costs  associated  with  governmental  standards  and  regulations  restrict  or
prohibit  any part of our  operations,  it may  adversely  affect our results of
operations and profitability.

IF OUR PRODUCTS FAIL TO RECEIVE  REGULATORY  APPROVAL OR ARE SEVERELY LIMITED IN
THE PRODUCTS SCOPE OF USE, THEN WE MAY BE UNABLE TO RECOUP CONSIDERABLE RESEARCH
AND DEVELOPMENT EXPENDITURES ALREADY INCURRED

Our products that are approved to be  manufactured as of May 31, 2008 include 17
medicines.  There are 9 products in the stage of research and  development as of



                                       11


May 31, 2008.  The production of our  pharmaceutical  products is subject to the
regulatory   approval  of  the  SFDA.  The  regulatory  approval  procedure  for
pharmaceuticals can be quite lengthy, costly, and uncertain.  Depending upon the
discretion of the SFDA,  the approval  process may be  significantly  delayed by
additional clinical testing and require the expenditure of currently unavailable
resources;  in  such  an  event,  it may be  necessary  for  us to  abandon  our
application.  Even where  approval  of the  product is  granted,  it may contain
significant   limitations   in  the  form  of  narrow   indications,   warnings,
precautions,  or  contra-indications  with  respect  to  conditions  of use.  If
approval of our product is denied,  abandoned,  or severely  limited in terms of
the scope of products use, it may result in the inability to recoup considerable
research and development expenditures already incurred.

OUR RESEARCH AND  DEVELOPMENT  MAY BE COSTLY AND/OR  UNTIMELY,  AND THERE ARE NO
ASSURANCES  THAT OUR  RESEARCH  AND  DEVELOPMENT  WILL EITHER BE  SUCCESSFUL  OR
COMPLETED WITHIN THE ANTICIPATED TIMEFRAME, IF EVER AT ALL

The  research  and  development  of our  new and  existing  products  and  their
subsequent  commercialization  plays an important role in our success. As of May
31, 2008, there are 9 products under research and  development,  including Hugan
Granule, Tiopronin, Omeprazole for Injection,  Ceftriaxone Sodium and Tazobactam
Sodium, Donepezil dispersible tablets,  Mycophenolate Mofetil Granules,  rhaFGF,
rhCNTF and Compound Diclofenac Sodium Injection. The research and development of
new products is costly and time consuming,  and there are no assurances that our
research and  development of new products will either be successful or completed
within the anticipated  time frame, if ever at all. There are also no assurances
that  if  the   product  is   developed,   that  it  will  lead  to   successful
commercialization.

WE CANNOT GUARANTEE THE PROTECTION OF OUR INTELLECTUAL  PROPERTY RIGHTS,  AND IF
INFRINGEMENT OR COUNTERFEITING OF OUR INTELLECTUAL  PROPERTY RIGHTS OCCURS, THEN
OUR REPUTATION AND BUSINESS MAY BE ADVERSELY AFFECTED

To protect the brand names of our products,  we have  registered and applied for
registration  of our  trademarks  in the  PRC,  where  we have a major  business
presence.

All of our  products  are sold under  these  trademarks.  As of the date of this
Prospectus,  we have not  experienced any  infringements  of such trademarks for
sales of pharmaceutical products, and as of the date of this Prospectus, we were
not aware of any  infringement of our  intellectual  property  rights.  However,
there is no assurance that there will not be any  infringement of our brand name
or other registered  trademarks or counterfeiting of our products in the future.
Should  any such  infringement  or  counterfeiting  occur,  our  reputation  and
business may be adversely affected.  We may also incur significant  expenses and
substantial  amounts  of time and effort to protect  our  intellectual  property
rights in the future.  Such diversion of our resources may adversely  affect our
existing business and future expansion plans.

OUR  REPUTATION  AND BUSINESS  MAY BE ADVERSELY  AFFECTED AS A RESULT OF PRODUCT
LIABILITY OR DEFECTIVE PRODUCTS



                                       12


We may  produce  products  which  inadvertently  have an adverse  pharmaceutical
effect on the health of individuals  despite proper  testing.  Existing PRC laws
and regulations do not require us to maintain third party liability insurance to
cover product liability claims. However, if a product liability claim is brought
against us, it may, regardless of merit or eventual outcome, result in damage to
our reputation, breach of contract with our customers,  decreased demand for our
products, costly litigation, product recalls, loss of revenue, and the inability
to  commercialize  some products.  We are currently not aware of any existing or
anticipated product liability claims with respect to our products.

WE RELY ON THE COOPERATION  WITH CERTAIN RESEARCH  LABORATORIES,  PHARMACEUTICAL
INSITITUIONS,  AND UNIVERSITIES,  AND IF THESE  INSTITUTIONS  CEASE TO COOPERATE
WITH US AND WE CANNOT FIND OTHER SUITABLE  SUBSTITUTE  RESEARCH AND  DEVELOPMENT
PARTNERS,  THEN OUR ABILITY TO DEVELOP  NEW  PRODUCTS  MAY BE  HINDERED  AND OUR
BUSINESS MAY BE ADVERSELY AFFECTED

Helpson  cooperates  with several  research  institutions  including the Chinese
Academy  of  Medical  Sciences,  China  Pharmaceutical  University,  Academy  of
Military Medical Science,  Chongqing Medical University and Sichuan  University.
Helpson relies to a certain extent on these  institutions for its development of
new  products.  There is no  assurance  that these  institutions  will  continue
cooperating  with  Helpson  to  develop  new  products.  In the event that these
institutions  cease to  cooperate  with  Helpson and  Helpson  cannot find other
suitable  substitute research and development  partners,  our ability to develop
new products may be hindered and our business may be adversely affected.


                    RISKS RELATED TO DOING BUSINESS IN CHINA
                    ----------------------------------------

Helpson  operates from  facilities that are located in China.  Accordingly,  its
operations must conform to governmental regulations and rules of the PRC.

OUR  OPERATIONS  AND ASSETS IN CHINA ARE SUBJECT TO  SIGNIFICANT  POLITICAL  AND
ECONOMIC UNCERTAINTIES

Changes in PRC laws and regulations, or their interpretation,  or the imposition
of  confiscatory  taxation,  restrictions  on currency  conversion,  imports and
sources of supply,  devaluations  of  currency or the  nationalization  or other
expropriation of private enterprises could have a material adverse effect on our
business,  results of  operations  and  financial  condition.  Under our current
leadership,  the Chinese  government has been pursuing  economic reform policies
that encourage private economic activity and greater economic  decentralization.
There is no assurance,  however,  that the Chinese  government  will continue to
pursue these policies,  or that it will not  significantly  alter these policies
from time to time without notice.

A SLOWDOWN IN THE  CHINESE  ECONOMY OR AN  INCREASE  IN ITS  INFLATION  RATE MAY
ADVERSELY IMPACT OUR REVENUES.



                                       13


The  Chinese  economy  has  grown at an  approximately  9% rate for more than 25
years, making it the fastest growing major economy in recorded history. In 2007,
China's  economy  grew by 11.4%,  the fastest  pace in 11 years.  While  China's
economy has grown,  inflation has also recently become a major issue of concern.
China's consumer price index growth rate reached 8.7% year over year in 2008.

We cannot  assure you that growth of the Chinese  economy  will be steady,  that
inflation  will  be  controllable  or  that  any  slowdown  in  the  economy  or
uncontrolled  inflation  will not have a negative  effect on our business.  More
recently,  the Chinese  government  announced its intention to continuously  use
macroeconomic  tools and  regulations  to slow the rate of growth of the Chinese
economy,  the results of which are difficult to predict.  Adverse changes in the
Chinese economy will likely impact our financial performance.


YOU MAY EXPERIENCE DIFFICULTIES IN EFFECTING SERVICE OF LEGAL PROCESS, ENFORCING
FOREIGN JUDGMENTS OR BRINGING ORIGINAL ACTIONS IN THE PRC BASED ON U.S. OR OTHER
FOREIGN LAWS AGAINST THE COMPANY OR OUR MANAGEMENT

Helpson,  our operating company,  is incorporated under the laws of the PRC, and
substantially all of our assets are located in the PRC. In addition, many of our
directors,   managers,  and  executive  officers  reside  within  the  PRC,  and
substantially  all of the assets of these persons are located within the PRC. As
a result,  it may not be possible to effect service of process within the United
States or elsewhere  outside the PRC upon certain of our directors,  supervisors
or executive  officers,  including  with respect to matters  arising  under U.S.
federal securities laws or applicable state securities laws.  Moreover,  the PRC
does not have treaties providing for the reciprocal  recognition and enforcement
of judgments of courts with the United States, the United Kingdom, Japan or many
other  countries.  As a  result,  recognition  and  enforcement  in  the  PRC of
judgments  of a court in the United  States  and any of the other  jurisdictions
mentioned  above in  relation  to any matter  may be  difficult  or  impossible.
Furthermore,  an  original  action  may be brought  in the PRC  against  us, our
directors,  managers, or executive officers only if the actions are not required
to be arbitrated by PRC law and Helpson's  articles of association,  and only if
the facts alleged in the complaint give rise to a cause of action under PRC law.
In  connection  with any such  original  action,  a PRC court may  impose  civil
liability, including monetary damages.

BECAUSE WE RECEIVE SUBSTANTIALLY ALL OF OUR REVENUE IN RENMINBI, WHICH CURRENTLY
IS NOT A  FREELY  CONVERTIBLE  CURRENCY,  AND THE PRC  GOVERNMENT  CONTROLS  THE
CURRENCY  CONVERSION  AND THE  FLUCTUATION  OF THE  RENMINBI,  WE ARE SUBJECT TO
CHANGES IN THE PRCS' POLITICAL AND ECONOMIC DECISIONS

We receive substantially all of our revenues in Renminbi, which currently is not
a freely  convertible  currency.  The PRC  government  may,  at its  discretion,
restrict  access  in the  future  to  foreign  currencies  for  current  account
transactions.  Any  future  restrictions  on  currency  exchanges  may limit our
ability  to use  revenue  generated  in  Renminbi  to fund any  future  business
activities  outside China or to make dividend or other payments in U.S. dollars.



                                       14


Although the Chinese government introduced  regulations in 1996 to allow greater
convertibility  of the Renminbi for current  account  transactions,  significant
restrictions   still   remain,   including   primarily  the   restriction   that
foreign-invested  enterprises  may only buy, sell or remit  foreign  currencies,
after providing valid commercial documents, at those banks authorized to conduct
foreign  exchange  business.  In  addition,  conversion  of Renminbi for capital
account items, including direct investment and loans, is subject to governmental
approval in China,  and  companies  are required to open and  maintain  separate
foreign  exchange  accounts for capital account items. We cannot be certain that
the Chinese regulatory  authorities will not impose more stringent  restrictions
on the  convertibility  of the  Renminbi,  especially  with  respect  to foreign
exchange transactions.

THE VALUE OF OUR  SECURITIES  WILL BE  AFFECTED  BY THE  FOREIGN  EXCHANGE  RATE
BETWEEN U.S. DOLLARS AND RMB

The value of our common  stock will be  affected by the  foreign  exchange  rate
between U.S.  dollars and Renminbi.  For example,  to the extent that we need to
convert U.S. dollars into Renminbi for our operational needs and should Renminbi
appreciate  against the U.S. dollar at that time, our financial position and the
price of our common stock may be adversely affected. Conversely, if we decide to
convert Renminbi into U.S. dollars for the purpose of declaring dividends on our
common  stock or for other  business  purposes and the U.S.  dollar  appreciates
against the  Renminbi,  the U.S.  dollar  equivalent  of our  earnings  from our
subsidiary in China would be reduced.

THE GROWTH OF THE CHINESE ECONOMY HAS BEEN UNEVEN ACROSS GEOGRAPHIC  REGIONS AND
ECONOMIC  SECTORS,  AND A DOWNTURN IN CERTAIN REGIONS IN WHICH WE DO BUSINESS OR
IN OUR ECONOMIC SECTOR WOULD SLOW DOWN OUR GROWTH AND PROFITABILITY

The growth of the Chinese economy has been uneven across geographic  regions and
economic  sectors.  There can be no assurance that growth of the Chinese economy
will be  steady  or that any  downturn  will not have a  negative  effect on our
business.  Our  profitability  may  decrease  due to a downturn  in the  Chinese
economy.  More  specifically,  the  expansion  of our  sales  area  in the  less
economically  developed  central and western  provinces  of China will depend on
those provinces achieving certain income levels.

ANY  OCCURRENCE  OF SERIOUS  INFECTIOUS  DISEASES,  SUCH AS RECURRENCE OF SEVERE
ACUTE  RESPIRATORY  SYNDROME (SARS) CAUSING  WIDESPREAD  PUBLIC HEALTH PROBLEMS,
COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS

A renewed outbreak of SARS or other widespread  public health problems in China,
where all of our revenue is derived,  and in Hainan,  where our  operations  are
headquartered,  could have a negative effect on our  operations.  Our operations
may be  impacted by a number of public  health-related  factors,  including  the
following:

o    quarantines  or  closures  of our  factories  or  subsidiaries  which would
     severely disrupt its operations;



                                       15



o    the sickness or death of key officers and employees; and
o    general slowdown in the Chinese economy.

Any of the foregoing  events or other  unforeseen  consequences of public health
problems could adversely affect our business and results of operations.

WE ARE SUBJECT TO THE ENVIRONMENTAL PROTECTION LAWS OF THE PRC

Our manufacturing  process may produce  by-products such as effluent,  gases and
noise,  which are harmful to the  environment.  We are subject to multiple  laws
governing environmental protection, such as "The Law on Environmental Protection
in the PRC" and "The Law on  Prevention  of Effluent  Pollution  in the PRC," as
well as standards set by the relevant governmental  authorities  determining the
classification  of  different  wastes  and  proper  disposal.  We have  properly
attained a waste disposal permit for our manufacturing  facility,  which details
the types and  concentration  of effluents and gases  allowed for disposal.  The
temporary  waste  disposal  permit will expire on  September  28,  2009.  We are
responsible for the renewal of the waste disposal permit.  There is no assurance
that we will  obtain the renewal of the waste  disposal  permit when the current
permit expires.

China  is  experiencing   substantial  problems  with  environmental  pollution.
Accordingly,  it is likely that the national,  provincial and local governmental
agencies will adopt stricter pollution controls.  There can be no assurance that
future  changes in  environmental  laws and  regulations  will not impose costly
compliance requirements on us or otherwise subject us to future liabilities. Our
business's  profitability  may be adversely  affected if  additional or modified
environmental control regulations are imposed upon us.

RECENT PRC  REGULATIONS  RELATING TO  ACQUISITIONS  OF PRC  COMPANIES BY FOREIGN
ENTITIES MAY LIMIT OUR ABILITY TO ACQUIRE PRC COMPANIES AND ADVERSELY AFFECT THE
IMPLEMENTATION OF OUR STRATEGY AS WELL AS OUR BUSINESS AND PROSPECTS

The PRC State  Administration  of Foreign Exchange or SAFE issued a pubic notice
in October 2005  ("Decree No. 75"),  requiring  PRC  residents and PRC corporate
entities to register with and obtain  approvals from competent local SAFE branch
in connection with their direct or indirect offshore investment activities.

Decree No. 75  requires  registration  by March 31,  2006 of direct or  indirect
investments  previously made by PRC residents in offshore companies prior to the
implementation of Decree No. 75 on November 1, 2005. If a PRC shareholder with a
direct  or  indirect  stake  in an  offshore  parent  company  fails to make the
required SAFE registration, the PRC subsidiaries of such offshore parent company
may be prohibited from making distributions of profit to the offshore parent and
from paying the offshore  parent  proceeds from any reduction in capital,  share
transfer or liquidation in respect of the PRC subsidiaries. Furthermore, failure
to comply with the various SAFE registration  requirements described above could
result in liability under PRC laws for foreign exchange evasion.



                                       16


In addition,  SAFE issued updated  internal  implementing  rules  ("Implementing
Rules") in relation to Decree No. 75. The  Implementing  Rules were  promulgated
and became  effective  on May 29, 2007.  Such  Implementing  Rules  provide more
detailed  provisions and requirements  regarding the overseas investment foreign
exchange registration procedures.  For an offshore special purpose company which
was  established  and owned the onshore  assets or equity  interests  before the
implementation  date of the  Decree  No.  75, a  retroactive  SAFE  registration
requirement is repeated.

Due to the lack of official interpretation,  some of the terms and provisions of
the  Decree  No.  75  and  the  Implementing  Rules  remain  unclear,   and  the
implementation  of the Decree No. 75 by central SAFE and local SAFE branches has
been inconsistent  since its adoption.  Therefore,  we cannot predict how Decree
No. 75 will affect our business  operations or future  strategies.  For example,
our  present  and  prospective  PRC  subsidiaries'  ability to  conduct  foreign
exchange   activities,   such  as  the   remittance  of  dividends  and  foreign
currency-denominated  borrowings,  may be subject to compliance  with the Decree
No. 75 by our PRC resident shareholders. In addition, such PRC residents may not
always be able to complete  registration  procedures  required by the Decree No.
75. We also have little control over either our present or prospective direct or
indirect shareholders or the outcome of such registration  procedures. A failure
by our PRC resident  shareholders or future PRC resident  shareholders to comply
with the Decree No. 75, if SAFE  requires it, could subject us to fines or legal
sanctions,  restrict our overseas or cross-border  investment activities,  limit
our  subsidiary's  ability to make  distributions or pay dividends or affect our
ownership structure, which could adversely affect our business and prospects.

On August 8, 2006, six PRC regulatory agencies, including the Chinese Securities
Regulatory Commission,  or CSRC, promulgated a regulation (the "M&A Regulation")
which  became  effective  on September  8, 2006.  This  regulation,  among other
things,  has some  provisions  that purport to require that an offshore  special
purpose vehicle,  or SPV, formed for listing purposes and controlled directly or
indirectly by PRC companies or individuals shall obtain the approval of the CSRC
prior to the listing and trading of such SPV's  securities on an overseas  stock
exchange.

There are, however,  substantial  uncertainties regarding the interpretation and
application of current or future PRC laws and regulations, including the New M&A
Rule. Accordingly, the Company cannot assure you that PRC government authorities
will not ultimately take a view contrary to the Company's  understanding that it
does not need the CSRC approval,  and PRC government authorities may impose some
additional approvals and requirements.  Therefore, we cannot predict how the M&A
Regulation will affect our business  operations or future strategy.  If the CSRC
requires that we obtain its approval, we may be unable to obtain a waiver of the
CSRC approval  requirements,  if and when  procedures are  established to obtain
such a waiver. Any uncertainties  and/or negative publicity  regarding this CSRC
approval  requirement  could have a material adverse effect on the trading price
of our common stocks.



                                       17


                        RISKS RELATED TO OUR COMMON STOCK
                        ---------------------------------

THE MARKET  PRICE FOR OUR COMMON  STOCK MAY BE VOLATILE  WHICH COULD RESULT IN A
COMPLETE LOSS OF YOUR INVESTMENT

The  market  price for our  common  stock is likely  to be highly  volatile  and
subject to wide fluctuations in response to factors including the following:

     o    actual or anticipated fluctuations in our quarterly operating results,
     o    announcements of new products by us or our competitors,
     o    changes in financial estimates by securities analysts,
     o    conditions in the pharmaceutical market,
     o    changes in the  economic  performance  or market  valuations  of other
          companies involved in pharmaceutical production,
     o    announcements   by  our   competitors  of  significant   acquisitions,
          strategic partnerships, joint ventures or capital commitments,
     o    additions or departures of key personnel, or
     o    potential litigation.

In  addition,  the  securities  markets  have  from  time  to  time  experienced
significant price and volume  fluctuations that are not related to the operating
performance  of  particular  companies.   These  market  fluctuations  may  also
materially and adversely affect the market price of our common stock.

THE  OUTSTANDING  WARRANTS  MAY  ADVERSELY  AFFECT  US IN THE  FUTURE  AND CAUSE
DILUTION TO EXISTING  SHAREHOLDERS

We currently have warrants outstanding to purchase up to 2,952,941 shares of our
common  stock.  Exercise of the warrants may cause  dilution in the interests of
other  shareholders  as a result of the  additional  common  stock that would be
issued  upon  exercise.  In  addition,  sales of the shares of our common  stock
issuable  upon  exercise of the warrants  could have a depressive  effect on the
price of our stock, particularly if there is not a coinciding increase in demand
by  purchasers of our common  stock.  Further,  the terms on which we may obtain
additional  financing  during the period any of the warrants remain  outstanding
may be adversely affected by the existence of these warrants as well.

WE MAY ISSUE ADDITIONAL SHARES OF OUR CAPITAL STOCK TO RAISE ADDITIONAL CASH FOR
WORKING  CAPITAL;  IF WE ISSUE  ADDITIONAL  SHARES  OF OUR  CAPITAL  STOCK,  OUR
STOCKHOLDERS WILL EXPERIENCE DILUTION IN THEIR RESPECTIVE  PERCENTAGE  OWNERSHIP
IN THE COMPANY

We may issue additional shares of our capital stock to raise additional cash for
working capital.  There is no anti-dilution  protection or preemptive  rights in
connection  with our common stock.  Thus, the  percentage  ownership of existing
holders of common stock may be diluted in their respective  percentage ownership
in us if we issue additional shares of our capital stock.



                                       18


A  LARGE  PORTION  OF OUR  COMMON  STOCK  IS  CONTROLLED  BY A SMALL  NUMBER  OF
STOCKHOLDERS  AND AS A RESULT,  THESE  STOCKHOLDERS  ARE ABLE TO  INFLUENCE  AND
ULTIMATELY CONTROL THE OUTCOME OF STOCKHOLDER VOTES ON VARIOUS MATTERS

A large  portion of our common stock is held by a small number of  stockholders.
For  instance,  Heung Mei Tsui holds  25.57%  and Zhilin Li holds  23.65% of the
Company's common stock,  respectively,  as of the date of this Prospectus.  As a
result,  these two stockholders are able to influence and ultimately control the
outcome of  stockholder  votes on various  matters,  including  the  election of
directors and other corporate transactions  including business combinations.  In
addition,  the  occurrence  of sales of a large  number of shares of our  common
stock,  or the  perception  that these sales could  occur,  may affect our stock
price and could  impair our  ability to obtain  capital  through an  offering of
equity  securities.  Furthermore,  the current ratios of ownership of our common
stock  reduce the public  float and  liquidity  of our common stock which can in
turn affect the market price of our common stock.

THERE IS CURRENTLY A LIMITED  TRADING MARKET FOR OUR COMMON STOCK WHICH MAY MAKE
IT DIFFICULT TO SELL SHARES OF OUR COMMON STOCK

Our common stock is currently traded in the over-the-counter  market through the
Over-the-Counter  Bulletin  Board ("OTC Bulletin  Board").  The quotation of our
shares on the OTC Bulletin  Board may result in a less liquid  market  available
for our existing and potential stockholders to trade shares of our common stock,
could  depress the trading  price of our common stock and could have a long-term
adverse impact on our ability to raise capital in the future.  While there is an
active trading market for our common stock, it is small.  Further,  there can be
no assurance that an active trading market will be maintained.  We cannot assure
you that our  common  stock  will  ever be  included  for  trading  on any stock
exchange or through any other quotation system (including,  without  limitation,
the NASDAQ Stock Market).

WE  ARE  LIKELY  TO  REMAIN  SUBJECT  TO  "PENNY  STOCK"  REGULATIONS  AND  AS A
CONSEQUENCE  THERE ARE  ADDITIONAL  SALES PRACTICE  REQUIREMENTS  AND ADDITIONAL
WARNINGS ISSUED BY THE SEC

As long as the trading  price of our common stock is below $5.00 per share,  the
open-market  trading  of our common  stock will be subject to the "penny  stock"
rules of the SEC.  The "penny  stock"  rules impose  additional  sales  practice
requirements  on  broker-dealers  who sell  securities  to  persons  other  than
established  customers and accredited  investors (generally those with assets in
excess of $1,000,000 or annual income  exceeding  $200,000 or $300,000  together
with their spouse).  For transactions  covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of securities and
have received the  purchaser's  written  consent to the  transaction  before the
purchase.  Additionally,  for any  transaction  involving a penny stock,  unless
exempt,  the broker-dealer  must deliver,  before the transaction,  a disclosure
schedule  prescribed  by  the  SEC  relating  to the  penny  stock  market.  The
broker-dealer   also  must  disclose  the   commissions   payable  to  both  the
broker-dealer and the registered  representative  and current quotations for the
securities.  Finally,  monthly  statements must be sent disclosing  recent price



                                       19


information  on the limited  market in penny stocks.  These  additional  burdens
imposed on broker-dealers may restrict the ability of broker-dealers to sell the
common stock and may affect a stockholder's ability to resell the common stock.

There can be no assurance  that our common stock will qualify for exemption from
the "penny stock" rules.  In any event,  even if our common stock is exempt from
such rules,  we would remain  subject to Section  15(b)(6) of the Exchange  Act,
which gives the SEC the authority to restrict any person from participating in a
distribution  of a "penny stock" if the SEC finds that such a restriction  would
be in the public interest.

Stockholders  should be aware that,  according to SEC Release No. 34-29093,  the
market for penny stocks has suffered in recent years from  patterns of fraud and
abuse.  Such patterns  include (i) control of the market for the security by one
or a few broker-dealers  that are often related to the promoter or issuer;  (ii)
manipulation of prices through  prearranged  matching of purchases and sales and
false and  misleading  press  releases;  (iii) boiler room  practices  involving
high-pressure  sales tactics and unrealistic  price projections by inexperienced
sales persons;  (iv) excessive and undisclosed bid-ask  differential and markups
by selling broker-dealers;  and (v) the wholesale dumping of the same securities
by promoters and broker-dealers  after prices have been manipulated to a desired
level,  along with the  resulting  inevitable  collapse of those prices and with
consequent  investor  losses.  Our  management  is aware of the abuses that have
occurred historically in the penny stock market.

WE ARE RESPONSIBLE FOR THE  INDEMNIFICATION  OF OUR OFFICERS AND DIRECTORS UNDER
CERTAIN CIRCUMSTANCES WHICH COULD RESULT IN SUBSTANTIAL  EXPENDITURES,  WHICH WE
MAY BE UNABLE TO RECOUP

Our  Restated  and  Amended  Bylaws  provide  for  the  indemnification  of  our
directors, officers, employees, and agents, under certain circumstances, against
attorney's  fees and other expenses  incurred by them in any litigation to which
they become a party arising from their  association with or activities on behalf
of us. This  indemnification  policy could result in  substantial  expenditures,
which we may be unable to recoup.

COMPLIANCE  WITH THE  SARBANES-OXLEY  ACT COULD COST  HUNDREDS OF  THOUSANDS  OF
DOLLARS,  REQUIRE  ADDITIONAL  PERSONNEL  AND  REQUIRE  HUNDREDS OF MAN HOURS OF
EFFORT, AND THERE CAN BE NO ASSURANCE THAT WE WILL HAVE THE PERSONNEL, FINANCIAL
RESOURCES OR EXPERTISE TO COMPLY WITH THESE REGULATIONS

As directed by Section 404 of the  Sarbanes-Oxley  Act of 2002,  the SEC adopted
rules  requiring  public  companies  to  include a report of  management  on the
Company's  internal  controls over financial  reporting in their annual reports.
Our management has identified  significant  deficiencies in our internal control
over financial reporting as of December 31, 2007. Our management  concluded that
those  internal  control  deficiencies  result  in  a  material  weakness.   The
identified weakness did not result in material adjustments to our 2007 financial
statements.  However,  an uncured weakness could negatively impact our financial
statements  for subsequent  years.  We cannot be certain that we will be able to
successfully complete the procedures, certification and attestation requirements
of Section 404 of the Sarbanes-Oxley  Act, or that our auditors will not have to



                                       20


report a material  weakness in conjuction with the presentation of our financial
statements.  If we fail to comply with the requirements of Section 404 or if our
auditors  report such  material  weakness,  the accuracy and  timeliness  of our
annual report may be materially  adversely affected and could cause investors to
lose confidence in our reported financial information.

OUR HOLDING COMPANY STRUCTURE MAY LIMIT THE PAYMENT OF DIVIDENDS

We  have  no  direct  business  operations,  other  than  the  ownership  of our
subsidiaries.  While we have no current intention of paying dividends, should we
decide  in the  future  to do so,  as a  holding  company,  our  ability  to pay
dividends  and meet other  obligations  depends upon the receipt of dividends or
other  payments  from  our  operating   subsidiaries   and  other  holdings  and
investments. In addition, our operating subsidiaries,  from time to time, may be
subject to restrictions on their ability to make  distributions to us, including
as a result of restrictive  covenants in loan  agreements,  restrictions  on the
conversion of local currency into U.S.  dollars or other hard currency and other
regulatory restrictions as discussed below. PRC regulations currently permit the
payment of dividends only out of accumulated profits as determined in accordance
with PRC accounting  standards and regulations.  Our subsidiary in China is also
required  to set aside a  portion  of its after  tax  profits  according  to PRC
accounting  standards and regulations to fund certain reserve funds.  Currently,
our  subsidiary in China is the only source of revenues or  investment  holdings
for the payment of dividends. If it does not accumulate sufficient profits under
PRC accounting  standards and regulations to first fund certain reserve funds as
required by PRC accounting standards, we will be unable to pay any dividends.


                                 USE OF PROCEEDS

This  Prospectus  relates to shares of our common  stock that may be offered and
sold from time to time by the  selling  stockholders.  We will not  receive  any
proceeds from the sale of shares of common stock in this offering. To the extent
the warrants are exercised on a cash basis,  we will receive the exercise  price
of those warrants.  We intend to use such proceeds received from the exercise of
the warrants, if any, for working capital and general corporate purposes.


            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our  common  stock is traded  on the  OTCBB  under  the  symbol  "CPHI.OB".  The
following  table  sets  forth the price  representing  the range of high and low
sales  prices  for our common  stock as  reported  on the OTCBB for the  periods
indicated  below. The quotations  reflect  inter-dealer  prices,  without retail
mark-up, markdown or commission, and may not represent actual transactions.



                                       21






          Quarter Ended                    High                Low
       ---------------------          ---------------      -------------

              2008
       ---------------------          ---------------      -------------
           1st Quarter                    $3.09               $2.07
       ---------------------          ---------------      -------------

              2007
       ---------------------          ---------------      -------------
           4th Quarter                    $4.17               $1.95
       ---------------------          ---------------      -------------
           3rd Quarter                    $1.80               $1.35
       ---------------------          ---------------      -------------
           2nd Quarter                    $2.17               $1.64
       ---------------------          ---------------      -------------
           1st Quarter                    $2.28               $1.60
       ---------------------          ---------------      -------------

              2006
       ---------------------          ---------------      -------------
           4th Quarter                    $2.35               $1.30
       ---------------------          ---------------      -------------
           3rd Quarter                    $1.60               $1.07
       ---------------------          ---------------      -------------
           2nd Quarter                    $1.70               $1.15
       ---------------------          ---------------      -------------
           1st Quarter                    $2.05               $1.05
       ---------------------          ---------------      -------------

As of June 27,  2008,  the  closing  price of our common  stock on the OTCBB was
$2.02. As of June 23, 2008, the  stockholders'  list for our common stock showed
171 registered  shareholders of record,  which figure does not take into account
those  stockholders whose certificates are held in the name of broker-dealers or
other nominees.


            MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION


FORWARD-LOOKING STATEMENTS

The  following  discussion of China Pharma  Holdings,  Inc.'s  ("China  Pharma")
financial condition and results of operations should be read in conjunction with
its  financial  statements  and  the  related  notes,  and the  other  financial
information included elsewhere in this Current Report.
This  filing  contains  forward-looking  statements.  The  words  "anticipated,"
"believe," "expect",  "plan," "intend," "seek," "estimate,"  "project," "could,"
"may,"  and  similar  expressions  are  intended  to  identify   forward-looking
statements. These statements include, among others, information regarding future
operations,  future  capital  expenditures,  and  future  net  cash  flow.  Such
statements  reflect  China  Pharma  management's  current  views with respect to
future events and  financial  performance  and involve risks and  uncertainties,
including, without limitation, general economic and business conditions, changes
in foreign, political,  social, and economic conditions,  regulatory initiatives
and compliance  with  governmental  regulations,  the ability to achieve further
market penetration and additional customers,  and various other matters, many of
which are beyond China  Pharma's  control.  Should one or more of these risks or
uncertainties  occur, or should  underlying  assumptions  prove to be incorrect,
actual  results  may vary  materially  and  adversely  from  those  anticipated,
believed,   estimated  or  otherwise   indicated.   Consequently,   all  of  the
forward-looking statements made in this filing are qualified by these cautionary
statements and there can be no assurance of the actual results or developments.



                                       22



China  Pharma  Holdings,  Inc. is a specialty  bio-pharmaceutical  company  with
Scalable Good Manufacturing Practice ("GMP") certified manufacturing facilities.
We currently have eight different  production lines which develop,  manufacture,
and market  Western and Chinese  medicines.  Over the years we have  developed a
wide distribution  network,  a professional  marketing team, and strong research
and development ("R&D")  capabilities.  We have a portfolio of therapeutics that
target:  central nervous system  ("CNS"),  cardiovascular,  wound recovery,  and
infectious  diseases.  Our  therapeutics  has a targeted  market  segment,  both
current and future,  which  covers a large  patient  population.  We also have a
highly professional and experienced management team.

Strong  Revenue Growth and High Margins -We have  experienced a compound  annual
growth rate of over 80% in sales of our  therapeutics  since 2003.  In the three
months ended March 31, 2008, we generated $11.72 million revenue, an increase of
61.98%, or $4.48 million,  from sales of $7.23 million in the three months ended
March 31,  2007.  We achieved a gross  margin  of49.56% in the first  quarter of
2008, while in the first quarter of 2007, the gross margin was 45.60%,  which is
above the industry  average gross margin of 34.2%. We are able to compete in the
highly fragmented  pharmaceutical industry through our diversified  therapeutics
line, cost control and strong sales network.  Our experienced  management  team,
market insights and strong R&D capabilities  enable us to develop and launch new
and improved generic products based on market demand.

Proven  Record of Success - We have a proven track record of success.  We have a
porfolio of over 30 specifications of drugs that focus on the treatment of: CNS,
cardiovascular,   cerebrovascular,   and   infectious   diseases.   Among  these
specifications two are market leaders: FGF and Buflomedil hydrochloride. We were
awarded the "National Key New Product" by the Ministry of Science and Technology
of the PRC with the State  Administration  of Taxation,  Ministry of Commerce of
the  PRC,  General   Administration  of  Quality  Supervision,   Inspection  and
Quarantine  of the PRC, and State  Environmental  Protection  Administration  of
China. We are a profitable  company with a low cost, high margin business model.
We are seeing a quick growth in sales with a constant  growth in income,  due to
our focus on the largest segment of China's pharmaceutical market. We have eight
different types of modern production lines with capacity to meet future demands.

Clear Strategy for Growth - We are part of a rapidly growing industry,  in which
we are the leader in generic  drugs.  We have  created a  competitive  advantage
through a  segmented  therapeutics  line  designed  to target  specific  patient
groups.  Our R&D is guided by the market and we target  name brand drugs and new
generic  drugs in China.  The R&D covers a variety of  diseases,  but focuses on
high incidence and high mortality  diseases in China,  which need more effective
treatment.  In an attempt to remain a leading  player in the  market,  we target
off-patent drugs or drugs about to be off-patent with cumulative global sales of
over $1 billion.  Through  September  2007, we have 10 drugs on track to launch,
including a new  anti-drug-resistance  antibiotic  which has already entered the
SFDA  technical  evaluation.  We also have three drugs which are waiting for the
SFDA's  production  approval.  Bumetanide  received SFDA production  approval in
January 2008. It is estimated that all therapeutic  products  currently  pending
approval will contribute to the revenue.



                                       23


I. Summary

During the three months ended March 31, 2008,  we  maintained  steady and speedy
growth and excellent financial performance.  Revenue has increased 61.98%, gross
profit  76.04%,  net income 76.52% and EPS 72.06%,  compared to the three months
ended March 31,  2007.  For the three  months  ended March 31,  2008,  our total
revenue reached $11.72 million,  an increase of 61.98% from $7.23 million in the
three  months  ended  March  31,  2007.  This  growth  is  attributable  to  the
development  of existing  products  and  strengthening  our  marketing  with new
products which were launched after late 2006.  This is in line with our strategy
of  launching  new  products  while  expanding  into  the  several   competitive
pharmaceutical markets domestically.

Our financial  performance  for the first quarter of 2008 has an obvious  growth
compared to the first  quarter of 2007. We have seen an increase in gross profit
of 76.04%  to $5.81  million.  Net  income,  without  consideration  of  foreign
currency  translation  adjustment,  has increased by 76.52% to $ 4.19 million in
the first  quarter  of 2008.  This is the result of the  development  of the new
products and additional marketing activities.

For the three  months ended March 31, 2008,  EPS  increased by 72.06%,  reaching
$0.11  compared  to $0.07 for the three  months  ended  March 31,  2007.  We are
working  closely with various  pharmaceutical  research  institutions to develop
more functional  products to meet the customers' needs. Our focus is to create a
steady increase in revenue. We have seen in the past that the key to our success
is to maximize the possibilities of health care industry.

We also have adopted a modern enterprise system to enhance internal control over
accounting and reporting.  In the near future,  we will build up more systematic
and continuous internal control procedures for the long-term development and the
benefit of our shareholders and prospective investors.

II. Business Overview

We are  primarily  engaged  in the  research,  development,  manufacturing,  and
marketing  of  pharmaceutical  and  nutritional  supplements.  During  2007,  we
launched two new products, Alginic Sodium Diester and Granisetron hydrochloride.
And we are planning to launch a new product, Bumetanide in 2008.

We plan to expand our  biotechnology  product  series.  Based on the  foundation
established  by  some  of  our  widely   recognized   medicine  labels  such  as
Neurotrophicpeptide,  we have  launched and will continue to launch a variety of
biological  medicines,   including  the  injected  hepatocyte   growth-promoting
factors,   which  are  expected  to  fuel  additional   growth  beyond  that  of
Neurotrophicpeptide.

One of our products,  Buflomedil Hydrochloride (which includes the raw material,
injectable  product and tablet form) has received  the  following  recognitions,
awards and designations:

o The key technology project in Hainan in 2003 by Haikou Municipality.



                                       24


o The "National Key New Products"  certificate  in 2003 by the State Science and
Technology Department, State Taxation Bureau, Ministry of Commerce, State Bureau
of Quality  Supervision,  Inspection  and  Quarantine,  and State  Environmental
Protection Bureau.

o The  "Best  Commercialized  Technology"  award  in  Hainan  in 2004 by  Hainan
Scientific and Technological Result Examination Committee.

In 2003, we attained GMP  authentication  and the award of "Best  Enterprise for
Supporting SARS Medicine"  awarded by Hainan Food and Drug  Administration.  Our
products   have  been   distributed   and  sold  to  more  than  29   provinces,
sovereignties, and autonomous regions around China. We have 16 sales offices and
approximately  680 proxy agents  throughout the PRC. The main channels we use to
deliver our products are as follows: (1) Distribution system (Proxy Agents); (2)
Direct sale system to  hospitals;  (3)  Distribution  of products to  end-market
through local medical companies.

Onny  Investment  Limited  was  incorporated  in the British  Virgin  Islands on
January 12, 2005 and was a development  stage enterprise  through June 15, 2005.
On June 16, 2005, Onny acquired all of the outstanding  shares of Hainan Helpson
Medical &  Biotechnology  Co.,  Ltd, a  privately  held  Chinese  joint  venture
(Helpson) and emerged from the development  stage. On October 19, 2005, Onny was
reorganized as a wholly owned subsidiary of China Pharma Holdings, Inc. formerly
TS Electronics, Inc. (the Company).

Additionally,  on February 1, 2007, we fulfilled a fund raising equity  offering
of units  priced at $1.70  each  consisting  of one share of common  stock and a
warrant to purchase  one-half of a share of common stock at an exercise price of
$2.38  per  share.  We  received  gross  proceeds  in the  aggregate  amount  of
$4,259,900.  The net proceeds,  after deducting the related offering expenses of
$462,717 amounted to $3,797,183.  In total, we issued 2,505,882 shares of common
stock and issued  three-year  warrants  to purchase an  aggregate  of  1,252,941
shares of common stock to 17 accredited investors. In December 2007, we received
proceeds of $119,000 upon the exercise of warrants to purchase  50,000 shares of
common stock. The remaining  warrants issued in conjunction with the offering to
buy  1,202,941  shares of common  stock have not been  exercised at December 31,
2007.

III. Trend in the Market.

Studies show that due to the expansion and aging of the world's  population,  an
increasing  number  of  people  have  age-related  diseases,   such  as  cancer,
Alzheimer's disease,  diabetes,  and rheumatoid  arthritis.  These diseases have
already become  prevalent,  particularly  in developed  areas.  In a growing and
aging population, people need to find more effective methods of treatment.

Patient  empowerment  has been a factor  in  high-quality  healthcare.  Many are
better  informed about the importance of health issues and medical  advancement.
Naturally,  people  today are  demanding  greater  care and access to the latest
medical procedures and medicines.



                                       25


We view  this  market  trend as an  opportunity.  However,  the best way to take
advantage of this  opportunity  is to identify our  business  risks  beforehand.
Generally speaking, there are three aspects of risks:

o External Risk
In recent years, the Chinese medical system has been reformed,  resulting in the
State  Department's  establishment  of a  basic  medical  insurance  system  for
employees. Considering the social environment and the governmental policy in the
pharmaceutical industry in PRC, a large increase in sales can be expected due to
local  government  involvement in the industry.  Competition will also be strong
across the industry overall. Currently, our existing products are competitive in
the market and possess growth potential.  However, from a long-term perspective,
some major western  medicine  producers are also seeking  Chinese  market share.
This will  present us with strong  competition  in the natural  medicine  market
sector.

o Operation Risk
One of the major uncertainties in our industry is the purchase of raw materials.
Raw materials are primarily affected by the geographical,  island environment of
Hainan Province.  Because of high transportation costs and the need to guarantee
production supply  requirements,  we have to store large amounts of inventory to
maintain consistent  production levels. In addition,  partial raw materials need
to be specially  ordered  which further  increases the need to store  inventory.
Finally,  due to the increasing  sales, we must store a large volume of finished
product and packaging material.

o Foreign Currency Risk
Substantially  all of our  operations  are  conducted  in the PRC. Our sales and
purchases are conducted  within the PRC in Chinese  Renminbi.  As a result,  the
effect of the exchange  rate  fluctuation  would  inevitably be considered to be
material to our business operations.

All of our revenues and expenses are accounted  for in Renminbi.  But we use the
United States dollar  ("USD") for financial  reporting  purposes.  Conversion of
Renminbi  into foreign  currencies  is  regulated by the People's  Bank of China
through a unified floating exchange rate system. Although the PRC government has
stated its intention to support the value of the Renminbi  ("RMB"),  there could
be no assurance  that such exchange rate will not become  volatile again or that
the USD will not devalue  significantly  against  the  Renminbi.  Exchange  rate
fluctuations may adversely affect the value, in USD terms, of our net assets and
income derived from its operations in the PRC.

IV. Analysis of financial performance for the three months ended March 31, 2008



                                       26





                           CHINA PHARMA HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME
                                   (unaudited)
                      For the three months ended March 31,


                                                        Percentage                            Percentage        Growth
                                           2008         of Revenue             2007           of Revenue         Rate
                                   ----------------    -------------    -----------------    -------------    ------------
                                                                                               


Revenue                               $ 11,717,045          100.00%          $ 7,233,768          100.00%          61.98%
Cost of revenue                          5,909,768           50.44%            3,934,849           54.40%          50.19%
                                   ----------------                     -----------------


Gross profit                             5,807,277           49.56%            3,298,919           45.60%          76.04%
                                   ----------------                     -----------------


Operating expenses:
   Selling expenses                        337,792            2.88%              147,883            2.04%         128.42%
   General and administrative              815,793            6.96%            1,306,086           18.06%         -37.54%
                                   ----------------                     -----------------
Total operating expenses                 1,153,585            9.85%            1,453,969           20.10%         -20.66%
                                   ----------------                     -----------------


Income from operations                   4,653,692           39.72%            1,844,950           25.50%         152.24%
                                   ----------------                     -----------------


Non-operating income (expenses):
   Interest income                               -                                13,775            0.19%        -100.00%
   Interest expense                        (45,273)          -0.39%              (56,899)          -0.79%         -20.43%
   Other income                                  -                               572,213            7.91%        -100.00%
                                   ----------------                     -----------------
Total non-operating income                 (45,273)          -0.39%              529,089            7.31%        -108.56%
(expense)                          ----------------                     -----------------


Income before taxes                      4,608,419           39.33%            2,374,039           32.82%          94.12%
Income tax expense                         417,878            3.57%                    -
                                   ----------------                     -----------------
Net income                             $ 4,190,541           35.76%          $ 2,374,039           32.82%          76.52%
                                   ----------------                     -----------------
Comprehensive income - foreign
currency translation adjustments         1,745,242           14.89%              216,416            2.99%         706.43%
                                   ----------------                     -----------------
Comprehensive income                  $  5,935,783           50.66%          $ 2,590,455           35.81%         129.14%
                                   ----------------                     -----------------

Basic and Diluted Earnings Per
Share                                   $    0.112                             $   0.065                           72.06%
                                   ----------------                     -----------------
Basic and Diluted Weighted
Average Shares Outstanding              37,278,938                            36,337,958
                                   ----------------                     -----------------





                                       27


Revenues

Revenue  for the three  months  ended  March 31,  2008 is  approximately  $11.72
million or an increase of 61.98%  compared to $7.23  million of the fist quarter
of 2007. This dramatic  improvement in revenue is due to the following elements:
on the demand side, in addition to the strong Chinese  economy,  the demands for
medicine are  increasing;  on the supply side,  our output has been  expanded to
meet the increased market demands.  We are increasing our marketing  efforts for
our products and have widened our distribution channels. Our older products have
been  well-accepted  by  customers.  In the  first  quarter  of  2008,  Pusen OK
contributed  approximately $1.89 million of our revenue, which was 16.17% of the
total net  revenues,  an increase of 99% or $941  thousand  when compared to the
same period of 2007. The growth is mainly due to a $5.6 million  contract from a
major  distributor  at the  beginning of 2008.  Also,  we  broadened  our market
channels  and because of the severe snow storms that hit central and south China
from middle January 2008, there was a dramatic increase of flu,  cerebrovascular
and cardiovascular diseases. Pusen Ok is used to temporarily relieve runny nose,
watery eyes,  fever,  headache,  soar throat,  pain of  arthritis,  and muscular
arches.  In the  first  quarter  of  2008,  sales  from one of our  other  older
products,  aFGF,  reached  $1.34  million,  an increase  of 35%,  compared to $1
million of the first quarter of 2007.

Some of the other older products that have greatly increased in the three months
ended March 31, 2008 are: Buflomedil  Hydrochloride with an increase of 197.77%,
Gastrodin  with an  increase  of 69.97%,  Cefaclor  with an  increase of 63.86%,
Neurotrophicpetide  with an  increase  of 53.95%,  and  Andrographolide  with an
increase of 23.09%.  Products  which had been  introduced in 2006 are now in the
mature  stage.  Revenues  from  these  products  launched  in  2006  contributed
approximately  $2.12 million to the total  increase of revenues for this period,
among which, Ozagrel contributed  approximately $865 thousand.  Finally, the new
products that have been introduced  last year  contributed  approximately  $1.25
million to the total  increase in revenues  this year,  among which  Granisetron
hydrochloride  contributed $759 thousand, and Alginic Sodium Diester contributed
$500 thousand to the total increase.

Cost of Revenue

Cost of revenue for the three  months  ended  March 31,  2008 was  approximately
$5.91 million, which was 50.44% of revenue for the same period. The cost for the
three  months  ended March 31, 2007 was $3.93  million,  which is an increase of
$1.97 million or 50.19%,  this was primarily due to the increase in sales volume
this year.

Gross Profit

The gross margin for the first quarter of 2008 has reached 49.56%,  gross profit
for the three  months  ended  March 31,  2008 has  reached  approximately  $5.80
million,  which has increased by about $2.51 million or 76.04%, when compared to
the three  months  ended March 31, 2007 to $3.30  million,  the gross  margin is
45.60%. The improved profit was due to the substantial  increase in revenues and
reduce in product expenses in this period.

Selling Expenses



                                       28


Selling  expenses for the three  months  ended March 31, 2008 have  increased to
about $338  thousand  or 2.88% of the total  revenue,  which is an  increase  of
128.42% from $147 thousand or 2.04% of the total revenue for the three months as
of March 31, 2007.  Due to our attempt to broaden our market share  further,  we
have  invested  heavily in the  marketing of our  products,  which has increased
traveling expenses, office expenses and salaries.

General & Administrative Expenses

General and administrative expenses incurred in the three months ended March 31,
2008 are about $816 thousand which represents  approximately  6.96% of the total
revenue.  G&A expense has  decreased by  $490,293,  or 37.54% as compared to the
three  months ended March 31, 2007.  This was mainly due to the  improvement  on
accounts receivable collection, lower allowance for doubtful account compared to
the same period in 2007, and the amount of salaries, legal services,  accounting
services,  and investment  consulting services. We have also seen an increase in
intangible assets, which has increased amortization expense.

Income from Operations

Income  from  operations  has  increased  by  approximately   $2.81  million  to
approximately  $4.65  million,  which is an increase  of 152.24%  from the three
months ended March 31, 2007.  This is a combined result of the increase in sales
and reduction in general and administrative expenses.

Interest Expense

Interest  expense has  decreased by $11,626 or 20.43% to $45,273 ended March 31,
2008.  This  is  due to the  payment  of the  money  borrowed  from  the  former
shareholders.

Income Tax Expense

We have accrued $ 417,878  income tax, or 3.57% of revenue in this  quarter.  We
have been granted a "tax  holiday"  granting a favorable  rate of 50% of the tax
rates in  effect  during  fiscal  2008  through  2010 as  determined  by the PRC
government and the regional tax authorities.  This year we accrue our tax at the
rate of 9%.

Net Income

The net income as of March 31 2008 has  increased  by 1.82  million or 76.52% to
$4.19 million,  compared to $2.37million for the  corresponding  period of 2007.
There are two reasons  that  contributed  to the growth.  One is the increase of
revenue and gross profit, the other is the decrease of G&A expense.




                                       29



V. Analysis of financial performance for the three months ended March 31, 2008

                           CHINA PHARMA HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)


                                                         For the three months
                                                           ended March 31,
                                                     --------------------------
                                                         2008           2007
                                                     -----------    -----------
                                                                     (RESTATED)
Cash Flows from Operating Activities:
   Net income                                        $ 4,190,541    $ 2,374,039
   Depreciation and amortization                         162,779        100,063
   Gain on sale of intangibles                              --         (569,398)
   Changes in assets and liabilities:
     Trade accounts receivable                        (5,343,190)    (1,728,236)
     Other receivables                                   (44,977)      (739,783)
     Advances to suppliers                             1,275,939     (1,095,219)
     Inventory                                           234,072     (1,092,813)
     Deferred offering costs                                --           59,743
     Trade accounts payable                              275,053        247,713
     Accrued expenses                                     (7,001)        27,960
     Accrued taxes payable                               738,767         78,756
     Other payables                                      (46,030)        88,814
     Advances from customers                              85,325          6,571
                                                     -----------    -----------
Net Cash from Operating Activities                     1,521,278     (2,241,790)
                                                     -----------    -----------

Cash Flows from Investing Activities:
   Purchase of property and equipment                     (6,994)        (2,360)
   Proceeds from the sale of intangibles                    --           38,453
   Purchase of intangible assets                        (418,079)          --
   Advances for purchase of intangible assets         (1,918,791)       836,404
                                                     -----------    -----------
Net Cash from Investing Activities                    (2,343,864)       872,497
                                                     -----------    -----------

Cash Flows from Financing Activities:
   Proceeds from sale of common stock and warrants          --        3,797,183
   Payments of short term notes payable                 (376,271)          --
   Related party payables/receivables                       --         (138,860)
                                                     -----------    -----------
Net Cash from Financing Activities                      (376,271)     3,658,323
                                                     -----------    -----------

Effect of Exchange Rate Changes on Cash                   50,539          5,247
                                                     -----------    -----------
Net Change in Cash                                    (1,148,318)     2,294,277
                                                     -----------    -----------
Cash and Cash Equivalents at Beginning of Period       1,830,335        656,441
                                                     -----------    -----------
Cash and Cash Equivalents at End of Period           $   682,017    $ 2,950,718
                                                     -----------    -----------


                                       30


As of March 31, 2008, the cash and cash equivalents balance reached $682,017, or
1.35% of total assets,  while the amount was $2,950,719 or 8.36% of total assets
for the three months ended March 31, 2007.

Net cash from  operating  activities  has increased by $ 3,763,068 or 167.86% to
$1,521,278  in the three  months  ended  March 31,  2008,  compared  to negative
$2,241,790  during the same time in the prior year. This  improvement  came from
the increased net income,  and an  improvement  on collection of trade  accounts
receivables.

Cash outflows from  investing  activities  were  $2,343,864 as of March 31 2008.
This is due to the purchase of intangible assets and fixed assets which cost the
company  $418,079 and $6,994  respectively,  as well as advances for purchase of
intangibles in the amount of $1,918,791.

Cash used in financing  activities  were  $376,271 for the first  quarter  ended
March 31 2008. The main reason is that the note to former  shareholders of $376,
271 was paid off. For the same time for 2007, the cash from financing activities
was $3,658,323; this is due to the completion of an offering priced at $1.70 per
unit consisting of one share of common stock and a warrant to purchase  one-half
of a share of common stock at an exercise price of $2.38 per share.  We received
gross proceeds in the aggregate  amount of $4,259,900.  The net proceeds,  after
deduction of related offering  expenses of $462,717  amounted to $3,797,183.  We
issued an aggregate of  2,505,882  shares of common stock and issued  three-year
warrants to purchase an  aggregate  of  1,252,941  shares of common  stock to 17
accredited  investors.  In December 2007, we received  proceeds of $119,000 upon
the  exercise  of  warrants  to  purchase  50,000  shares of common  stock.  The
remaining  warrants  issued in  conjunction  with the offering to buy  1,202,941
shares of common stock have not been exercised at December 31, 2007.


VII. Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements.

VIII. Recently Enacted Accounting Pronouncements

In September  2006,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  157,  Fair Value
Measurements,  which  defines fair value,  establishes a framework for measuring
fair value in generally accepted  accounting  principles and expands disclosures
about  fair  value  measurements.  SFAS No. 157 is  effective  for fiscal  years
beginning  after  November 15,  2007,  and interim  periods  within those fiscal
years. In February 2008, the FASB issued FASB Staff Position (FSP FIN) No. 157-2
which  extended  the  effective  date  for  certain   nonfinancial   assets  and
nonfinancial  liabilities to fiscal years beginning after November 15, 2008. The
Company does not expect the  adoption of SFAS No. 157 to have a material  impact
on our consolidated financial statements.

In  February  2007,  the FASB issued  SFAS No.  159,  The Fair Value  Option for



                                       31


Financial Assets and Financial  Liabilities.  SFAS No. 159 permits  companies to
choose to measure many  financial  instruments  and certain  other items at fair
value.  SFAS No. 159 is effective  for  financial  statements  issued for fiscal
years  beginning  after  November  15,  2007.  The  Company  does not expect the
adoption of SFAS No. 159 to have a material impact on our consolidated financial
statements.

In June 2007,  the Emerging  Issues Task Force of the FASB issued EITF Issue No.
07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to be
Used in Future  Research and  Development  Activities",  ("EITF  07-3") which is
effective for fiscal years beginning after December 15, 2007. EITF 07-3 requires
that  nonrefundable   advance  payments  for  future  research  and  development
activities  be deferred and  capitalized.  Such amounts will be recognized as an
expense as the goods are delivered or the related  services are performed.  EITF
07-3 is not expected to have a material  impact on our results of  operations or
financial position.

In December 2007, the FASB issued SFAS No. 141(R),  Business  Combinations,  and
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statement. SFAS
No. 141(R) requires an acquirer to measure the identifiable assets acquired, the
liabilities  assumed and any  non-controlling  interest in the acquiree at their
fair values on the  acquisition  date, with goodwill being the excess value over
the  net  identifiable   assets   acquired.   SFAS  No.  160  clarifies  that  a
non-controlling  interest  in a  subsidiary  should be reported as equity in the
consolidated financial statements,  consolidated net income shall be adjusted to
include  the  net  income  attributed  to  the   non-controlling   interest  and
consolidated comprehensive income shall be adjusted to include the comprehensive
income attributed to the non-controlling  interest.  The calculation of earnings
per share  will  continue  to be based on  income  amounts  attributable  to the
parent. SFAS No. 141(R) and SFAS No. 160 are effective for financial  statements
issued for fiscal years  beginning  after  December 15, 2008.  Early adoption is
prohibited.  The Company has not yet determined  the effect on our  consolidated
financial statements, if any, upon adoption of SFAS No. 141(R) or SFAS No. 160.

In March  2008,  the FASB  issued SFAS No.  161,  Disclosures  about  Derivative
Instruments and Hedging Activities. SFAS No. 161 amends SFAS No. 133, Accounting
for  Derivative   Instruments  and  Hedging   Activities  to  require   enhanced
disclosures  concerning the manner in which an entity uses  derivatives (and the
reasons it uses them), the manner in which  derivatives and related hedged items
are  accounted  for under  SFAS No.  133 and  interpretations  thereof,  and the
effects that derivatives and related hedged items have on an entity's  financial
position,  financial performance,  and cash flows. SFAS No. 161 is effective for
financial  statements  of  fiscal  years and  interim  periods  beginning  after
November  15,  2008.  The  Company  has not yet  determined  the  effects on its
consolidated financial statements,  if any, that may result upon the adoption of
SFAS 161.

IX. Conclusion

The  overall  performance  during  the three  months  ended  March 31,  2008 was
outstanding. Revenue has increased by 61.98%, gross profit by 76.04%, net income
by 76.52% and EPS by 72.06%, compared to the three months ended March 31, 2007.



                                       32


In order to  maintain  our  growth  and  profitability  in the  future,  we must
continue to focus our efforts on marketing and R&D. By distributing  our product
to a larger and more varied customer base, we will organically  increase revenue
and through massive R&D investment, we will increase our product line.

                                    BUSINESS

Principal Products and Services

Helpson's  primary business is medical  research and development,  manufacturing
and sales of medicines.  Helpson manufactures and sells the following categories
of products:  western medicine,  biomedicine,  traditional  Chinese medicine and
nutritional supplements.

At present, Helpson is manufacturing 17 kinds of medicines in total. We received
new medicine certifications for the following five kinds of medicines:

Naproxen Sodium and Pseudophedrine  Hydrochloride  Sustained Release Tablets: to
temporarily  relieve  cold,  sinus  and flu  symptoms,  blocked  nose  caused by
anaphylaxis rhinitis, runny nose, fever, sore throat, symptoms of myalgia in the
limbs and pain around the joints.

Bumetanide  for  Injection:  a diuretics  drug used for the treatment of various
edema  diseases   (including  those  associated  with  heart  failure,   hepatic
cirrhosis, nephropathy, and pulmonary edema and etc.), hypertension, and for the
treatment and prevention of acute renal failure, hyperkalemia, hypercalcemia and
for the rescue of acute drug poisoning.

Buflomedil  Hydrochloride:  used for the  treatment of  peripheral  blood vessel
diseases, including intermission claudication,  renaud syndrome and blood vessel
convulsion.

Cefaclor  Dispersible  Tablets:  a  cephalosporin  antibiotic  drug used for the
treatment of  tympanitis,  lower  respiratory  tract  infection,  urinary  tract
infections (UTI) and skin/skin tissue infection.

Roxithromycin  Dispersible Tablet: a macrolide antibiotic used for the treatment
of pharyngitis  and tonsillitis  caused by  Streptococcus  pyogenes;  sinusitis,
tympanitis,  acute and chronic  bronchitis caused by acute bacteria,  Mycoplasma
pneumonia and Chlamydia pneumoniae;  urethritis and cervical infection caused by
Chlamydia  trachomatis  (CT);  skin soft tissue  infection  caused by  sensitive
bacteria.

Helpson is  manufacturing  the following  medicines in addition to the medicines
listed above:

Gastrodin Injection: used in case of the following symptoms:  tiredness, loss of
concentration,  poor sleep, (the "declined spirit" syndrome),  and for traumatic
syndromes of the brain; vertigo; neuralgia; headaches etc.

Hepatocyte  Growth-promoting  Factor for Injection:  used to treat serious viral
hepatitis  symptoms caused by various viral  hepatitis  types (acute,  subnormal



                                       33


temperature, chronic serious disease early or middle period of hepatitis)

Propylgallate   for  Injection:   used  for  preventing  and  treating  cerebral
thrombosis,  coronary heart disease, and complication after the surgery-thrombus
deep phlebitis, etc.

Ozagrel Sodium for Injection:  used to treat acute thrombus brain infarction and
brain sport obstacle infarction.

Alginic   Sodium   Diester   Injection:   used  in   ischemic   heart   disease,
cerebrovascular diseases (cerebral thrombosis, cerebral embolism, coronary heart
disease, etc.) and high lipoprotein blood disease.

Granisetron  Hydrochloride Injection:  indicated to reduce the symptom of nausea
and vomiting caused by  radiotherapy  and  chemotherapy  during the treatment of
malignant tumors.

Cerebroprotein  Hydroloysate  Injection:  indicated  for the treatment of memory
decline  and  attention   deficit  disorder  (ADD)  caused  by  the  sequela  of
craniocerebral trauma and cerebrovascular diseases.

Clarithromycin:  a macrolide  antibiotic  drug for the treatment of  nasopharynx
infection,  lower  respiratory  tract infection,  skin tissue  infection,  acute
tympanitis  and  mycoplasma  pneumonia  caused  by  clarithromycin   susceptible
organisms;  urethritis and cervical  infection  caused by chlamydia  trachomatis
(CT);  and the treatment of legionella  infection,  mycobacterium  avium complex
(MAC) infection and helicobacter pylori infection.

Anhydroandrographolide:  used  for  clearing  away  heat  and  detoxify,  as  an
antibacterial and to diminish inflammation; used in upper respiratory infection,
bacillary diarrhea.

Vitamin B6 for Injection: vitamin supplement.

Thymopolypetides  Injection:  used for treating  various  primary or recurring T
cell  defective  diseases,  autoimmune  diseases,  to assist in the treatment of
diseases and tumors of various cells with reduced immunological function.

Cefalexin  Capsules:  suitable for acute tonsillitis  caused by sensitive fungi,
airway  infections,   such  as  pharyngitis,   otitis  media,  nasal  sinusitis,
bronchitis; pneumonia, respiratory tract infection, urinary tract infections and
skin soft tissue infections etc.

In addition,  Helpson's  products include a Recombined  Human Fibroblast  Growth
Factor  (rhaFGF),  which is used as a raw  material  for  cosmetics  and has the
function of wound repairing,  including skin injury caused by ultraviolet light,
acne,  desquamation  and redness after skin  replacement,  skin injury caused by
alpha hydroxyl acid, skin injury of the deep layer after grazing, and other skin
injuries.

As of May 31,  2008,  there are nine drugs in  different  stages of research and
development.  Among them, one innovative anti-resistant antibiotic is undergoing
technical  examination  by the SFDA.  In  addition,  we are waiting for the SFDA



                                       34


approval of the production of three other drugs.

Due to the nature of the biotechnology and  pharmaceutical  industries,  Helpson
continually  strives to change its  product  portfolio  to respond to changes in
market demand.  Helpson also plans to expand its  biotechnology  product series.
Based on the  foundation  established  by some of  Helpson's  widely  recognized
medicine  labels  such as  Neurotrophicpeptide,  Helpson has  launched  and will
continue to launch a variety of  biological  medicine,  including  the  injected
hepatocyte  growth-promoting  factors,  which are  expected  to fuel  additional
growth beyond that of Neurotrophicpeptide.

Helpson adjusts the delivery system and marketing for each of its products based
on the product's target patient group. Maintaining a variety of delivery systems
(e.g. tablet,  injection,  powder,  etc.) targeted for different groups enhances
Helpson's  competitive  position  in the  market.  Helpson's  present  types  of
delivery include covered tablet, capsule, troche, oral fluid, injection,  frozen
powder, acicula, and germ-free powder acicula.

Positioned in a rapidly growing industry,  Helpson has leading generic drugs and
continuously  improving sales results.  It possesses new competitive  advantages
through segmented pipelines designed for the specific target patient groups. Its
products  are aimed at  treating  a variety  of  prevailing  diseases  in China,
including neurology,  cardiovascular and cerebrovascular diseases,  diabetes and
infectious  diseases.  We are  market-oriented  in the process of  research  and
development of new medicines, focusing on innovative medicines with great market
potential and brand generic drugs  developed in China. To be a leading player in
the market, we aim at international  generic drugs whose patent expires or is to
expire with a sales amount of over $1 billion.  Our R&D is  concentrated on high
incidence and high mortality diseases which need more effective treatments.

We are able to compete in the highly fragmented  pharmaceutical industry through
its diversified pipeline, cost control and strong sales network. Our experienced
management  team,  market  insights and strong R&D capacity enable us to develop
and launch new and improved generic products based on market demand. We are also
able to provide  its  therapeutic  in a variety of delivery  mechanisms  such as
covered tablet, capsule, oral fluid, injections, frozen powder.

Principal Markets

The principal markets of Helpson lie within China. With approximately  one-fifth
of the world's  population and a  fast-growing  gross  domestic  product,  China
presents significant potential for the pharmaceutical industry. According to the
Freedonia Group,  pharmaceutical demand in China reached RMB198.0 billion ($25.4
billion)  in 2005,  representing  a growth of 12.1%  annually  since  2000.  The
Freedonia Group expects the total pharmaceutical expenditure in China to grow at
13.6% annually between 2005 and 2010. Such growth rate is  significantly  higher
as  compared  to the  rest of the  world,  where  growth  of the  pharmaceutical
industry is  projected  to be at a compound  annual  growth rate of 5.0% to 8.0%
between 2004 and 2009 according to IMS Health. The overall production of Chinese
pharmaceutical  industry is expected to reach RMB 740 billion to RMB 760 billion
in  2008,   increasing   by  20%  compared  to  the  previous   year.   (Source:
http://www.chinapharm.com.cn)



                                       35


PricewaterhouseCoopers  ("PWC")  predicted  that China will  become the  world's
fifth  largest  pharmaceutical  market  in 2010 and the  largest  pharmaceutical
market by 2050. (http://www.jlccd.gov.cn/info/readinfo.cgi?1414092252754364) The
growth is driven by increased income levels, overall improvement of life quality
and the  consumer's  desire for improved  healthcare.  In addition,  the broader
coverage of healthcare and the  increasing  aging  population  contribute to the
increased demand for pharmaceutical products. Patients' choices of drugs depends
on the  affordability  of and  access to  medicines.  The  Chinese  government's
increased  spending on the rural market is another  driving  force of our future
development.

Distribution

As of May 31,  2008,  Helpson's  products  were sold in more than 29  provinces,
sovereignties and autonomous regions in China.  Helpson has 16 sales offices and
approximately 680 sales agents throughout China.

Helpson  has  widespread  distribution  networks  and  professional  sales team.
Helpson delivers its products to clinical hospitals and terminal markets through
local pharmaceutical trading companies with Good Supply Practice Certifications.

Industry Background and Competition

The  pharmaceutical  industry's  primary  categories  include chemical medicine,
traditional  Chinese  medicinal  material,  traditional  Chinese medicinal film,
prepared Chinese herbal medicine,  antibiotics,  biological products, biological
medicine,  radioactive  medicine,  medical  appliances,   sanitation  materials,
pharmaceutical machinery, medical packaging and trading.

Competition  in the  pharmaceutical  industry is reduced by barriers to entry. A
company  wishing to enter into the industry  must comply with the  standards and
regulations  set forth by the  government.  In the PRC,  the State Food and Drug
Administration  of  China  (the  "SFDA")  is the  authority  that  monitors  and
supervises  the   administration  of  the   pharmaceutical   industry  including
pharmaceutical  products,  medical  appliances,  and  equipment.  Pharmaceutical
manufacturing enterprises must obtain a Pharmaceutical  Manufacturing Enterprise
Permit  issued by the relevant  pharmaceutical  administrative  authorities  and
relevant  health  departments  at the  provincial  level where the enterprise is
located.  Furthermore, all pharmaceutical products produced in the PRC, with the
exception of Chinese  herbal  medicines in soluble form,  must bear a registered
number approved by the appropriate  governmental authorities in the PRC. Lastly,
in  accordance  with  the  World  Health  Organization,  the  PRC  now  requires
compliance with GMP standards in pharmaceutical  production in order to minimize
the risks involved in any  pharmaceutical  production  that cannot be eliminated
through testing final products.  As the regulatory approval process becomes more
stringent, it also increases the barriers to entering the market.

Due to the  variety  of  consumer  demands  within  the  pharmaceutical  market,
pharmaceutical  companies  have  relatively  dispersed  product  lines.  We have
formulated the following development strategies:  (1) to be market-oriented,  to
take advantage of our R&D capacities and to take  technology and products as our



                                       36


strategic focus; (2) to launch seven to ten new medicines and one brand medicine
in the next three years; (3) to provide more effective methods to treat patients
by developing innovative medicines; (4) to enlarge market shares by establishing
new sales channels and expanding  current sales channels;  (5) to launch leading
generic drugs and innovative drugs with an aggregate sales of $ 1 billion in the
world.

Description of Property

Helpson owns a factory with a floor area of 663.94 square meters  located at the
East Wing, 6/F, 5 Jianshe Road, Jinpan Industrial Development Zone, Haikou.

Helpson also owns the land use rights to another 31,050 square meters located at
plot C09-2,  Hainan  Bonded Zone,  Haikou.  Helpson built a factory with a floor
area of approximately 7,300 square meters on this parcel.

In  addition,  Helpson  entered  into a  lease  agreement  with  Hainan  Zhongfu
Going-abroad  Personnel Service Center  ("Zhongfu"),  under which Helpson rented
the offices  located at 2/F,  Jiahai  Building owned by Zhongfu as its principal
executive offices.  The term of the lease is 10 years, from November 21, 2000 to
November 20, 2010.

Intellectual Property

Helpson owns the following 17 registered trademarks:  Funalin, Fukexing, Beisha,
Shiduotai, Xinuo, Pusenlitai, Pusenouke, Shuchang, Shenkaineng, an AFGF logo, an
HPS logo,  two HELPSON  logos,  as well as four other  logos.  The  registration
numbers of the 17 registered trademarks are as follows: No.1280259,  No.1500459,
No.1511770,   No.1535416,   No.1537828,   No.1535420,   No.1272792,  No.1272759,
No.1272760,  No.1330294,  No.1327731, No.1330295, No.1476339 and No.3993785, No.
4074317, No.4074321 and No. 4315247.

In addition,  Helpson has applied for registration of five other trademarks used
in connection  with western  medicine,  raw material  medicine,  Chinese  herbal
medicine and medicine  injections.  Helpson has obtained five acceptance notices
of  trademark  registration  application,  and the  application  numbers  are as
follows: No.4074320, No.4074314, No.4075447, No.4074322 and No.4074316.

Employees

As of May 31, 2008, Helpson had 310 employees in total.

Government Regulation

The following is a summary of the principal  governmental  laws and  regulations
that are or may be applicable to  pharmaceutical  manufacturing  companies  like
Helpson in China.  The scope and enforcement of many of the laws and regulations
described  below  are  uncertain.  We  cannot  predict  the  effect  of  further
developments  in the Chinese legal system,  including  the  promulgation  of new
laws, changes to existing laws, or the interpretation or enforcement of laws.



                                       37


Drug  Administration Law of the PRC was promulgated by the Standing Committee of
National  People's Congress on February 28, 2001 and effective as of December 1,
2001, and its implemental  rules were promulgated by the State Council on August
4, 2004 and effective as of September 15, 2002. According to Drug Administration
Law of the PRC and its implemental  rules, a pharmaceutical  manufacturer  shall
obtain Pharmaceutical Manufacturing Permit and the Drug Approval Number for each
manufactured  medicine from relevant SFDA's provincial  branch,  which are valid
for five years and are renewable upon application before expiration.

Administration  Regulations for Drug Registration was promulgated by the SFDA on
July  10,  2007,  and  was  effective  as of  October  1,  2007.  Administration
Regulations for Drug  Registration  specifies the requirements and procedures of
obtaining a Drug Approval Number for new drug,  including the  requirements  for
clinical trial of new drugs,  procedures of registering  imported  medicines and
report and approval procedures of generic medicines.

Good Manufacturing  Practices (GMP) for Pharmaceutical  Products,  as revised in
1998 was  promulgated  by the SFDA on June 18, 1999 and became  effective  as of
August 1, 1999, and the Authentication  Regulations for Drug GMP was promulgated
by the SFDA on  September  7, 2005 and became  effective  on October 1, 2005.  A
pharmaceutical  manufacturer  must meet the GMP  standards  and  obtain  the GMP
Certificate  with  a  five-year  validity  period  from  SFDA.  Before  the  GMP
Certification  expires,  the  pharmaceutical  manufacturer  must apply again and
complete  the relevant  procedures,  which may take about 120 working  days,  to
obtain a new GMP  Certificate.  On October  24,  2007,  the SFDA  issued the new
guideline for authentication  standards of GMP, effective as of January 1, 2008.
The new guideline may result in a rise of cost for a pharmaceutical manufacturer
to  meet  the new  standards  so as to  maintain  the  GMP  qualification.  If a
pharmaceutical  manufacturer  fails to obtain or maintain GMP  Certification and
still  carries  on its  production,  it will  be  fined  and the  Pharmaceutical
Manufacturing Permit may be revoked under serious circumstances.

Supervision  Administration Regulations for Drug Distribution was promulgated by
the SFDA on January  31,  2007 and  effective  as of May 1, 2007.  According  to
Supervision Administration  Regulations for Drug Distribution,  a pharmaceutical
manufacturer can only sell drugs produced by itself, and it shall not sell drugs
produced by other  manufacturers  or  produced  by itself but for  commissioning
manufacturing purpose.

Regulations  for Drug  Advertisement  Censoring was  promulgated by the SFDA and
State  Administration  for Industry and Commerce  (the "SAIC") on March 13, 2007
and effective as of May 1, 2007. Standards for Drug Advertisement  Censoring and
Publication  promulgated by the SFDA and the SAIC on March 3, 2007 and effective
as of May 1, 2007. According to Regulations for Drug Advertisement  Censoring, a
pharmaceutical  manufacturer  must obtain a Drug  Advertisement  Approval Number
from the  provincial  branch of the SFDA which is valid for a period of one year
if the  drug  advertisement  describes  the  functions  or  benefits  of a drug.
However,  if  an  over-the-counter   drug  advertisement  in  any  media,  or  a
prescription drug advertisement in professional medical magazine, only refers to
the name of the drug,  including the general name and commercial  name,  without
any other addition promotional  information,  the advertisement does not need to
be censored or approved.



                                       38


Legal Proceedings

We have no pending legal  proceedings.  From time to time, we may be involved in
various claims,  lawsuits,  disputes with third parties,  and actions  involving
allegations of breach of contract or product liability actions incidental to the
normal business operations.


                                   MANAGEMENT

The  following  table sets forth the names of all of our current  directors  and
executive officers.

--------------------------------------------------------------------------------
Name                     Age                          Position
--------------------------------------------------------------------------------
Zhilin Li                55      Director, President and Chief Executive Officer
--------------------------------------------------------------------------------
Xinhua Wu                45      Director and Chief Financial Officer
--------------------------------------------------------------------------------
Gene Michael Bennett     60      Independent Director
--------------------------------------------------------------------------------
Yingwen Zhang            63      Independent Director
--------------------------------------------------------------------------------
Baowen Dong              67      Independent Director
--------------------------------------------------------------------------------
Jian Yang                53      Secretary
--------------------------------------------------------------------------------


Ms. Zhilin Li: Ms. Li is the director,  President  and Chief  Executive  Officer
("CEO") of the Company.  She is a founder of Helpson, and has served as chairman
and CEO of Helpson  since 1993.  Ms. Li was  formerly  the  president  of Haikou
Bio-engineering  Institute,  and the vice president of the Sichuan  Institute of
Biology.  She graduated from Sichuan  University,  where she majored in biology,
and later became an instructor.

Mr. Xinhua Wu: Mr. Wu is the director and Chief Financial Officer ("CFO") of the
Company.  He has acted as CFO of Helpson since his  employment  in 1999.  Mr. Wu
served as CFO and assistant to the CEO at Hainan Guobang Enterprises Inc., where
he was employed from 1992 to 1999. Mr. Wu graduated from the University of Wales
with an MBA degree and  Jiangxi  Financial  College  with a Bachelor  of Science
degree in Finance.

Mr. Gene  Michael  Bennett:  Mr.  Bennett has served as a member of our board of
directors as an  independent  director  since  February 1, 2008.  Mr. Bennett is
presently a partner of Beijing Nexis  Investment  Consulting  Corporation  which
provides management consulting services to Chinese companies. From 2000 to 2004,
he acted as partner  of ProCFO  Company.  Prior to that,  he served as CFO and a
Board  Member  in  Argonaut  Computers.  Mr.  Bennett  worked  as  professor  of
accounting,  taxation and auditing at several universities  including California
State  University,  Chapman  University,  University  of  Hawaii  and  Chaminade
University.  Mr. Bennett is a graduate of Michigan State University and Michigan



                                       39


University.  He is also a Doctor of Business  Administration  (DBA) candidate in
Corporate Governance at City University of Hong Kong.

Mr. Yingwen Zhang: Mr. Zhang has served as a member of our board of directors as
an  independent  director  since  February 1, 2008.  Mr.  Zhang  graduated  from
Department of Chemical Engineering, Tianjin University in 1967. He worked as the
CEO of  Sinopec  Sichuan  Vinylon  Works  from  1983 to 1988 and  worked  as the
director of Sichuan Foreign Trade and Economic Cooperation Bureau (The Bureau of
Commerce of Sichuan  Province) from December 1988 to April 2000.  Since then, he
has acted as the Economic and  Commercial  Counselor's  Office of the Embassy of
the People's Republic of China in Malaysia. Mr. Zhang currently is the member of
the 9th Chinese People's Political Consultative Conference (CPPCC).

Mr. Baowen Dong: Mr. Dong has served as a member of our board of directors as an
independent  director  since  February 1, 2008.  Mr. Dong  graduated  from Xi'an
University of Science and Technology in 1966. He is the  professor,  researcher,
director of the staff room, and the department head in Sichuan  University since
1974. He is also an expert member of the Sichuan University  Teaching Evaluation
Council since August 2001.

Ms. Jian Yang:  Ms. Yang has been the Secretary of the Company since October 19,
2005. She is a founder and director of Helpson. Ms. Yang was a technician at the
Sichuan  Institute of Biology in 1990 and vice  president of Haikou  Biomedicine
Engineering  Co.,  Ltd.  in  1991.  Ms.  Yang  obtained  her MBA  degree  at the
University of Wales, England.

Board Composition and Committees

Since  February 1, 2008,  the board of directors has been composed of Zhilin Li,
Xinhua Wu,  Gene  Michael  Bennett,  Yingwen  Zhang and Baowen  Dong.  All board
actions  require the approval of a majority of the  directors in attendance at a
meeting at which a quorum is present.

Gene  Michael  Bennett,  Yingwen  Zhang and Baowen Dong have served on the Audit
Committee  since  February  1, 2008.  Mr.  Bennett,  the  Chairman  of the Audit
Committee,  is a financial expert serving on the Audit  Committee.  The board of
directors has adopted an Audit Committee Charter  specifying the authorities and
responsibilities of the Audit Committee.

We currently have no Nomination Committee,  Compensation Committee, or any other
committees;  therefore,  the  board  will  act in  the  capacity  of the  absent
committees.

Disclosure  of  Commission   Position  of  Indemnification  for  Securities  and
Liabilities

Our Amended and Restated Certificate of Incorporation,  with certain exceptions,
eliminate  any  personal  liability  of  directors  or  officers  to us  or  our
stockholders for monetary damages for the breach of such person's fiduciary duty
to the extent permitted by law. We have also adopted Amended and Restated Bylaws
which provide for  indemnification  to the full extent  permitted  under the law
which includes all liability,  damages,  costs,  or expenses  arising from or in



                                       40


connection with service for,  employment by, or other affiliation with us to the
maximum extent and under all circumstances permitted by law.

There are  presently no material  pending  legal  proceeding to which any of our
directors,  officers,  or employee is a party. There is no pending litigation or
legal proceeding  involving one of our directors,  officers,  employees or other
agents as to which  indemnification is being sought, and we are not aware of any
pending or threatened  litigation that may result in claims for  indemnification
by any director, officer, employee or other agent.

To  the  extent   provisions  of  our  Amended  and  Restated   Certificate   of
Incorporation and our Amended and Restated Bylaws provide for indemnification of
directors for liabilities  arising under the Securities Act or the Exchange Act,
those provisions are, in the opinion of the Securities and Exchange  Commission,
against public policy and therefore are unenforceable.

Code of Business Conduct and Ethics

We have  adopted  a Code of  Business  Conduct  and  Ethics to  provide  guiding
principles to all of our employees. Our Code of Business Conduct and Ethics does
not cover every issue that may arise,  but it sets out basic principles to guide
our employees and provides  that all of our  employees  must conduct  themselves
accordingly  and seek to avoid even the  appearance  of improper  behavior.  Any
employee which violates our Code of Business  Conduct and Ethics will be subject
to disciplinary action, up to an including termination of his or her employment.
Generally,   our  Code  of  Business  Conduct  and  Ethics  provides  guidelines
regarding:

o    compliance with laws, rules and regulations,
o    conflicts of interest,
o    insider trading,
o    corporate opportunities,
o    competition and fair dealing,
o    discrimination and harassment,
o    health and safety,
o    record keeping,
o    confidentiality,
o    protection and proper use of company assets,
o    payments to government personnel,
o    waivers of the Code of Business Conduct and Ethics,
o    reporting any illegal or unethical behavior, and
o    compliance procedures.

In  addition,  we have also  adopted a Code of  Ethics  for our Chief  Executive
Officer  and senior  financial  officers.  In  addition  to our Code of Business
Conduct and Ethics,  our CEO and senior  financial  officers are also subject to
specific policies regarding:

o    disclosures made in our filings with the SEC,
o    deficiencies in internal  controls or fraud  involving  management or other
     employees  who  have  a  significant  role  in  our  financial   reporting,
     disclosure or internal controls,



                                       41




o    conflicts of interests, and
o    knowledge of material  violations  of  securities  or other laws,  rules or
     regulations to which we are subject. A copy of our Code of Business Conduct
     and Ethics has been filed with the Securities and Exchange Commission as an
     exhibit to the registration statement of which this prospectus is a part.

                       DIRECTOR AND EXECUTIVE COMPENSATION

No cash compensation was paid to our directors for services as a director during
the  fiscal  year ended  December  31,  2007.  We have no  standard  arrangement
pursuant to which our internal  directors are  compensated for their services in
their  capacity  as  directors.   The  board  of  directors  may  award  special
remuneration to any director  undertaking any special  services on behalf of our
company other than services  ordinarily  required of a director.  All authorized
out-of-pocket  expenses  incurred by a director on our behalf will be subject to
reimbursement upon our receipt of required supporting document of such expenses.
No internal  director  received and/or accrued any compensation for his services
as a director, including committee participation and/or special assignments.

Our three independent directors are entitled to the following compensation:  Mr.
Bennett's  compensation consists of $16,000 per year, payable quarterly within 5
days of the start of the  quarter,  and 5,000  warrants of common  stock with an
exercise  price of $3.32 per share;  Mr. Zhang and Mr. Dong are each entitled to
RMB40,000 annually, payable quarterly within 5 days of the start of the quarter.

The following table provides  compensation  information for the period indicated
with  respect  to the person who  served as our  president  for the years  ended
December 31, 2007 and 2006 (collectively,  the "Named Executive  Officers").  No
other executive officers received  compensation in excess of $100,000 during the
fiscal years ended December 31, 2007 and 2006.

SUMMARY COMPENSATION TABLE


-------------------------------------------------------- ------------------------------------------- ---------------
                                                                          Long Term Compensation
-------------------------------------------------------- ------------------------------------------- ---------------
                               Annual Compensation                      Awards             Payouts
------------------- ------ ----------------------------- ------------------------------ ------------ ---------------
                                                                                               
        (a)           (b)    (c)     (d)       (e)               (f)            (g)          (h)          (i)
      Name and       Year   Salary  Bonus  Other Annual   Restricted Stock   Securities     LTIP        All Other
      Principal              ($)     ($)   Compensation      Awards ($)      Under-lying   Payouts   Compensation ($)
      Position                                                               Options/        ($)
                                                                             SARs (#)
------------------- ------ ------- ------ -------------- ----------------- ------------ ------------ ---------------
(1) Zhilin Li        2007     0       0          0              0                0           0             0
Director, CEO and    2006     0       0          0              0                0           0             0
President
------------------- ------ ------- ------ -------------- ----------------- ------------ ------------ ---------------



(1) Zhilin Li has been our CEO and  president  since  October  20,  2005.  As of
January 20,  2006,  Zhilin Li was elected as the  director of the  Company.  Her
salary in the fiscal  year ended  December  31, 2007 has not been paid as of the
date of this Prospectus.



                                       42



Stock Option Grants and Exercises

We currently have no option, retirement, pension, or profit sharing programs for
the  benefit of the  directors,  officers or other  employees,  but the board of
directors may recommend adoption of one or more such programs in the future.

Employment, Severance and Change of Control Agreements

Ms. Zhilin Li entered into an Employment Agreement with Helpson,  which provides
that Ms. Li is employed by Helpson to perform executive management.  The term of
her  employment  is from July 1, 2005 to June 30,  2010.  Her  annual  salary is
RMB800,000 or approximately  $100,000.  Mr. Xinhua Wu was employed by Helpson to
act as its CFO.  The term of his  employment  is from  July 1,  2005 to June 30,
2010. His annual salary is RMB500,000 or  approximately  $62,500.  Ms. Jian Yang
was employed by Helpson to act as its Deputy  General  Manager.  The term of her
employment  is from  July 1,  2005  to June  30,  2010.  Her  annual  salary  is
RMB500,000 or approximately $62,500.

Ms.  Zhilin  Li was paid RMB  150,000  as the  compensation  for  acting  as the
Company's  director,  CEO and  president  during the fiscal  year ended June 30,
2005.  Mr.  Xinhua Wu and Ms. Jian Yang received no  compensation  for acting as
officers  during the fiscal year ended June 30, 2005.  Ms. Zhilin Li, Mr. Xinhua
Wu and Ms. Jian Yang have not received any  compensation  for acting as officers
during the fiscal years ended  December 31, 2006 and December 31, 2007 as of the
date of this Prospectus.


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain  information  known to us with respect to
the  beneficial  ownership  of our common  stock as of June 27, 2008 and (i) all
persons who are known to us to be  beneficial  owners of five percent or more of
the common stock,  (ii) each of our Directors,  and (iii) all current  Directors
and executive officers as a group.



                                       43


                                        SHARES
        NAME AND ADDRESS OF           BENEFICIALLY        PERCENT OF
        BENEFICIAL OWNER (1)            OWNED             CLASS OWNED

       Named Executive Officers
          and Directors
            Zhilin Li                 10,000,000            23.65%

       Beneficial Owners of Five
         Percent or More
          Heung Mei Tsui              10,812,651             25.57%
           Jian Yang                   2,278,815              5.39%

       Total Shares Owned by          23,091,466             54.62%
        Persons Named Above

(1) The address of Ms. Li and Ms. Tsui is 2nd Floor, No.17, Jinpan Road, Haikou,
Hainan Province,  China. The address of Ms. Yang is 1 Haoyuan ST, RM 5B, Blog 7,
Asia Luxury Garden, Haikou, Hainan Province, China.

Beneficial  ownership  is  determined  in  accordance  with  the  rules  of  the
Securities and Exchange  Commission and includes voting or investment power with
respect to the securities.

Unless otherwise indicated by footnote, the persons named in the table have sole
voting  and sole  investment  power with  respect to all shares of common  stock
shown as  beneficially  owned  by  them,  subject  to the  applicable  community
property laws.  Percentage of beneficial ownership is based on 42,278,938 shares
of our common stock outstanding as of June 27, 2008.


                            SELLING SECURITY HOLDERS

We have prepared  this  Prospectus  to allow the selling  stockholders  or their
pledgees,  donees,  transferees or other  successors in interest,  to sell up to
6,450,000  shares of our common  stock.  All of the common stock offered by this
Prospectus is being offered by the selling stockholders for their own accounts.

The following tables set forth:

o    the name of the selling stockholders,

o    the number of shares of our  common  stock  that the  selling  stockholders
     beneficially  owned prior to the  offering  for resale of the shares  under
     this Prospectus,

o    the number of shares of our common stock that may be offered for resale for
     the account of the selling stockholders under this prospectus, and



                                       44




o    the number and percentage of shares of our common stock to be  beneficially
     owned by the selling  stockholders  after the offering of the resale shares
     (assuming  all of  the  offered  resale  shares  are  sold  by the  selling
     stockholders).

Beneficial  ownership is determined in accordance  with the rules of the SEC and
generally includes voting or investment power with respect to outstanding voting
securities,  as well as any voting  securities which the person has the right to
acquire  within 60 days,  through the  conversion or exercise of any security or
other  right.  The  information  as to the number of shares of our common  stock
owned by each  selling  security  holder is based upon our books and records and
the information provided by our transfer agent.

We may amend or  supplement  this  prospectus,  from time to time, to update the
disclosure  set  forth  in the  table.  Because  the  selling  security  holders
identified  in the table may sell some or all of the shares  owned by them which
are included in this prospectus,  and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares, no
estimate  can be given as to the number of shares  available  for resale  hereby
that will be held by the  selling  security  holders  upon  termination  of this
offering. We have,  therefore,  assumed for the purposes of the following table,
that the selling security holders will sell all of the shares owned beneficially
by them,  which  are  covered  by this  prospectus,  but will not sell any other
shares of our common stock that they presently own.

--------------------------------------  -----------------------  --------------------  -------------------------
                                         Number of Shares of      Number of Shares      Shares of Common Stock
                Name                         Common Stock         Offered Pursuant        Beneficially Owned
                                          Beneficially Owned     to this Prospectus      After the Offering *
                                        Prior to the Offering
--------------------------------------  -----------------------  --------------------  -------------------------
                                                                                          Number      Percent
--------------------------------------  -----------------------  --------------------  ------------- -----------
                                                                                                  
--------------------------------------  -----------------------  --------------------  ------------- -----------
Pope Investments LLC (1)                      2,500,000               2,500,000             0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Guerrilla Partners, LP (2)                     609,375                 609,375              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Hua-Mei 21st Century Partners, LP (3)          937,500                 937,500              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Guerrilla IRA Partners, LP (4)                  15,625                 15,625               0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Lake Street Fund, L.P. (5)                     781,250                 781,250              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Gregory Cook Wedbush  Morgan Sec Inc.           15,625                 15,625               0            0%
CTDN/ IRA Contributory 1/16/02 (6)
--------------------------------------  -----------------------  --------------------  ------------- -----------
Fred  L.  Astman  Wedbush  Securities
Inc  Cust/ IRA R/O  Holding  10/13/92          375,000                 375,000              0            0%
(7)
--------------------------------------  -----------------------  --------------------  ------------- -----------
Joseph  Anthony  Cardaropoli  Wedbush
Morgan  Securities CTDN/ IRA Rollover           15,625                 15,625               0            0%
1/12/06 (8)
--------------------------------------  -----------------------  --------------------  ------------- -----------
John  Peter  Selda   Wedbush   Morgan
Securities     Inc.     CTDN/     IRA           62,500                 62,500               0            0%
Contributory 08/27/96 (9)
--------------------------------------  -----------------------  --------------------  ------------- -----------
Heller Capital Investments, LLC (10)           250,000                 250,000              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Chestnut Ridge Partners, LP (11)               187,500                 187,500              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------



                                       45


Kensington Partners, L.P. (12)                 178,125                 178,125              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Bald Eagle Fund, Ltd. (13)                      9,375                   9,375               0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Straus Partners, L.P. (14)                     112,500                 112,500              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Straus-GEPT Partners, L.P. (15)                 75,000                 75,000               0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Sandor Capital Master Fund, L.P. (16)           62,500                 62,500               0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
MidSouth Investor Fund LP (17)                  62,500                 62,500               0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
FirsTrust Group, Inc. (18)                     150,000                 150,000              0            0%
--------------------------------------  -----------------------  --------------------  ------------- -----------
Hayden Communications  International,           50,000                 50,000               0            0%
Inc. (19)
--------------------------------------  -----------------------  --------------------  ------------- -----------
TOTAL SHARES OFFERED                          6,450,000               6,450,000
--------------------------------------  -----------------------  --------------------  ------------- -----------


*    Assumes  that all shares of common stock  registered  will be sold and that
     all shares of common stock underlying warrants will be issued and sold.

(1)  Includes (a)  2,000,000  shares of our common  stock  purchased in the 2008
     Private Placement; and (b) 500,000 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(2)  Includes  (a)  487,500  shares of our common  stock  purchased  in the 2008
     Private Placement; and (b) 121,875 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(3)  Includes  (a)  750,000  shares of our common  stock  purchased  in the 2008
     Private Placement; and (b) 187,500 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(4)  Includes  (a)  12,500  shares of our  common  stock  purchased  in the 2008
     Private  Placement;  and (b) 3,125 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(5)  Includes  (a)  625,000  shares of our common  stock  purchased  in the 2008
     Private Placement; and (b) 156,250 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(6)  Includes  (a)  12,500  shares of our  common  stock  purchased  in the 2008
     Private  Placement;  and (b) 3,125 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(7)  Includes  (a)  300,000  shares of our common  stock  purchased  in the 2008
     Private Placement;  and (b) 75,000 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(8)  Includes  (a)  12,500  shares of our  common  stock  purchased  in the 2008
     Private  Placement;  and (b) 3,125 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(9)  Includes  (a)  50,000  shares of our  common  stock  purchased  in the 2008
     Private Placement;  and (b) 12,500 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(10) Includes  (a)  200,000  shares of our common  stock  purchased  in the 2008
     Private Placement;  and (b) 50,000 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(11) Includes  (a)  150,000  shares of our common  stock  purchased  in the 2008
     Private Placement;  and (b) 37,500 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.



                                       46


(12) Includes  (a)  142,500  shares of our common  stock  purchased  in the 2008
     Private Placement;  and (b) 35,625 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(13) Includes (a) 7,500 shares of our common stock purchased in the 2008 Private
     Placement;  and (b) 1,875 shares of our common stock issuable upon exercise
     of warrants with an exercise price of $2.80 per share purchased in our 2008
     Private Placement.
(14) Includes  (a)  90,000  shares of our  common  stock  purchased  in the 2008
     Private Placement;  and (b) 22,500 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(15) Includes  (a)  60,000  shares of our  common  stock  purchased  in the 2008
     Private Placement;  and (b) 15,000 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(16) Includes  (a)  50,000  shares of our  common  stock  purchased  in the 2008
     Private Placement;  and (b) 12,500 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(17) Includes  (a)  50,000  shares of our  common  stock  purchased  in the 2008
     Private Placement;  and (b) 12,500 shares of our common stock issuable upon
     exercise of warrants with an exercise price of $2.80 per share purchased in
     our 2008 Private Placement.
(18) Includes (a) 75,000  shares of our common stock  issuable  upon exercise of
     warrants with an exercise price of $2.80 per share and (b) 75,000 shares of
     our common stock  issuable upon exercise of warrants with an exercise price
     of $3.60 per share.  FirsTrust Group, Inc. received the warrants as part of
     the  compensation  for the  management  consulting  and  advisory  services
     provided to us by its wholly owned subsidiary, FirsTrust China Ltd.
(19) Includes (a) 25,000  shares of our common stock  issuable  upon exercise of
     warrants with an exercise price of $3.00 per share and (b) 25,000 shares of
     our common stock  issuable upon exercise of warrants with an exercise price
     of $3.50 per share. Hayden Communications International,  Inc. received the
     warrants as part of the compensation for its consulting services.

None  of  the  selling   stockholders  are   broker-dealers   or  affiliates  of
broker-dealers.  None of the selling  stockholders has, or within the past three
years has had, any position,  office or other material  relationship  with us or
any of our  predecessors  or affiliates,  other than as described  previously in
this section.

We will not  receive  any  proceeds  from the resale of the common  stock by the
selling stockholders.  To the extent the warrants are exercised on a cash basis,
we will receive the  exercise  price of those  warrants.  We have agreed to bear
expenses incurred by the selling stockholders that relate to the registration of
shares being  offered and sold by the selling  stockholders,  including  the SEC
registration  fee and legal,  accounting,  printing  and other  expenses of this
offering.


                            DESCRIPTION OF SECURITIES

The descriptions in this section and in other sections of this Prospectus of our



                                       47


securities  and various  provisions of our Restated and Amended  Certificate  of
Incorporation  and our  Restated  and  Amended  Bylaws  are  limited  solely  to
descriptions of the material terms of our securities,  Articles of Incorporation
and Bylaws.  Our Amended and Restated  Certificate of Incorporation  and Amended
and Restated Bylaws have been filed with the SEC as exhibits to our registration
statement of which this Prospectus forms a part.

Common Stock

The  authorized  capital stock of the Company  consists of 60,000,000  shares of
common stock, $0.001 par value per share (the "Common Stock"). As of the date of
this Prospectus, approximately 42,278,938 shares of Common Stock were issued and
outstanding. The holders of our Common stock are entitled to equal dividends and
distributions per share with respect to the common stock when and if declared by
the Board of Directors from funds legally available therefore.  No holder of any
shares of our Common  stock has a preemptive  right to subscribe  for any of our
securities.  Upon  liquidation,  dissolution,  or  winding  up of us,  and after
payment of  creditors  and  preferred  stockholders,  the assets will be divided
pro-rata  on a  share-for-share  basis among the holders of the shares of Common
Stock.  All  shares of Common  Stock now  outstanding  are fully  paid,  validly
issued, and non-assessable.

Each share of Common  Stock is entitled to one vote with respect to the election
of any  director or any other  matter upon which  stockholders  are  required or
permitted  to vote.  Holders of the Common Stock do not have  cumulative  voting
rights,  so the holders of more than 50% of the combined  shares  voting for the
election of  directors  may elect all of the  directors if they choose to do so,
and, in that  event,  the  holders of the  remaining  shares will not be able to
elect any members to the board of directors.

Warrants

In the 2007 Private Placement,  we issued to 17 accredited  investors three-year
warrants to purchase an aggregate  of 1,252,941  shares of our common stock with
an exercise price of $2.38 per share. In December 2007, we received  proceeds of
$119,000  upon the  exercise of warrants  to  purchase  50,000  shares of common
stock.  The remaining  warrants  issued in conjunction  with the offering to buy
1,202,941 shares of common stock have not been exercised at December 31, 2007.

In the 2008 Private Placement,  we issued to 17 accredited  investors three-year
warrants to purchase an aggregate  of 1,250,000  shares of our common stock with
an exercise price of $2.80 per share.

On June 24,  2008,  the  Company  issued to  FirsTrust  Group,  Inc.  three-year
warrants to purchase  75,000 shares of the  Company's  common stock at $2.80 per
share and three-year  warrants to purchase 75,000 shares of the Company's common
stock  at  $3.60  per  share.  The  Company  issued  these  warrants  as  equity
compensation  under the  Consulting  Agreement and the  Supplementary  Agreement
entered  into between the Company and  FirsTrust  China Ltd.  (the  wholly-owned
subsidiary of FirsTrust Group, Inc.).



                                       48


On the same date,  the Company  issued to Hayden  Communications  International,
Inc. three-year warrants to purchase 25,000 shares of the Company's common stock
at $3.00 per share and  three-year  warrants  to purchase  25,000  shares of the
Company's  common stock at $3.50 per share. The Company issued these warrants as
equity  compensation under the Investor Relations  Consulting  Agreement entered
into between the Company and Hayden Communications International, Inc.

Shares Eligible for Future Sale

On June 27, 2008, 42,278,938 shares of our common stock were outstanding. Of the
total  outstanding  shares,  10,384,351  shares of common stock are  immediately
eligible  for  sale  in  the  public  market  without   restriction  or  further
registration  under the  Securities  Act.  All other  outstanding  shares of our
common stock are "restricted securities" as such term is defined under Rule 144,
in that such shares were issued in private  transactions  not involving a public
offering  and may  not be sold in the  absence  of  registration  other  than in
accordance with Rules 144, 144(k),  or 701 promulgated  under the Securities Act
or another exemption from registration.

In  general,  under Rule 144 as  currently  in effect,  a person,  including  an
affiliate,  who has beneficially  owned shares for at least one year is entitled
to sell, within any three-month period commencing 90 days after the date of this
Prospectus,  a number of shares  that does not exceed the greater of one percent
of the then outstanding shares of our common stock or the average weekly trading
volume in our common stock during the four calendar weeks  preceding the date on
which  notice  of such  sale is  filed,  subject  to  various  restrictions.  In
addition,  a person  who is not  deemed  to have  been an  affiliate  of ours at
anytime during the 90 days preceding a sale and who has  beneficially  owned the
shares  proposed  to be sold for at least two years  would be  entitled  to sell
those  shares under Rule 144(k)  without  regard to the  requirements  described
above. To the extent that shares were acquired from an affiliate,  such person's
holding  period for the purpose of affecting a sale under Rule 144  commences on
the date of transfer from the affiliate.

Future Sales of  substantial  amounts of our common  stock under Rule 144,  this
Prospectus, or otherwise,  could adversely affect the prevailing market price of
our common  stock and could  impair our  ability to raise  capital  through  the
future sale of our securities.

Transfer Agent and Registrar

The Transfer  Agent and Registrar  for our common stock is  Securities  Transfer
Corporation,  2591  Dallas  Parkway,  Suite  102,  Frisco,  Texas  75234 and its
telephone number is 469.633.0100.


                              PLAN OF DISTRIBUTION

We are  registering a total of 6,450,000  shares of our common stock,  including
1,450,000 shares of common stock issuable upon exercise of outstanding warrants,
that are being offered by the selling stockholders.  As used in this Prospectus,
"selling stockholders" includes the pledgees,  donees, transferees or others who
may later hold the selling stockholders'  interests in the common stock. We will



                                       49


pay the  costs  and fees of  registering  the  common  shares,  but the  selling
stockholders  will pay any brokerage  commissions,  discounts or other  expenses
relating to the sale of the common stock.  We will not receive the proceeds from
the sale of the common  stock by the  selling  stockholders.  We will,  however,
receive  proceeds  from the  exercise of  warrants to purchase  shares of common
stock.

The   selling   stockholders   and  any  of  their   pledgees,   assignees   and
successors-in-interest  may, from time to time,  sell any or all of their shares
of common stock on any stock exchange,  market, or trading facility on which the
shares  are traded or in private  transactions.  These  sales may be at fixed or
negotiated  prices.  The  selling  stockholders  may  use any one or more of the
following methods when selling shares:

     -  Ordinary   brokerage   transactions   and   transactions  in  which  the
broker-dealer solicits purchasers;
     - Block trades in which the  broker-dealer  will attempt to sell the shares
as agent but may  position  and  resell a portion of the block as  principal  to
facilitate the transaction;
     - Purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
     - An exchange  distribution  in accordance with the rules of the applicable
exchange;
     - Privately negotiated transactions;
     -  Broker-dealers  may  agree  with  the  selling  stockholders  to  sell a
specified number of such shares at a stipulated price per share;
     - A combination of any such methods of sale; and
     - Any other method permitted pursuant to applicable law.

The  selling  stockholders  may  also  sell  shares  under  Rule 144  under  the
Securities Act, if available, rather than under this Prospectus.  Broker-dealers
engaged by the selling  stockholders  may arrange for other  brokers-dealers  to
participate in sales.  Broker-dealers may receive  commissions or discounts from
the  selling  stockholders  (or,  if any  broker-dealer  acts as  agent  for the
purchaser  of shares,  from the  purchaser)  in amounts  to be  negotiated.  The
selling  stockholders  do not expect these  commissions  and discounts to exceed
what is customary in the types of transactions involved.

The  selling  stockholders  may from  time to time  pledge  or grant a  security
interest in some or all of the shares of common stock or warrants  owned by them
and,  if they  default in the  performance  of their  secured  obligations,  the
pledges,  or secured  parties may offer and sell the shares of common stock from
time to time under this  Prospectus,  or under an amendment  to this  Prospectus
under Rule  424(b)(3)  or other  applicable  provision  of the  Securities  Act,
amending the list of selling stockholders to include the pledgee, transferee, or
other successors in interest as selling stockholders under this Prospectus.

                                  LEGAL MATTERS

The validity of the securities  offered by this  Prospectus  will be passed upon
for us by King & Wood LLP.



                                       50


                                    EXPERTS

Our  financial  statements  as of and for the years ended  December 31, 2007 and
2006 included in this prospectus have been audited by Hansen, Barnett & Maxwell,
P.C.,  independent  registered  public  accounting  firm,  as indicated in their
report with  respect  thereto,  and have been so  included in reliance  upon the
report of such firm  given on their  authority  as  experts  in  accounting  and
auditing.


           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                            AND FINANCIAL DISCLOSURE

None.

                    WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have  filed  with the SEC a  registration  statement  on Form S-1  under  the
Securities  Act in  connection  with the  offering  of the  common  stock by the
selling  stockholders.  This  Prospectus,  which  is  part  of the  registration
statement,  does not contain all of the information included in the registration
statement.  Some information is omitted and you should refer to the registration
statement and its exhibits.  With respect to references  made in this Prospectus
to any contract,  agreement or other document of ours,  such  references are not
necessarily  complete  and you  should  refer to the  exhibits  attached  to the
registration  statement  for copies of the actual  contract,  agreement or other
document.

We are subject to the informational  requirements of the Securities Exchange Act
of  1934  which  requires  us  to  file  reports,  proxy  statements  and  other
information  with the Securities and Exchange  Commission.  Such reports,  proxy
statements and other information may be inspected at public reference facilities
of the SEC at 100 F Street N.E. Washington,  D.C. 20549. Copies of such material
can be  obtained  from the Public  Reference  Section of the SEC at 100 F Street
N.E.  Washington,  D.C.  20549 at prescribed  rates.  Because we file  documents
electronically  with the SEC, you may also obtain this  information  by visiting
the SEC's internet website at http://www.sec.gov.









                                       51




                                      F-25
                           CHINA PHARMA HOLDINGS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                    CONTENTS

Consolidated Balance Sheets for March 31, 2008 (Unaudited)
and December 31, 2007 (Restated)                                             F-2

Consolidated Statements of Operations (Unaudited) for the Three Months
Ended March 31, 2008 and March 31, 2007                                      F-3


Consolidated  Statements of Cash Flows (Unaudited) for the Three Months
Ended March 31, 2008 and March 31, 2007                                      F-4

Notes to Unaudited Consolidated Financial Statements                         F-5


                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006


Report of Independent Registered Public Accounting Firm                     F-11

Consolidated Financial Statements:

Consolidated Balance Sheets                                                 F-12

Consolidated Statements of Operations                                       F-13

Consolidated Statement of Stockholders' Equity                              F-14

Consolidated Statements of Cash Flows                                       F-15

Notes to Consolidated Financial Statements                                  F-16



                                      F-1




                             CHINA PHARMA HOLDINGS, INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (unaudited)

                                                                    March 31,    December 31,
                                                                      2008          2007
                                                                   -----------   -----------
                                                                                 (Restated)
                                                                           
ASSETS
Current Assets:
       Cash and cash equivalents                                   $   682,017   $ 1,830,335
       Trade accounts receivable, less allowance for doubtful
             accounts of $3,019,930 and $2,440,852, respectively    24,804,992    18,572,976
       Other receivables, less allowance for doubtful
             accounts of $64,230 and $43,908, respectively             476,749       413,596
      Advances to suppliers                                          1,568,111     2,757,320
      Inventory                                                     14,810,192    14,448,771
                                                                   -----------   -----------
Total Current Assets                                                42,342,061    38,022,998
                                                                   -----------   -----------

Non-current Assets:
     Property and equipment, net of accumulated depreciation of
        $1,150,987 and $1,003,802, respectively                      2,636,030     2,625,216
    Intangible assets, net of accumulated amortization of
       $291,809 and $221,715, respectively                           2,515,356     2,063,252
   Advances for purchase of intangible assets                        2,801,633       807,345
   Deferred tax assets                                                 195,303       187,509
                                                                   -----------   -----------
Total Non-current Assets                                             8,148,322     5,683,322
                                                                   -----------   -----------
TOTAL ASSETS                                                       $50,490,383   $43,706,320
                                                                   -----------   -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
    Trade accounts payable                                         $   590,722   $   297,299
    Accrued expenses                                                   265,008       261,301
    Accrued taxes payable                                            1,078,850       311,009
   Other payables                                                       42,521        86,161
    Advances from customers                                            359,646       261,583
   Short-term notes payable                                          2,420,894     2,693,428
                                                                   -----------   -----------
Total Current Liabilities                                            4,757,641     3,910,781
                                                                   -----------   -----------
    Research and development commitments                                35,601        34,181
                                                                   -----------   -----------
Total Liabilities                                                    4,793,242     3,944,962
                                                                   -----------   -----------
Stockholders' Equity:
     Common stock, $0.001 par value, 60,000,000 shares
          authorized, 37,278,938 shares issued and outstanding          37,279        37,279
    Additional paid-in capital                                      11,678,606    11,678,606
    Foreign currency translation adjustment                          4,584,546     2,839,304
    Retained earnings                                               29,396,710    25,206,169
                                                                   -----------   -----------
Total Stockholders' Equity                                          45,697,141    39,761,358
                                                                   -----------   -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $50,490,383   $43,706,320
                                                                   -----------   -----------




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



                                      F-2



                              CHINA PHARMA HOLDINGS, INC.
                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               AND COMPREHENSIVE INCOME
                                      (unaudited)

                                                                      For the three months
                                                                        ended March 31,
                                                                      2008            2007
                                                                  ------------    ------------
Revenue                                                           $ 11,717,045    $  7,233,768
Cost of revenue                                                      5,909,768       3,934,849
                                                                  ------------    ------------

Gross profit                                                         5,807,277       3,298,919
                                                                  ------------    ------------

Operating expenses:
   Selling expenses                                                    337,792         147,883
   General and administrative                                          815,793       1,306,086
                                                                  ------------    ------------
Total operating expenses                                             1,153,585       1,453,969
                                                                  ------------    ------------

Income from operations                                               4,653,692       1,844,950
                                                                  ------------    ------------

Non-operating income (expenses):
   Interest income                                                        --            13,775
   Interest expense                                                    (45,273)        (56,899)
   Other income                                                           --           572,213
                                                                  ------------    ------------
Total non-operating income (expense)                                   (45,273)        529,089
                                                                  ------------    ------------

Income before taxes                                                  4,608,419       2,374,039
Income tax expense                                                     417,878            --
                                                                  ------------    ------------
Net income                                                        $  4,190,541    $  2,374,039
                                                                  ------------    ------------
Comprehensive income - foreign currency translation adjustments      1,745,242         216,416
                                                                  ------------    ------------
Comprehensive income                                              $  5,935,783    $  2,590,455
                                                                  ------------    ------------

Basic and Diluted Earnings Per Share                              $       0.11    $       0.07
                                                                  ------------    ------------
Basic and Diluted Weighted Average Shares Outstanding               37,278,938      36,337,958
                                                                  ------------    ------------



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


                                      F-3


                      CHINA PHARMA HOLDINGS, INC.
                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (unaudited)

                                                     For the three months ended March 31,
                                                            2008            2007
                                                         -----------    -----------
                                                                        (Restated)
Cash Flows from Operating Activities:
     Net income                                          $ 4,190,541    $ 2,374,039
     Depreciation and amortization                           162,779        100,063
     Gain on sale of intangibles                                --         (569,398)
     Changes in assets and liabilities:
        Trade accounts receivable                         (5,343,190)    (1,728,236)
        Other receivables                                    (44,977)      (739,783)
        Advances to suppliers                              1,275,939     (1,095,219)
        Inventory                                            234,072     (1,092,813)
        Deferred offering costs                                 --           59,743
        Trade accounts payable                               275,053        247,713
        Accrued expenses                                      (7,001)        27,960
        Accrued taxes payable                                738,767         78,756
        Other payables                                       (46,030)        88,814
        Advances from customers                               85,325          6,571
                                                         -----------    -----------
Net Cash from Operating Activities                         1,521,278     (2,241,790)
                                                         -----------    -----------

Cash Flows from Investing Activities:
        Purchase of property and equipment                    (6,994)        (2,360)
        Proceeds from the sale of intangibles                   --           38,453
        Purchase of intangible assets                       (418,079)          --
        Advances for purchase of intangible assets        (1,918,791)       836,404
                                                         -----------    -----------
Net Cash from Investing Activities                        (2,343,864)       872,497
                                                         -----------    -----------

Cash Flows from Financing Activities:
       Proceeds from sale of common stock and warrants          --        3,797,183
       Payments of short term notes payable                 (376,271)          --
       Related party payables/receivables                       --         (138,860)
                                                         -----------    -----------
Net Cash from Financing Activities                          (376,271)     3,658,323
                                                         -----------    -----------

Effect of Exchange Rate Changes on Cash                       50,539          5,247
                                                         -----------    -----------
Net Change in Cash                                        (1,148,318)     2,294,277
                                                         -----------    -----------
Cash and Cash Equivalents at Beginning of Period           1,830,335        656,441
                                                         -----------    -----------
Cash and Cash Equivalents at End of Period               $   682,017    $ 2,950,718
                                                         -----------    -----------


Supplemental Cash Flow Disclosure:
Cash paid for interest                                   $    83,515    $    56,899
Cash paid for income taxes                                      --             --





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



                                      F-4



                           CHINA PHARMA HOLDINGS, INC.
              UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2008
                                   (unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying  unaudited condensed consolidated financial statements of China
Pharma Holdings,  Inc. (the Company) and its subsidiaries were prepared pursuant
to the rules and  regulations  of the  United  States  Securities  and  Exchange
Commission.  Certain  information  and note  disclosures  normally  included  in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations.  Management of the Company (Management)  believes
that the following  disclosures are adequate to make the  information  presented
not misleading. These condensed consolidated financial statements should be read
in conjunction with the audited consolidated  financial statements and the notes
thereto included in the Company's Form 10-KSB report for the year ended December
31, 2007.

These  unaudited  condensed   consolidated   financial  statements  reflect  all
adjustments  (consisting  only of normal  recurring  adjustments)  that,  in the
opinion  of  Management,  are  necessary  to  present  fairly  the  consolidated
financial  position  and  results of  operations  of the Company for the periods
presented.  Operating  results for the three months ended March 31, 2008 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2008.

Organization - Onny  Investment  Limited (Onny) was  incorporated in the British
Virgin  Islands on  January  12,  2005 and was a  development  stage  enterprise
through June 15, 2005. On June 16, 2005,  Onny  acquired all of the  outstanding
shares of Hainan  Helpson  Medical &  Biotechnology  Co., Ltd, a privately  held
Chinese joint venture (Helpson) and emerged from the development stage.

On October 19, 2005, Onny was reorganized as a wholly owned  subsidiary of China
Pharma Holdings, Inc., formerly TS Electronics, Inc. (the Company).

Nature of  Operations - Helpson  manufactures  and markets  several  Western and
Chinese medicines sold mainly to hospitals and private retailers in the People's
Republic of China  (PRC),  through its  marketing  department  located in Hainan
Province. There are also nine other offices, with sales representatives in other
provinces and cities  throughout the PRC.  Helpson's other operating  activities
include biochemical products, health products, and cosmetics.

Accounting  Estimates - The  preparation  of 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 the disclosures of contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods.  Actual results could differ
from those estimates.

Basic and Diluted  Earnings  per Common  Share - Basic and diluted  earnings per
common share are computed by dividing net income by the weighted-average  number
of common shares outstanding. As of March 31, 2008 and 2007 potentially dilutive
securities  includes  warrants  outstanding to purchase a total of 1,202,941 and
1,252,941  shares,  respectively,  of the Company's  common stock at an exercise
price of $2.38 per share.  These have not been  included in the  computation  of
earnings per share as their effect is antidilutive.



                                      F-5


Recently  Enacted  Accounting  Standards  - In  September  2006,  the  Financial
Accounting  Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements,
which defines fair value,  establishes  a framework for measuring  fair value in
generally  accepted  accounting  principles and expands  disclosures  about fair
value  measurements.  SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007, and interim  periods  within those fiscal years.  In February
2008, the FASB issued FASB Staff Position (FSP FIN) No. 157-2 which extended the
effective date for certain  nonfinancial assets and nonfinancial  liabilities to
fiscal years  beginning after November 15, 2008. The adoption of the portions of
SFAS No.  157 that  were not  postponed  by (FSP  FIN) No.  157-2 did not have a
material impact on our consolidated  financial statements.  The Company does not
expect the adoption of the postponed portions of SFAS No. 157 to have a material
impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R),  Business  Combinations,  and
SFAS No. 160,  Noncontrolling  Interests in Consolidated  Financial  Statements.
SFAS No.  141(R)  requires  an  acquirer  to  measure  the  identifiable  assets
acquired,  the  liabilities  assumed  and any  non-controlling  interest  in the
acquiree at their fair values on the  acquisition  date, with goodwill being the
excess value over the net identifiable  assets acquired.  SFAS No. 160 clarifies
that a non-controlling  interest in a subsidiary should be reported as equity in
the consolidated financial statements, consolidated net income shall be adjusted
to  include  the net  income  attributed  to the  non-controlling  interest  and
consolidated comprehensive income shall be adjusted to include the comprehensive
income attributed to the non-controlling  interest.  The calculation of earnings
per share  will  continue  to be based on  income  amounts  attributable  to the
parent. SFAS No. 141(R) and SFAS No. 160 are effective for financial  statements
issued for fiscal years  beginning  after  December 15, 2008.  Early adoption is
prohibited. SFAS No. 141(R) and SFAS No. 160 are not expected to have a material
impact on our results of operations or financial position.

Restatement  of Financial  Statements -  Subsequent  to March 2008,  the Company
realized that the December 31, 2007 consolidated  financial statements needed to
be revised to correct an  overstatement  of advances  paid to  suppliers  in the
amount of  $724,628,  an  overstatement  of other  receivables  in the amount of
$82,717,  and an  understatement of advance for purchase of intangible assets in
the amount of $807,345. The Company concluded that advances made for purchase of
intangible  assets should be treated as a long-term  asset.  This correction was
not considered  material in accordance  with SAB 108 for the year ended December
31, 2007 but is considered  significant.  As a result, the Company corrected the
financial  statements for December 31, 2007. The corrected  consolidated balance
sheet is included in these financial statements.  The correction of the December
31, 2007  financial  statements  had no effect on the  previously  reported  net
income. The effect of the restatement was as follows:





                                      F-6




                                                          Reported      Restatement     As Restated
                                                        ------------    ------------    ------------
                                                                                     
Consolidated Balance Sheet as of December 31, 2007
Other receivables                                       $    496,313    $    (82,717)   $    413,596
Advances to suppliers                                      3,481,948        (724,628)      2,757,320
Total Current Assets                                      38,830,343        (807,345)     38,022,998
Advances for purchase of intangible assets                      --           807,345         807,345
                                                        ------------    ------------    ------------
TOTAL ASSETS                                            $ 43,706,320    $       --      $ 43,706,320
                                                        ------------    ------------    ------------

Consolidated Statement of Cash Flows
For the year ended December 31, 2007
Other receivables                                       $   (111,660)   $     79,426    $    (32,234)
Advances to suppliers                                     (1,028,119)        853,332        (174,867)
Net Cash provided by Operating Activities                  2,801,898         932,758       3,734,656
Advance for purchase of intangible assets                       --          (932,758)       (932,758)
Net Cash used in Investing Activities                     (1,479,531)       (932,758)     (2,412,289)
                                                        ------------    ------------    ------------
Net Change in Cash                                      $  1,173,894    $       --      $  1,173,894
                                                        ------------    ------------    ------------




NOTE 2 - INVENTORY

Inventory consisted of the following:



                                March 31,           December 31,
                                  2008                  2007
                               -----------          -----------
Raw materials                  $11,770,466          $12,521,536
Work in progress                    62,915               60,404
Finished goods                   2,976,811            1,866,831
                               -----------          -----------
      Total Inventory          $14,810,192          $14,448,771
                               -----------          -----------




NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:



                                      March 31,       December 31,
                                        2008              2007
                                    -----------       -----------
Permit of land use                  $   401,110       $   385,102
Building                              1,826,439         1,753,547
Plant, machinery and equipment        1,397,780         1,341,996
Motor vehicle                            44,818            37,193
Office equipment                         92,945            88,210
Construction in progress                 23,925            22,970
                                    -----------       -----------
Total                                 3,787,017         3,629,018
Less: accumulated depreciation       (1,150,987)       (1,003,802)
                                    -----------       -----------
Property and Equipment, net         $ 2,636,030       $ 2,625,216
                                    -----------       -----------



                                      F-7



Depreciation  is computed on a  straight-line  basis over the  estimated  useful
lives of the assets as follows:


     Asset                                                Life - years
     -----                                                ------------
Permit of land use                                          40 - 70
Building                                                    20 - 35
Plant, machinery and equipment                                 10
Motor vehicle                                                5 - 10
Office equipment                                               5


For the three  months  ended March 31, 2008 and 2007,  depreciation  expense was
$103,203 and $93,307, respectively.

NOTE 4 - INTANGIBLE ASSETS

Intangible  assets  represent  the  costs  on  patents,  trademarks,   licenses,
techniques and formulas.  Intangible  assets have a  weighted-average  remaining
useful life of approximately  9.25 years.  Amortization of intangible assets was
$59,576  and  $6,756  for the  three  months  ended  March  31,  2008 and  2007,
respectively.

In January,  2007 the Company  entered  into an  agreement  to acquire a certain
pharmaceutical  formula  from an  unrelated  party  for  cash  for an  aggregate
purchase price of $427,217.  This has been recorded under the caption Intangible
assets in the accompanying balance sheet as of March 31, 2008.

NOTE 5 - DEBT

Short Term Notes Payable -On July 13, 2007, the Company  entered into a new line
of credit with the bank collateralized by certain land use rights, machinery and
equipment.  The  outstanding  advances  made  under  the  line  of  credit  were
$2,420,894 and $2,324,278 at March 31, 2008 and December 31, 2007, respectively.
The line of credit was renewed  during the first  quarter of 2008 with due dates
of August and September of 2008 and bears interest  payable  monthly at the rate
of 7.84%.

Short Term Notes Payable to Former  Shareholders  - In January 2006, the Company
converted  its dividend  payable of  $4,402,147  into  short-term  notes bearing
interest at a rate of 2.25% per annum.  The final principal  balance of $369,150
was paid in January, 2008. The accrued interest of $215,933 is still outstanding
and is included in accrued liabilities.

NOTE 6 - INCOME TAXES

The Company accounts for its income taxes in accordance with SFAS No. 109, which
requires recognition of deferred tax assets and liabilities and their respective
tax bases and any tax credit carry forwards  available.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

Undistributed  earnings of the Company's  foreign  subsidiary since  acquisition
amounted to approximately $26 million at March 31, 2008. Those earnings, as well
as  the  investment  in  the  subsidiaries  of  approximately  $17  million  are
considered to be indefinitely  reinvested and, accordingly,  no U.S. federal and
state  income  taxes have been  provided  thereon.  Upon  distribution  of those



                                      F-8


earnings in the form of dividends or otherwise,  the Company would be subject to
both U.S.  income taxes  (subject to an adjustment  for foreign tax credits) and
withholding   taxes  payable  to  the  PRC.   Determination  of  the  amount  of
unrecognized  deferred U.S. income tax liability is not practical because of the
complexities associated with its hypothetical calculation; however, unrecognized
foreign  tax  credits  may be  available  to  reduce a portion  of the U.S.  tax
liability.

On March 16,  2007,  the  National  People's  Congress  of China  passed the new
Enterprise Income Tax Law, (EIT Law), and on December 6, 2007, the State Council
of China issued the Implementation Regulations for the EIT Law which took effect
on January 1, 2008. The EIT Law and  Implementation  Regulations  Rules impose a
unified EIT of 25% on all  domestic-invested  enterprises  and Foreign  Invested
Entities, or FIEs, unless they qualify under certain limited exceptions.

The Company is located in a special region, which had a 15% corporate income tax
rate  before  the new EIT  Law.  The new  EIT  Law  abolished  the  preferential
corporate  income tax rate in the special region.  However,  because the Company
was in  existence  prior to the March 16,  2007  China tax law  change,  it will
gradually  transit to the new 25% tax rate over the next five years  starting on
January 1, 2008. The phase-in income tax rate is 18% for 2008, 20% for 2009, 22%
for  2010,  24% for 2011,  and 25% for 2012 and  after.  Also,  the  Company  is
permitted to use their  remaining  tax holiday,  so they will continue to have a
favorable  income tax rate of 50% in effect  during  fiscal 2008 through 2010 as
determined by the PRC government and the regional tax authorities.

As a result of the above changes,  starting from 2008, the Company's  enterprise
income tax rate will be:


                Year                    Enterprise Income Tax Rate
                ----                    --------------------------
                2008                                9%
                2009                                10%
                2010                                11%
                2011                                24%
           2012 and after                           25%


The Company has also  incurred  various  other  taxes,  comprised  primarily  of
business  taxes,   value-added  taxes,  urban  construction   taxes,   education
surcharges and others. Any unpaid amounts are reflected on the balance sheets as
accrued taxes payable.

NOTE 7 - STOCKHOLDERS' EQUITY

The Company has  outstanding  warrants to  purchase an  aggregate  of  1,202,941
shares of Company's  common stock at an exercise  price of $2.38 per share which
expire on January 29, 2010.

NOTE 8 - CONTINGENCIES

Economic  environment  -  Significantly  all of  the  Company's  operations  are
conducted  in  the  PRC,  and  therefore  the  Company  is  subject  to  special
considerations  and  significant  risks not typically  associated with companies
operating in the United States of America.  These risks  include,  among others,
the political,  economic and legal  environments and fluctuations in the foreign
currency  exchange rate. The Company's  results from operations may be adversely
affected by changes in the  political  and social  conditions in the PRC, and by
changes  in  governmental   policies  with  respect  to  laws  and  regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates
and methods of taxation, among other things.



                                      F-9


In addition,  all of the Company's  revenue is denominated in the PRC's currency
of  Renminbi  (RMB),  which  must be  converted  into  other  currencies  before
remittance  out of the PRC. Both the  conversion of RMB into foreign  currencies
and the  remittance of foreign  currencies  abroad  require  approval of the PRC
government.


NOTE 9 - SUBSEQUENT EVENTS


On May 30, 2008 the Company  completed  an offering of Units priced at $2.00 per
Unit consisting of one share of Company common stock and a three-year warrant to
purchase one-fourth of one share of Company common stock at an exercise price of
$2.80 per  share.  The  Company  issued  5,000,000  shares  of common  stock and
three-year  warrants  to  purchase  1,250,000  shares  of  common  stock  to  17
accredited investors for gross proceeds of $10,000,000.  The net proceeds, after
deduction of related offering expenses of $731,062,  amounted to $9,268,938.  In
addition,  the placement agent in the transaction was issued three-year warrants
to purchase  300,000  shares of common  stock at an exercise  price of $2.98 per
share.  The proceeds were allocated to the warrants  issued to the investors and
the  placement  agent based upon their fair values of  $1,090,342  and $249,366,
respectively  and the balance of the proceeds of $8,952,511 was allocated to the
shares of common  stock.  The fair value of the warrants,  determined  using the
Black-Scholes   Option  Pricing  Model,   was  calculated  using  the  following
assumptions:  risk free interest rate of 2.93%,  expected  dividend yield of 0%,
expected volatility of 62.9% and an expected life of 3 years.

The common  shares and the shares  underlying  the  warrants  have  registration
rights, and the Company is required to file a registration  statement  including
said shares with the Securities and Exchange  Commission.  In the event that the
Company  does not file a  registration  statement  within 45 days of the closing
date of the offering,  or the registration  statement is not declared  effective
within the 90 or 120 day time  periods  from the closing  date as defined in the
registration rights agreement,  or if the Company fails to keep the registration
statement  effective,  the  Company  will be  required  to pay a penalty to each
investor equal to one percent (1%) of the purchase price for each 30 day period.
The  Company  estimates  that the  probability  of not filing  the  registration
statement  within the allowed  time period is remote;  therefore  no accrual has
been made for these potential penalties. The Company will evaluate any liability
related to the  effectiveness  date of the registration  statement at the end of
each reporting period.

On June 24, 2008,  the Company  issued  three-year  warrants to purchase  75,000
shares of Company  common  stock at $2.80 per share and  three-year  warrants to
purchase  75,000  shares of the  Company's  common stock at $3.60 per share to a
vendor valued at $90,487.

Also on June 24, 2008, the Company issued three-year warrants to purchase 25,000
shares of Company  common  stock at $3.00 per share and  three-year  warrants to
purchase  25,000  shares of the  Company's  common stock at $3.50 per share to a
vendor valued at $29,554.

The fair values of the warrants  issued on June 24, 2008,  determined  using the
Black-Scholes   Option  Pricing  Model,  were  calculated  using  the  following
assumptions:  risk free interest rate of 3.14%,  expected  dividend yield of 0%,
expected volatility of 61.3% and an expected life of 3 years.




                                      F-10



HANSEN, BARNETT & MAXWELL, P.C.
   A Professional Corporation
  CERTIFIED PUBLIC ACCOUNTANTS
    5 Triad Center, Suite 750
  Salt Lake City, UT 84180-1128
      Phone: (801) 532-2200
       Fax: (801) 532-7944
         www.hbmcpas.com


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and the Stockholders of
China Pharma Holdings, Inc.

We have audited the consolidated  balance sheets of China Pharma Holdings,  Inc.
and subsidiaries as of December 31, 2007 and 2006, and the related  consolidated
statements of operations and comprehensive  income,  stockholders'  equity,  and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion the consolidated  financial  statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of China  Pharma
Holdings,  Inc.  and  subsidiaries  as of December  31,  2007 and 2006,  and the
results  of its  operations  and its cash  flows for the years  then  ended,  in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 1, the accompanying  consolidated financial statements have
been  restated  for the  effects  of  correcting  the  classification  of  other
receivables and advances to suppliers as of December 31, 2007 and 2006.


                                                 HANSEN, BARNETT & MAXWELL, P.C.

Salt Lake City, Utah
March 28,  2008,  except  for Note 1  regarding  the  restatement  of  financial
statements, as to which the date is May 3, 2008



                                      F-11





                           CHINA PHARMA HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                             December 31,  December 31,
                                                                 2007          2006
                                                             -----------   -----------
                                                                     

ASSETS
Current Assets:
Cash and cash equivalents                                    $ 1,830,335   $   656,441
Trade accounts receivable, less allowance for doubtful
accounts of $2,440,852 and $1,562,494, respectively           18,572,976    12,101,979
Other receivables, less allowance for doubtful
accounts of $43,908 and $27,517, respectively                    413,596       355,554
Deferred offering costs                                             --          59,390
Advances to suppliers                                          2,757,320       746,443
Inventory                                                     14,448,771    10,277,887
                                                             -----------   -----------
Total Current Assets                                          38,022,998    24,197,694
                                                             -----------   -----------
Non-current Assets:
Property and equipment, net of accumulated depreciation of
$1,003,802 and $619,645, respectively                          2,625,216     2,725,173
Intangible assets, net of accumulated amortization of
$221,715 and $135,656, respectively                            2,063,252        65,344
Advances for purchase of intangible assets                       807,345     1,509,434
Deferred tax assets                                              187,509        16,736
                                                             -----------   -----------
Total Non-current Assets                                       5,683,322     4,316,687
                                                             -----------   -----------
TOTAL ASSETS                                                 $43,706,320   $28,514,381
                                                             -----------   -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable                                       $   297,299   $   477,291
Accrued expenses                                                 261,301       104,216
Accrued taxes payable                                            311,009       167,419
Other payables                                                    86,161       185,096
Advances from customers                                          261,583       141,871
Accounts payable - related parties                                  --          22,650
Short-term notes payable                                       2,693,428     6,533,649
                                                             -----------   -----------
Total Current Liabilities                                      3,910,781     7,632,192
                                                             -----------   -----------
Research and development commitments                              34,181        31,980
                                                             -----------   -----------
Total Liabilities                                              3,944,962     7,664,172
                                                             -----------   -----------
Stockholders' Equity:
Common stock, $0.001 par value, 60,000,000 shares
authorized, 37,278,938 and 34,723,056 shares issued and
outstanding, respectively                                         37,279        34,723
Additional paid-in capital                                    11,678,606     7,764,979
Foreign currency translation adjustment                        2,839,304       663,871
Retained earnings                                             25,206,169    12,386,636
                                                             -----------   -----------
Total Stockholders' Equity                                    39,761,358    20,850,209
                                                             -----------   -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $43,706,320   $28,514,381
                                                             -----------   -----------




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


                                      F-12



                           CHINA PHARMA HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME


                                                   For the years
                                                 ended December 31,
                                          ----------------------------
                                               2007            2006
                                          ------------    ------------

Revenue                                   $ 33,186,324    $ 21,843,262
Cost of revenue                             17,619,180      11,745,815
                                          ------------    ------------

Gross profit                                15,567,144      10,097,447
                                          ------------    ------------

Operating expenses:
Selling expenses                             1,436,609         260,128
General and administrative                   1,879,306       1,213,828
                                          ------------    ------------
Total operating expenses                     3,315,915       1,473,956
                                          ------------    ------------

Income from operations                      12,251,229       8,623,491
                                          ------------    ------------

Non-operating income (expenses):
Interest income                                 31,805             991
Interest expense                              (237,398)       (145,881)
Other income                                   611,025         108,485
                                          ------------    ------------
Total non-operating income (expense)           405,432         (36,405)
                                          ------------    ------------

Income before taxes                         12,656,661       8,587,086
Income tax benefit                             162,872            --
                                          ------------    ------------
Net income                                $ 12,819,533    $  8,587,086
                                          ------------    ------------
Comprehensive income - foreign currency      2,175,433         563,945
translation adjustments                           --              --
Comprehensive income                      $ 14,994,966    $  9,151,031
                                          ------------    ------------

Earnings Per Share:
Basic                                     $       0.35    $       0.25
Diluted                                   $       0.34    $       0.25
                                          ------------    ------------
Weighted Average Shares Outstanding:
Basic                                       37,009,655      34,723,056
Diluted                                     37,259,909      34,723,056
                                          ------------    ------------




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


                                      F-13


                           CHINA PHARMA HOLDINGS, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                                                Accumulated
                                             Common Stock          Additional      Other                       Total
                                      -------------------------     Paid-in    Comprehensive   Retained     Stockholders'
                                         Shares        Amount       Capital        Income      Earnings        Equity
                                      -----------   -----------   -----------   -----------   -----------   -----------
Balance, December 31, 2005             34,723,056   $    34,723   $ 7,764,979   $    99,926   $ 3,799,550   $11,699,178
Net income for the year                      --            --            --            --       8,587,086     8,587,086
Foreign currency translation
adjustment                                   --            --            --         563,945          --         563,945
                                      -----------   -----------   -----------   -----------   -----------   -----------

Balance, December 31, 2006             34,723,056        34,723     7,764,979       663,871    12,386,636    20,850,209
Shares and warrants issued for cash     2,505,882         2,506     3,794,677          --            --       3,797,183
Exercise of warrants for cash              50,000            50       118,950          --            --         119,000
Net income for the year                      --            --            --            --      12,819,533    12,819,533
Foreign currency translation
adjustment                                   --            --            --       2,175,433          --       2,175,433
                                      -----------   -----------   -----------   -----------   -----------   -----------

Balance, December 31, 2007             37,278,938   $    37,279   $11,678,606   $ 2,839,304   $25,206,169   $39,761,358
                                      -----------   -----------   -----------   -----------   -----------   -----------


















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



                                      F-14


                           CHINA PHARMA HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                  For the years ended December 31,
                                                   ----------------------------
                                                        2007            2006
                                                   ------------    ------------
Cash Flows from Operating Activities:
Net income                                         $ 12,819,533    $  8,587,086
Depreciation and amortization                           422,443         397,001
Gain on sale of intangibles                            (580,922)           --
Changes in assets and liabilities:
Trade accounts receivable                            (5,413,718)     (6,077,526)
Other receivables                                       (32,234)         42,642
Advances to suppliers                                  (174,867)        (61,345)
Inventory                                            (3,325,681)     (4,214,702)
Deferred tax assets                                    (162,872)        115,564
Deferred offering costs                                  60,952            --
Trade accounts payable                                 (204,372)       (219,427)
Accrued expenses                                         73,451          86,265
Accrued taxes payable                                   126,812        (407,744)
Other payables                                           20,558         (71,759)
Advances from customers                                 105,573          87,612
                                                   ------------    ------------
Net Cash from Operating Activities                    3,734,656      (1,736,333)
                                                   ------------    ------------

Cash Flows from Investing Activities:
Purchase of property and equipment                      (51,841)       (182,346)
Proceeds from the sale of intangibles                 1,509,741            --
Purchase of intangible assets                        (2,937,431)         (9,657)
Advances for purchase of intangible assets             (932,758)           --
                                                   ------------    ------------
Net Cash from Investing Activities                   (2,412,289)       (192,003)
                                                   ------------    ------------

Cash Flows from Financing Activities:
Proceeds from sale of common stock and warrants       3,797,183            --
Proceeds from exercise of warrants                      119,000            --
Proceeds from short term notes payable                2,586,252       2,140,943
Payments of short term notes payable                 (6,705,456)           --
Proceeds from loan from shareholder                        --            22,650
Payment of offering costs                                  --           (58,167)
                                                   ------------    ------------
Net Cash Proceeds from Financing Activities            (203,021)      2,105,426
                                                   ------------    ------------

Effect of Exchange Rate Changes on Cash                  54,548          18,131
                                                   ------------    ------------
Net Change in Cash                                    1,173,894         195,221
                                                   ------------    ------------
Cash and Cash Equivalents at Beginning of Period        656,441         461,220
                                                   ------------    ------------
Cash and Cash Equivalents at End of Period         $  1,830,335    $    656,441
                                                   ------------    ------------






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





                                      F-15




                           CHINA PHARMA HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization - Onny  Investment  Limited (Onny) was  incorporated in the British
Virgin  Islands on  January  12,  2005 and was a  development  stage  enterprise
through June 15, 2005. On June 16, 2005,  Onny  acquired all of the  outstanding
shares of Hainan  Helpson  Medical &  Biotechnology  Co., Ltd, a privately  held
Chinese joint venture (Helpson) and emerged from the development stage.

On October 19, 2005, Onny was reorganized as a wholly owned  subsidiary of China
Pharma Holdings,  Inc., formerly TS Electronics,  (Company).  The reorganization
was accomplished by an exchange of Onny's common shares for 25,278,385 shares of
the Company's common stock resulting in a 851-for-1 exchange ratio. In addition,
the prior Onny  convertible  preferred  shareholders  exchanged their shares for
6,944,611 shares of the Company's common stock resulting in a 694-for-1 exchange
ratio.  The  reorganization  of Onny into the Company was  recognized as a stock
split  of the  common  stock  of Onny  and  the  effective  issuance  by Onny of
2,500,060 shares of the Company's common stock in exchange and the assumption of
$4,473  in  liabilities.  This  transaction  was  accounted  for  as  a  reverse
acquisition of the Company and was recognized as a non-monetary exchange.

Nature of  Operations - Helpson  manufactures  and markets  several  Western and
Chinese medicines sold mainly to hospitals and private retailers in The People's
Republic of China (PRC),  through its marketing department located in the Hainan
Province. There are also nine other offices, with sales representatives in other
provinces and cities  throughout the PRC.  Helpson's other operating  activities
include biochemical products, health products, and cosmetics.

Accounting  Estimates - The  preparation  of 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 the disclosures of contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods.  Actual results could differ
from those estimates.

Consolidation and Basis of Presentation - The accompanying  financial statements
have been prepared in accordance with accounting  principles  generally accepted
in the United  States of  America.  The  functional  currency  of the  operating
subsidiaries  in the  PRC is the  Chinese  Yuan  Renminbi  (CNY);  however,  the
accompanying  financial  statements have been expressed in United States Dollars
(USD).  The accompanying  consolidated  balance sheets have been translated into
USD  at  the  exchange  rates   prevailing  at  each  balance  sheet  date.  The
accompanying  consolidated  statements of operations have been translated  using
the average exchange rates prevailing during the periods of each statement.  See
Note 9.

The  accompanying  consolidated  financial  statements  include the accounts and
operations  of the Company and its wholly owned  subsidiaries.  All  significant



                                      F-16


inter-company balances and transactions have been eliminated in consolidation.

Fair Value of Financial  Instruments  - Based on the borrowing  rates  currently
available  to the  Company  for  bank  loans  with  similar  terms  and  average
maturities,  the carrying amounts of notes payable that were outstanding  during
the current  period  approximated  fair value because of either the immediate or
short-term  maturity of these  financial  instruments  or because the underlying
instruments are at interest rates which approximated current market rates.

Cash and cash equivalents - Cash and cash  equivalents  include interest bearing
and non-interest  bearing bank deposits,  money market accounts,  and short-term
certificates  of deposit with original  maturities of three months or less. Cash
deposits  are held at financial  institutions  in the PRC and are not insured by
the FDIC.

Trade  receivables and allowance for doubtful  accounts - Trade  receivables are
carried at original  invoiced  amounts less an allowance for doubtful  accounts.
The allowances for doubtful  accounts are calculated based on detailed review of
certain  individual  customer accounts and an estimation of the overall economic
conditions  affecting  the  Company's  customer  base.  The  Company  reviews  a
customer's credit history before extending credit. If the financial condition of
its customers were to  deteriorate,  resulting in an impairment of their ability
to make payments,  additional  allowances  may be required.  A provision is made
against  accounts  receivable to the extent they are  considered  unlikely to be
collected. It is common practice in the PRC for receivables to extend beyond one
year.  Included in trade  receivables is approximately  $2,002,059 that occurred
more  than one  year  from  December  31,  2007,  but is  estimated  to still be
collectable.

Inventory - Inventories are stated at the lower of cost or net realizable value,
on an average  cost basis.  The method of  determining  inventory  costs is used
consistently from year to year. Allowance for inventory obsolescence is provided
when the market value of certain inventory items are lower than the cost.

Valuation of Long-lived Assets - The carrying values of the Company's long-lived
assets are reviewed  for  impairment  annually or whenever  events or changes in
circumstances  indicate  that  they may not be  recoverable.  When such an event
occurs,  the Company projects the  undiscounted  cash flows to be generated from
the use of the asset and its eventual disposition over the remaining life of the
asset. If projections were to indicate that the carrying value of the long-lived
asset will not be  recovered,  the  carrying  value of the  long-lived  asset is
reduced  by the  estimated  excess  of the  carrying  value  over the  projected
discounted cash flows. There were no such impairments at December 31, 2007.

Property and Equipment - Property and equipment are stated at cost.  Maintenance
and  repairs  are  charged to expense as  incurred  and major  improvements  are
capitalized.  Gains or  losses  on  sales or  retirements  are  included  in the
statement of operations in the period of disposition.

Intangible  Assets  -  Acquisition  costs  on  patents,  trademarks,   licenses,
techniques,  formulas and other  intangibles are capitalized and amortized using
the straight-line  method over their useful lives. For those intangible  assets,
such as patents,  with legal protection over a period,  their useful life is the
protected period. Others that do not have legal protection periods are amortized



                                      F-17


generally  over 5 to 10  years.  The  Company  does  not  capitalize  internally
generated   intangible  assets.  The  Company's  intangible  assets  consist  of
techniques (formulas and manufacturing processes) for medicines.

Advances to Suppliers  and  Advances  from  Customers - The  Company,  as is the
common  practice in the PRC,  will often pay advanced  payments to suppliers for
materials  and receive from  customers  advances for  finished  products.  As of
December  31, 2007 and 2006,  the  advances to  suppliers  were  $2,757,320  and
$746,443,  respectively,  and the  advances  from  customers  were  $261,583 and
$141,871, respectively.

Revenue  Recognition  - The Company  recognizes  revenue when it is realized and
earned. The Company considers revenue realized or realizable and earned when (1)
it has persuasive evidence of an arrangement, (2) delivery has occurred, (3) the
sales  price is fixed or  determinable,  and (4)  collectability  is  reasonably
assured. Delivery does not occur until products have been shipped to the client,
risk of loss has  transferred  to the  client  and  client  acceptance  has been
obtained, client acceptance provisions have lapsed, or the Company has objective
evidence that the criteria  specified in client acceptance  provisions have been
satisfied.  The sales price is not considered to be fixed or determinable  until
all contingencies related to the sale have been resolved.

Cost of Revenues - Cost of revenues includes wages, materials, handling charges,
and other expenses associated with the manufacture and delivery of product.

Research and Development - Research and development expenditures are recorded as
expenses in the period in which they occur.

Retirement  Benefit  Plans  -  The  Company   contributes  to  various  employee
retirement  benefit plans organized by provincial  governments under which it is
required to make monthly contributions to these plans at rates prescribed by the
related provincial  governments.  The provincial governments undertake to assume
the retirement benefit  obligations of all existing and future retired employees
of the Company. Contributions to these plans are charged to expense as incurred.

Advertising  Costs  -  Advertising  costs  are  expensed  when  incurred.  Total
advertising  expense for the years ended December 31, 2007 and 2006 were $10,393
and $3,446, respectively.

Basic and Diluted  Earnings  per Common  Share - Basic and diluted  earnings per
common share are computed by dividing net income by the weighted-average  number
of common  shares  outstanding.  As of December  31, 2007  potentially  dilutive
securities includes warrants outstanding to purchase a total of 1,202,941 shares
of Company  common stock at an exercise  price of $2.38 per share.  There are no
dilutive  securities  outstanding at December 31, 2006. The following table is a
reconciliation  of the numerators and  denominators  used in the  calculation of
basic and diluted  earnings  per share and the  weighted-average  common  shares
outstanding, respectively:



                                      F-18



                                              For the Years Ended December 31,
                                                  2007               2006
                                              -----------        -----------

Net income                                    $12,819,533        $ 8,587,086
                                              -----------        -----------
Basic weighted-average common shares
outstanding                                    37,009,655         34,723,056
Effect of dilutive securities:
Warrants                                          250,254               --
                                              -----------        -----------
Diluted weighted-average common shares
outstanding                                    37,259,909         34,723,056
                                              -----------        -----------
Basic earnings per share                      $      0.35        $      0.25
                                              -----------        -----------

Diluted earnings per share                    $      0.34        $      0.25
                                              -----------        -----------


Credit  Risk - The  carrying  amounts of  accounts  receivable  included  in the
balance sheet represent the Company's exposure to credit risk in relation to its
financial  assets.  No other  financial  assets carry a significant  exposure to
credit risk. The Company performs ongoing credit  evaluations of each customer's
financial  condition.  It maintains  allowances  for doubtful  accounts and such
allowances in the aggregate have not exceeded management's estimations.

The Company has its cash in bank  deposits  primarily in the PRC.  Historically,
deposits  in PRC banks have been  secure due to the state  policy on  protecting
depositors' interests.  The PRC promulgated a new Bankruptcy Law in August 2006,
which  came into  effect on June 1,  2007,  which  contains  provisions  for the
implementation  of measures for the  bankruptcy of PRC banks.  In the event that
bankruptcy laws are enacted for banks in the PRC, the Company's  deposits may be
at a higher risk of loss.

Interest  Rate Risk - The Company is exposed to the risk arising  from  changing
interest rates,  which may affect the ability of repayment of existing debts and
viability of securing future debt instruments within the PRC.

Recently  Enacted  Accounting  Standards  - In  September  2006,  the  Financial
Accounting  Standards  Board (FASB)  issued  Statement  of Financial  Accounting
Standards  (SFAS) No. 157,  Fair Value  Measurements,  which defines fair value,
establishes  a  framework  for  measuring  fair  value  in  generally   accepted
accounting  principles and expands  disclosures  about fair value  measurements.
SFAS No. 157 is effective for fiscal years  beginning  after  November 15, 2007,
and interim periods within those fiscal years. In February 2008, the FASB issued
FASB Staff  Position (FSP FIN) No. 157-2 which  extended the effective  date for
certain  nonfinancial  assets  and  nonfinancial  liabilities  to  fiscal  years
beginning  after  November 15, 2008. The Company does not expect the adoption of
SFAS No. 157 to have a material impact on our consolidated financial statements.

 In February  2007,  the FASB issued  SFAS No.  159,  The Fair Value  Option for
Financial Assets and Financial  Liabilities.  SFAS No. 159 permits  companies to
choose to measure many  financial  instruments  and certain  other items at fair
value.  SFAS No. 159 is effective  for  financial  statements  issued for fiscal
years  beginning  after  November  15,  2007.  The  Company  does not expect the
adoption of SFAS No. 159 to have a material impact on our consolidated financial
statements.



                                      F-19


In June 2007,  the Emerging  Issues Task Force of the FASB issued EITF Issue No.
07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to be
Used in Future  Research  and  Development  Activities",  (EITF  07-3)  which is
effective for fiscal years beginning after December 15, 2007. EITF 07-3 requires
that  nonrefundable   advance  payments  for  future  research  and  development
activities  be deferred and  capitalized.  Such amounts will be recognized as an
expense as the goods are delivered or the related  services are performed.  EITF
07-3 is not expected to have a material  impact on our results of  operations or
financial position.

In December 2007, the FASB issued SFAS No. 141(R),  Business  Combinations,  and
SFAS No. 160,  Noncontrolling  Interests in Consolidated  Financial  Statements.
SFAS No.  141(R)  requires  an  acquirer  to  measure  the  identifiable  assets
acquired,  the  liabilities  assumed  and any  non-controlling  interest  in the
acquiree at their fair values on the  acquisition  date, with goodwill being the
excess value over the net identifiable  assets acquired.  SFAS No. 160 clarifies
that a non-controlling  interest in a subsidiary should be reported as equity in
the consolidated financial statements, consolidated net income shall be adjusted
to  include  the net  income  attributed  to the  non-controlling  interest  and
consolidated comprehensive income shall be adjusted to include the comprehensive
income attributed to the non-controlling  interest.  The calculation of earnings
per share  will  continue  to be based on  income  amounts  attributable  to the
parent. SFAS No. 141(R) and SFAS No. 160 are effective for financial  statements
issued for fiscal years  beginning  after  December 15, 2008.  Early adoption is
prohibited.  The Company has not yet determined  the effect on our  consolidated
financial statements, if any, upon adoption of SFAS No. 141(R) or SFAS No. 160.

In March  2008,  the FASB  issued SFAS No.  161,  Disclosures  about  Derivative
Instruments and Hedging Activities. SFAS No. 161 amends SFAS No. 133, Accounting
for  Derivative   Instruments  and  Hedging   Activities  to  require   enhanced
disclosures  concerning the manner in which an entity uses  derivatives (and the
reasons it uses them), the manner in which  derivatives and related hedged items
are  accounted  for under  SFAS No.  133 and  interpretations  thereof,  and the
effects that derivatives and related hedged items have on an entity's  financial
position,  financial performance,  and cash flows. SFAS No. 161 is effective for
financial  statements  of  fiscal  years and  interim  periods  beginning  after
November  15,  2008.  The  Company  has not yet  determined  the  effects on its
consolidated financial statements,  if any, that may result upon the adoption of
SFAS 161.

Restatement  of Financial  Statements -  Subsequent  to March 2008,  the Company
realized that the December 31, 2007 consolidated  financial statements needed to
be revised to correct an  overstatement  of advances  paid to  suppliers  in the
amount of  $724,628,  an  overstatement  of other  receivables  in the amount of
$82,717,  and an  understatement of advance for purchase of intangible assets in
the  amount of  $807,345.  In  addition,  the  December  31,  2006  consolidated
financial  statements  needed to be  revised  to  correct  an  overstatement  of
advances  paid to  suppliers  and an  understatement  of advance for purchase of
intangible  assets in the  amount of  $1,509,434.  The  Company  concluded  that
advances made for purchase of intangible assets should be treated as a long-term
asset.  This  correction was not considered  material in accordance with SAB 108
for the year ended December 31, 2007 and 2006 but is considered significant.  As
a result,  the Company corrected the financial  statements for December 31, 2007
and 2006. The correction of the December 31, 2007 and 2006 financial  statements



                                      F-20




had no  effect  on the  previously  reported  net  income.  The  effects  of the
restatements were as follows:


                                                            Reported          Restatement         As Restated
                                                         -------------       -------------       -------------
                                                                                        

Consolidated Balance Sheet as of December 31, 2007
Other receivables                                        $    496,313        $    (82,717)       $    413,596
Advances to suppliers                                       3,481,948            (724,628)          2,757,320
Total Current Assets                                       38,830,343            (807,345)         38,022,998
Advances for purchase of intangible assets                       --               807,345             807,345
TOTAL ASSETS                                             $ 43,706,320        $       --          $ 43,706,320

Consolidated Statement of Cash Flows
For the year ended December 31, 2007
Other receivables                                        $   (111,660)       $     79,426        $    (32,234)
Advances to suppliers                                      (1,028,199)            853,332            (174,867)
Net Cash provided by Operating Activities                   2,801,898             932,758           3,734,656
Advances for purchase of intangible assets                       --              (932,758)           (932,758)
Net Cash used in Investing Activities                      (1,479,531)           (932,758)         (2,412,289)
Net Change in Cash                                       $  1,173,894        $       --          $  1,173,894





Consolidated Balance Sheet as of December 31, 2006
Advances to suppliers                                    $  2,255,877        $ (1,509,434)       $    746,443
Total Current Assets                                       25,707,128          (1,509,434)         24,197,694
Advances for purchase of intangible assets                       --             1,509,434           1,509,434
TOTAL ASSETS                                             $ 28,514,381        $       --          $ 28,514,381



NOTE 2 - INVENTORY

Inventory consisted of the following:


                                 December 31,
                       -----------------------------
                            2007             2006
                       -----------       -----------

Raw materials          $12,521,536       $ 8,458,210
Work in progress            60,404         1,679,952
Finished goods           1,866,831           139,725
                       -----------       -----------
Total Inventory        $14,448,771       $10,277,887
                       -----------       -----------



NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2007 and 2006:



                                      F-21



                                                 December 31,
                                      -------------------------------
                                          2007                2006
                                      -----------         -----------
Permit of land use                    $   385,102         $   360,304
Building                                1,753,547           1,640,629
Plant, machinery and equipment          1,341,996           1,253,572
Motor vehicle                              37,193              14,763
Office equipment                           88,210              75,550
Construction in progress                   22,970                --
                                      -----------         -----------
Total                                   3,629,018           3,344,818
Less: accumulated depreciation         (1,003,802)           (619,645)
                                      -----------         -----------
Property and Equipment, net           $ 2,625,216         $ 2,725,173
                                      -----------         -----------


Depreciation  is computed on a  straight-line  basis over the  estimated  useful
lives of the assets as follows:


                      Asset                            Life - years
--------------------------------------------------  ------------------
Permit of land use                                       40 - 70
Building                                                 20 - 35
Plant, machinery and equipment                             10
Motor vehicle                                            5 - 10
Office equipment                                            5

For the years  ended  December  31,  2007 and  2006,  depreciation  expense  was
$327,921 and $353,831, respectively.

NOTE 4 - INTANGIBLE ASSETS

Intangible  assets  represent  the  costs  on  patents,  trademarks,   licenses,
techniques and formulas.  Intangible  assets have a  weighted-average  remaining
useful life of approximately  9.5 years.  Amortization of intangible  assets was
$94,522 and $43,170 for the year ended December 31, 2007 and 2006, respectively.
The estimated aggregate amortization expense for the next five years follows:


                Year               Amount
           ----------------  -------------------
                2008                  $ 221,538
                2009                    220,553
                2010                    218,722
                2011                    214,646
                2012                    214,646
             Thereafter                 973,147
                             -------------------
                Total               $ 2,063,252
                             -------------------


During the third quarter of 2007, the Company entered into agreements to acquire
certain  pharmaceutical  formulas  from  an  unrelated  party  for  cash  for an
aggregate purchase price of $2,091,850. This has been recorded under the caption
Intangible assets in the accompanying balance sheet as of December 31, 2007.

NOTE 5 - DEBT

Short  Term  Notes  Payable  - At  December  31,  2006,  the  Company  had loans
outstanding  totaling  $2,174,608  from a bank.  The loans bear  interest with a



                                      F-22


range of 6.14% to 6.43%,  principal and accrued  interest was repaid in July and
August of 2007. On July 13, 2007, the Company  entered into a new line of credit
with the bank collateralized by certain land use rights, machinery and equipment
Advances made under the line of credit of  $2,324,278  are due 7 months from the
date of the loan and bear interest  payable  monthly at rates ranging from 6.90%
to 7.37%.  The line of credit  expires on April 25,  2008 with any  advances  or
renewals  made prior to this date under the line having a maturity date no later
than October 25, 2008. The Company has borrowed all amounts  available under the
line of credit.

Short Term Notes Payable to Former  Shareholders  - In January 2006, the Company
converted  its dividend  payable of  $4,402,147  into  short-term  notes bearing
interest at a rate of 2.25% per annum.  The balance of the note at December  31,
2006 was  $4,359,041.  During  the  fourth  quarter of 2007,  the  Company  paid
$3,989,891 of these notes and the final note outstanding as of December 31, 2007
of $369,150 was paid in January, 2008.

NOTE 6 - INCOME TAXES

The Company accounts for its income taxes in accordance with SFAS No. 109, which
requires recognition of deferred tax assets and liabilities and their respective
tax bases and any tax credit carry forwards  available.  Deferred tax assets and
liabilities  are measured  using enacted tax rates  expected to apply to taxable
income in the years in which  those  temporary  differences  are  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

Undistributed  earnings of the Company's  foreign  subsidiary since  acquisition
amounted to approximately  $22 million at December 31, 2007. Those earnings,  as
well as the  investment in the  subsidiaries  of  approximately  $17 million are
considered to be indefinitely  reinvested and, accordingly,  no U.S. federal and
state  income  taxes have been  provided  thereon.  Upon  distribution  of those
earnings in the form of dividends or otherwise,  the Company would be subject to
both U.S.  income taxes  (subject to an adjustment  for foreign tax credits) and
withholding   taxes  payable  to  the  PRC.   Determination  of  the  amount  of
unrecognized  deferred U.S. income tax liability is not practical because of the
complexities associated with its hypothetical calculation; however, unrecognized
foreign  tax  credits  may be  available  to  reduce a portion  of the U.S.  tax
liability.

According to federal law in the PRC,  enterprises  with foreign  investment  and
foreign  enterprises  doing business in the PRC are generally subject to federal
enterprise income tax at a rate of 30%. However,  because the Company is located
in a special region, it has a 15% corporate income tax rate and has been granted
a "tax holiday"  during which it would pay no income taxes through  December 31,
2007. On March 16, 2007, the National  People's Congress of China passed the new
Enterprise Income Tax Law, (EIT Law), and on December 6, 2007, the State Council
of China issued the Implementation Regulations for the EIT Law which took effect
on January 1, 2008. The EIT Law and  Implementation  Regulations  Rules impose a
unified EIT of 25.0% on all  domestic-invested  enterprises and Foreign Invested
Entities, or FIEs, unless they qualify under certain limited exceptions.

As a result of the above  change  in the  income  tax  laws,  The  Company  will



                                      F-23


continue  to have a  favorable  rate of 50% of the tax  rates in  effect  during
fiscal 2008 through 2010 as  determined by the PRC  government  and the regional
tax authorities.

Following  is a  reconciliation  of  income  taxes  calculated  at  the  federal
statutory rates to actual income tax expense:

                                                  December 31,
                                        ------------------------------
                                            2007               2006
                                        -----------        -----------

Tax at statutory rate of 33%            $ 4,176,698        $ 2,919,609
Non-deductible expenses                        --               27,559
Change in temporary differences                --              (22,654)
Effect of lower foreign tax rates        (4,339,570)        (2,924,514)
                                        -----------        -----------
Deferred income tax benefit             $  (162,872)       $      --
                                        -----------        -----------


The temporary  differences  which give rise to the deferred income tax asset are
as follows:


                                                      December 31,
                                               -----------------------
                                                 2007           2006
                                               --------       --------

Allowance for doubtful trade receivables        183,586         16,446
Allowance for doubtful other receivables          3,923            290
                                               --------       --------
Total deferred income tax assets                187,509         16,736
Valuation allowance                                --             --
                                               --------       --------
Net deferred income tax asset                  $187,509       $ 16,736
                                               ========       ========



The Company has also  incurred  various  other  taxes,  comprised  primarily  of
business  taxes,   value-added  taxes,  urban  construction   taxes,   education
surcharges and others. Any unpaid amounts are reflected on the balance sheets as
accrued taxes payable.

NOTE 7 - STOCKHOLDERS' EQUITY

On February 1, 2007 the Company  completed  an offering of units priced at $1.70
per unit  consisting  of one share of  Company  common  stock  and a warrant  to
purchase  one-half of a share of Company  common  stock at an exercise  price of
$2.38 per share.  The Company received gross proceeds in the aggregate amount of
$4,259,900.  The net proceeds,  after deduction of related offering  expenses of
$462,717  amounted to  $3,797,183.  The Company issued an aggregate of 2,505,882
shares of common stock and issued  three-year  warrants to purchase an aggregate
of 1,252,941  shares of Company's common stock to 17 accredited  investors.  The
proceeds  were  allocated  to the  warrants  based  upon  their  fair  value  or
$2,010,219,  and the  balance of the  proceeds  was  allocated  to the shares of
common stock. The fair value of the warrants, determined using the Black-Scholes
Option Pricing Model, was calculated using the following assumptions:  risk free
interest rate of 4.80%,  expected  dividend yield of 0%, expected  volatility of
124.39% and an expected life of 3 years.

The common  shares and the shares  underlying  the  warrants  have  registration
rights and,  accordingly a registration  statement was filed with the Securities
Exchange Commission on March 30, 2007 within the 60 day period prescribed by the
registration rights agreement. The registration statement was declared effective
on May 4, 2007.



                                      F-24


In December 2007, the Company received proceeds of $119,000 upon the exercise of
warrants to purchase  50,000  shares of common stock.  The  remaining  1,202,941
warrants  issued in  conjunction  with the offering  have not been  exercised at
December 31, 2007 and have a weighted average life of 2.1 years.

NOTE 8 - TRANSFERS OF TECHNOLOGY

During 2007, the Company entered into agreements to sell certain  pharmaceutical
formulas in the research and development  stage in two separate  transactions to
third parties for an aggregate  sales price of  $1,509,741  which is recorded as
other income, net of transfer (sales) tax of $75,487, which has been recorded as
part  of  general  and  administrative  expenses  and  $853,332  of  cost in the
accompanying statement of operations and comprehensive income for the year ended
December 31, 2007.

NOTE 9 - CONTINGENCIES

Economic  environment  -  Significantly  all of  the  Company's  operations  are
conducted  in  the  PRC,  and  therefore  the  Company  is  subject  to  special
considerations  and  significant  risks not typically  associated with companies
operating in the United States of America.  These risks  include,  among others,
the political,  economic and legal  environments and fluctuations in the foreign
currency  exchange rate. The Company's  results from operations may be adversely
affected by changes in the  political  and social  conditions in the PRC, and by
changes  in  governmental   policies  with  respect  to  laws  and  regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates
and methods of taxation, among other things.

In addition,  all of the Company's  revenue is denominated in the PRC's currency
of  Renminbi  (RMB),  which  must be  converted  into  other  currencies  before
remittance  out of the PRC. Both the  conversion of RMB into foreign  currencies
and the  remittance of foreign  currencies  abroad  require  approval of the PRC
government.

NOTE 10 - RELATED PARTY TRANSACTIONS

On April 25,  2005 a dividend  of  $4,154,041  (adjusted  for  foreign  currency
translations  as of  the  balance  sheet  dates)  was  declared  to  the  former
shareholders  of  Helpson  which  was not  paid at  December  31,  2005  and was
subsequently  converted to demand notes bearing  interest at 2.25%  according to
the terms of the dividend.  The Company paid these notes and the related accrued
interest as discussed in Note 5.

NOTE 11 - CONCENTRATIONS

For the year ended December 31, 2007, three customers accounted for 21%, 20% and
12% of  sales,  respectively.  For the  year  ended  December  31,  2006,  three
customers accounted for 17%, 11% and 10% of sales, respectively. At December 31,
2007,  two  customers  accounted  for  20%  and  11%  of  accounts   receivable,
respectively.  At  December  31,  2006,  two  customers  made  up 18% and 14% of
accounts receivable.  For the year ended December 31, 2007, purchases from three
suppliers made up 17%, 17% and 11% of raw material purchases,  respectively. For
the year ended December 31, 2006 purchases from two suppliers  accounted for 44%
and 34% of raw material purchases, respectively.




                                      F-25


                 PART II: INFORMATION NOT REQUIRED IN PROSPECTUS


ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an itemization of various expenses,  all of which
we will pay in connection with the sale and distribution of the securities being
registered. All of the amounts shown are estimates,  except the SEC registration
fee.

SEC Registration Fee           $     540.08
Accounting Fees and Expenses   $  15,000.00
Legal Fees and Expenses        $  30,000.00
Miscellaneous                  $   2,600.00
Total                          $  48,140.08

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law authorizes a court to award,
or a  corporation's  board of  directors to grant,  indemnity  to directors  and
officers  in terms  sufficiently  broad to  permit  such  indemnification  under
certain  circumstances  for liabilities  (including  reimbursement  for expenses
incurred) arising under the Securities Act.

Our Amended and Restated  Certificate of Incorporation  and Amended and Restated
Bylaws  provide  for the  indemnification  of a present  or former  director  or
officer. Such indemnification shall include expenses,  including attorney's fees
actually  and  reasonably  incurred by him. We may  indemnify  such  individuals
against all costs, expenses, and liabilities incurred in a threatened,  pending,
or completed action,  suit, or proceeding  brought because such individual is or
was one of our directors or officers.

We have  been  advised  that  in the  opinion  of the  Securities  and  Exchange
Commission  indemnification  for liabilities arising under the Securities Act is
against  public policy as expressed in the  Securities  Act, and is,  therefore,
unenforceable.  In the  event  that a claim  for  indemnification  against  such
liabilities  is  asserted  by one of our  directors,  officers,  or  controlling
persons in connection with the securities being  registered,  we will, unless in
the  opinion of our legal  counsel  the matter has been  settled by  controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate  jurisdiction and will be governed by the final
adjudication of such issue.

At the present time,  there is no pending  litigation or proceeding  involving a
director,  officer, employee or other agent of our ours in which indemnification
would be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES.

On May 11, 2005, we sold to Halter  Financial  Group,  Inc. ("HFG") in a private
placement  1,875,045  shares of restricted  common stock at a purchase  price of
$0.1066641 per share,  pursuant to the terms of a Stock Purchase  Agreement (the



                                     II-26


"Purchase  Agreement")  executed by the parties on said date. As a result of the
purchase,  HFG became our controlling  shareholder,  owning approximately 75% of
our issued and  outstanding  shares of common  stock.  This issuance was made in
reliance on Section 4(2) of the Act and was made without general solicitation or
advertising.  The  purchaser  was a  sophisticated  investor  with access to all
relevant information  necessary to evaluate the investment,  and who represented
to us that the shares were being acquired for investment.

On October 19, 2005, we entered into a Securities  Exchange  Agreement with Onny
and its  original  stockholders  pursuant to which we acquired all of the issued
and outstanding shares of Onny from said stockholders in exchange for 27,499,940
shares of our common  stock.  This issuance was made in reliance on Section 4(2)
of the Act  and was  made  without  general  solicitation  or  advertising.  The
acquirers were sophisticated  investors with access to all relevant  information
necessary to evaluate the investment,  and who represented to us that the shares
were being acquired for investment.

In February 2007, the Company completed an offering of units priced at $1.70 per
unit  consisting  of one share of the  Company's  common  stock and a warrant to
purchase  one-half of a share of the Company's common stock at an exercise price
of $2.38 per share.  The Company  issued an  aggregate  of  2,505,882  shares of
common  stock and  issued  three-year  warrants  to  purchase  an  aggregate  of
1,252,941  shares of Company's  common stock to 17  accredited  investors.  This
issuance  was made in reliance on Section  4(2) of the Act and was made  without
general solicitation or advertising.  The acquirers were sophisticated investors
with access to all relevant  information  necessary to evaluate the  investment,
and who represented to us that the shares were being acquired for investment.

In May 2008, the Company completed an offering of units priced at $2.00 per unit
consisting of one share of the Company's  common stock and a warrant to purchase
one-quarter  of a share of the  Company's  common stock at an exercise  price of
$2.80 per share.  The Company issued an aggregate of 5,000,000  shares of common
stock and issued  three-year  warrants  to purchase an  aggregate  of  1,250,000
shares of Company's common stock to 17 accredited  investors.  This issuance was
made in  reliance  on  Section  4(2) of the Act  and was  made  without  general
solicitation or  advertising.  The acquirers were  sophisticated  investors with
access to all relevant information necessary to evaluate the investment, and who
represented to us that the shares were being acquired for investment.

On June 24,  2008,  the  Company  issued to  FirsTrust  Group,  Inc.  three-year
warrants to purchase  75,000 shares of the  Company's  common stock at $2.80 per
share and three-year  warrants to purchase 75,000 shares of the Company's common
stock at $3.60 per  share.  The  Company  issued  the above  warrants  as equity
compensation  under the  Consulting  Agreement and the  Supplementary  Agreement
entered  into between the Company and  FirsTrust  China Ltd.  (the  wholly-owned
subsidiary  of  FirsTrust   Group,   Inc.).   The  issuances  were  exempt  from
registration  under the Securities  Act in reliance on an exemption  provided by
Section 4(2) of that act.

On the same date,  the Company  issued to Hayden  Communications  International,
Inc. three-year warrants to purchase 25,000 shares of the Company's common stock



                                     II-27


at $3.00 per share and  three-year  warrants  to purchase  25,000  shares of the
Company's common stock at $3.50 per share. The Company issued the above warrants
as equity compensation under the Investor Relations Consulting Agreement entered
into  between the  Company and Hayden  Communications  International,  Inc.  The
issuances were exempt from registration  under the Securities Act in reliance on
an exemption provided by Section 4(2) of that act.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following Exhibits are attached hereto or incorporated herein by reference.

--------------------------------------------------------------------------------
Exhibit No.        Description
--------------------------------------------------------------------------------
2.1      Securities  Exchange Agreement between China Pharma and Onny Investment
         Limited dated October 19, 2005 (3)
--------------------------------------------------------------------------------
3.1      Amendment of Certificate of Incorporation (8)
--------------------------------------------------------------------------------
3.2      Amended and Restated Bylaws of China Pharma (9)
--------------------------------------------------------------------------------
4.1      Form of Warrant issued to FirsTrust Group, Inc. (10)
--------------------------------------------------------------------------------
4.2      Form of Warrant issued to Hayden Communications International, Inc.(10)
--------------------------------------------------------------------------------
5.1*     Opinion of King and Wood LLP
--------------------------------------------------------------------------------
10.1     Stock Purchase  Agreement  between Halter  Financial Group Inc. and the
         Registrant dated May 11, 2005 (1)
--------------------------------------------------------------------------------
10.2     Subscription   Agreement  between  Onny  Investment   Limited  and  the
         subscribers (3)
--------------------------------------------------------------------------------
10.3     Employment  Contract  between  Helpson and Zhilin Li dated July 1, 2005
         (5)
--------------------------------------------------------------------------------
10.4     Employment  Contract  between  Helpson and Xinhua Wu dated July 1, 2005
         (5)
--------------------------------------------------------------------------------
10.5     Employment  Contract  between  Helpson and Jian Yang dated July 1, 2005
         (5)
--------------------------------------------------------------------------------
10.6     Securities  Purchase  Agreement between the Registrant and 17 investors
         in the 2008 Private Placement (6)
--------------------------------------------------------------------------------
10.7     Registration  Rights Agreement  between the Registrant and 17 investors
         in the 2008 Private Placement (6)
--------------------------------------------------------------------------------
10.8     Form  of  Warrant  issued  to the 17  investors  in  the  2008  Private
         Placement (6)
--------------------------------------------------------------------------------
10.9     Supply  Contract  entered  into  between  Hainan  Helpson  Medicine and
         Bio-Technology Co. Ltd. and Sichuan Chengxin Pharmaceutical Company (7)
--------------------------------------------------------------------------------
10.10    Supply  Contract  entered  into  between  Hainan  Helpson  Medicine and
         Bio-Technology Co. Ltd. and Anhui Fuyang Xinte  Pharmaceutical  Company
         (7)
--------------------------------------------------------------------------------
10.11    Sales  Contract  entered  into  between  Hainan  Helpson  Medicine  and
         Bio-Technology Co. Ltd. and Anhui Fuyang Xinte  Pharmaceutical  Company
         (7)
--------------------------------------------------------------------------------
10.12    Sales  Contract  entered  into  between  Hainan  Helpson  Medicine  and
         Bio-Technology Co. Ltd. and Hainan Xinglin Medicine Company (7)
--------------------------------------------------------------------------------
14.1*    Code of Business Conduct and Ethics
--------------------------------------------------------------------------------
16.1     Letter regarding Change in certifying Accountant dated August 15. (2)
--------------------------------------------------------------------------------



                                     II-28

--------------------------------------------------------------------------------
21       Subsidiaries of China Pharma  Holdings,  Inc. filed on October 20, 2005
         (4)
--------------------------------------------------------------------------------
23.1*    Consent of King and Wood LLP (Included in Exhibit 5.1)
--------------------------------------------------------------------------------
23.2*    Consent of Hansen, Barnett & Maxwell, P.C.
--------------------------------------------------------------------------------

*     Filed herewithin

(1)  Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 000-29523) filed with the Commission on May 11, 2005.
(2)  Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 000-29523) filed with the Commission on August 18, 2005.
(3)  Previously  filed as an exhibit to our report on Form SB-2 (Commission File
     Number: 333-129161) filed with the Commission on October 20, 2005.
(4)  Previously  filed as an exhibit to our report on Form SB-2 (Commission File
     Number: 333-129161) filed with the Commission on December 23, 2005.
(5)  Previously  filed as an exhibit to our  report on Form  10-QSB  (Commission
     File Number: 000-29523) filed with the Commission on November 16, 2006.
(6)  Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 000-29523) filed with the Commission on May 28, 2008.
(7)  Previously  filed as an exhibit to our  report on Form  10-KSB  (Commission
     File Number: 000-29523) filed with the Commission on March 31, 2008.
(8)  Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 000-29523) filed with the Commission on May 4, 2006.
(9)  Previously  filed as an exhibit  to our report on Form PRE 14C  (Commission
     File Number: 000-29523) filed with the Commission on June 27, 2008.
(10) Previously  filed as an exhibit to our report on Form 8-K (Commission  File
     Number: 000-29523) filed with the Commission on June 27, 2008.


ITEM 17.  UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file,  during  any  period in which  offers or sales  are being  made,  a
post-effective amendment to this registration statement to:

     (i) Include any prospectus  required by section  10(a)(3) of the Securities
Act;

     (ii)  Reflect  in the  prospectus  any  facts or events  arising  after the
effective date of the registration  statement (or the most recent post-effective
amendment  thereof)  which,  individually  or  in  the  aggregate,  represent  a
fundamental  change in the information set forth in the registration  statement.
Notwithstanding the foregoing,  any increase or decrease in volume of securities
offered (if the total dollar value of  securities  offered would not exceed that
which  was  registered)  and any  deviation  from  the  low or  high  end of the
estimated  maximum  offering  range may be reflected  in the form of  prospectus
filed with the  Commission  pursuant  to Rule 424(b) if, in the  aggregate,  the
changes in volume  and price  represent  no more than 20% change in the  maximum
aggregate  offering price set forth in the  "Calculation  of  Registration  Fee"



                                     II-29


table in the effective registration statement.

      (iii) Include any material or changed information with respect to the plan
of distribution not previously  disclosed in the  registration  statement or any
material change to such information in the registration statement;

      Provided,  however,  that paragraphs  (1)(i),  (1)(ii) and (1)(iii) do not
apply if the information  required to be included in a post-effective  amendment
by those  paragraphs is contained in periodic  reports  filed by the  registrant
pursuant to section 13 or section 15(d) of the  Securities  Exchange Act of 1934
that  are  incorporated  by  reference  in  the  registration  statement,  or is
contained in a form of prospectus  filed pursuant to Rule 424(b) that is part of
the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act,
each such  post-effective  amendment  shall be  deemed to be a new  registration
statement relating to the securities  offered therein,  and the offering of such
securities  at that time shall be deemed to be the  initial  bona fide  offering
thereof.

(3) To remove from  registration by means of a  post-effective  amendment any of
the securities  being  registered  which remain unsold at the termination of the
offering.

(4) Each  prospectus  filed  pursuant to Rule  424(b) as part of a  registration
statement relating to an offering, other than registration statements relying on
Rule 430B or other than  prospectuses  filed in reliance on Rule 430A,  shall be
deemed to be part of and included in the  registration  statement as of the date
it is first used after effectiveness.  Provided, however, that no statement made
in a  registration  statement  or  prospectus  that is part of the  registration
statement or made in a document incorporated or deemed incorporated by reference
into the  registration  statement or prospectus that is part of the registration
statement  will, as to a purchaser with a time of contract of sale prior to such
first use,  supersede or modify any statement that was made in the  registration
statement or prospectus that was part of the  registration  statement or made in
any such document immediately prior to such date of first use.

(5) That, for the purpose of determining  liability  under the Securities Act to
any purchaser in the initial  distribution  of the  securities,  the undersigned
registrant   undertakes  that  in  a  primary  offering  of  securities  of  the
undersigned  registrant pursuant to this registration  statement,  regardless of
the  underwriting  method used to sell the securities to the  purchaser,  if the
securities  are  offered  or sold  to  such  purchaser  by  means  of any of the
following  communications,  the  undersigned  registrant will be a seller to the
purchaser  and  will be  considered  to offer or sell  such  securities  to such
purchaser:

      (i) Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424 of Regulation
C of the Securities Act;

      (ii) Any free writing  prospectus  relating to the offering prepared by or
on  behalf  of  the  undersigned  registrant  or  used  or  referred  to by  the
undersigned registrant;

      (iii) The  portion of any other free  writing  prospectus  relating to the
offering containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant; and

      (iv) Any other  communication that is an offer in the offering made by the
undersigned registrant to the purchaser.



                                     II-30



Insofar as indemnification  for liabilities  arising under the Securities Act of
1933 may be permitted to  directors,  officers  and  controlling  persons of the
registrant,  the  registrant  has  been  advised  that  in  the  opinion  of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is,  therefore,  unenforceable.  In the event that a
claim for  indemnification  against such liabilities  (other than the payment by
the  registrant  of  expenses  incurred  or  paid  by  a  director,  officer  or
controlling  person of the registrant in the  successful  defense of any action,
suit or proceeding) is asserted by such director,  officer or controlling person
in connection with the securities being registered,  the registrant will, unless
in the  opinion  of its  counsel  the matter  has been  settled  by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.


















                                     II-31





                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  Act of 1933,  the  Registrant
certifies  that it has duly caused this  Registration  Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Haikou, on July 10,
2008.


                                            China Pharma Holdings, Inc.

                                            By: /s/ Zhilin Li
                                            -------------------------------
                                            Zhilin Li
                                            Chief Executive Officer,
                                            President and Director


                                            By: /s/ Xinhua Wu
                                            -------------------------------
                                            Xinhua Wu
                                            Chief Financial Officer and
                                            Director


Pursuant to the  requirements  of the Securities  Act of 1933, as amended,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.


  SIGNATURE                             TITLE                          DATE

/s/ Zhilin Li
-------------
 Zhilin Li                        President , Chief Executive      July 10, 2008
                                  Officer and Director


/s/ Xinhua Wu
-------------
 Xinhua Wu                        Chief Financial Officer
                                  and Director                     July 10, 2008




/s/ Gene Michael Bennett
------------------------
 Gene Michael Bennett             Director                         July 10, 2008




/s/ Yingwen Zhang
-----------------
Yingwen Zhang                     Director                         July 10, 2008




/s/ Baowen Dong
---------------
Baowen Dong                       Director                         July 10, 2008