China Health Resource 10-Q/A 2009 Q3 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
For the Quarterly Period ended:  September 30, 2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________

Commission File Number: 000-50029

CHINA HEALTH RESOURCE, INC.

(Name of Small Business Issuer in its Charter)

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

343 Sui Zhou Zhong Road

Suining, Sichuan Province, P.R. China

(Address of Principal Executive Offices)

+(86-825) 239-1788

(Issuer’s Telephone Number)

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

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

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   o	Accelerated filer   o
Non-accelerated filer      o	Smaller Reporting Company   x

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

Number of shares outstanding of each of the issuer’s classes of common equity, as of November 11, 2009:  142,288,894 shares of Common Stock of par value US $0.001

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

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

EXPLANATORY NOTE

China Health Resource, Inc. ("CHRI" or the "Company") is filing this Amendment No. 1 on Form 10-Q/A (the “Amendment”) to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, originally filed November 23, 2009 (the "Third Quarter 2009 Form 10-Q"), to amend and restate the following previously-filed financial statements (the “Restatement”): our unaudited consolidated balance sheet and unaudited statement of operations as of September 30, 2009 contained in Part I, Item 1 of this Amendment. The Restatement results from our Board of Director’s determination subsequent to the issuance of our financial statements for the quarter ended September 30, 2009 that there were errors in the recording of the number of shares of the Company's Class A common stock (the "Class A Common Stock"), issued and outstanding and, therefore, our unaudited consolidated financial statements required restatement.

As previously announced in the Company's Current Report on Form 8-K filed April 15, 2010, financial information for the interim period ended September 30, 2009 contained in the previously-filed quarterly report and any related earnings press releases and similar communications issued by us related to this period should not be relied upon.  To the extent there are discrepancies between this Amendment and the previous report, press releases and similar communications, the information in this Amendment shall control.

Background of the Restatement

Effective July 30, 2009, the Company and Mr. Lei Guo, as Trustee for the Sichuan Yinfa Resource Co., Ltd. (“Trustee”), terminated the following agreements:  (1) Contract of Lease of Property entered into between CHRI and Trustee, dated December 19, 2008 (the “Property Lease”), with respect to the 3,262 acres of leased forest area property, license number B5103185981, located in Heiwengtang Valley, Xianping Forestry, Pingwu County, Mianyang City, Sichuan Province, the People’s Republic of China; and (2) the Amended and Restated Convertible Promissory Note (the “Note”), issued on January 21, 2009 and effective as of December 31, 2008, as rent for the Lease Property.  In connection with the termination of the Lease Property and Note, the 12,605,615 shares of Class A Common Stock issued to the Trustee on March 30, 2009, were withdrawn and cancelled and the Trustee was allowed to retain the 43,000,000 shares of Class A Common Stock issued to the Trustee on December 30, 2008. 

The Company disclosed these matters in a Current Report on Form 8-K filed August 11, 2009.

- 2 - -

During the preparation of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the "2009 10-K"), we discovered that the Third Quarter 2009 Form 10-Q erroneously reported that 43,000,000 shares of Class A Common Stock had been withdrawn and cancelled.  The financial statements contained in the Third Quarter 2009 Form 10-Q should have recorded that, as of September 30, 2009, the Company had 142,288,894 shares of Class A Common Stock outstanding.

The Company's audited financial statements contained in the 2009 10-K correctly reflect  the withdrawn and cancelled shares of Class A Common Stock.

During the preparation of the Restatement, we identified the following additional errors (the "Additional Errors") in the Third Quarter 2009 Form 10-Q regarding the description of the Company's capital stock:

·   The report erroneously stated the par value of the Company's Class A Common Stock to be $0.01 per share.  Effective April 15, 2009, the Company amended and restated its Certificate of Incorporation to decrease the Class A Common Stock’s par value to $0.001 per share.

·   The report erroneously stated that there were 8,344 shares of  Class B common stock ("Class B Common Stock") authorized as of September 30, 2009.  Effective April 15, 2009, the Company amended and restated its Certificate of Incorporation to eliminate the Class B Common Stock.

·   The report failed to state that the Company is authorized to issue 50,000,000 shares of undesignated preferred stock ("Preferred Stock"). Effective April 15, 2009, the Company amended and restated its Certificate of Incorporation to authorize the issuance of 50,000,000 shares of Preferred Stock.

We also discovered that the Additional Errors appeared in the audited financial statements contained in the 2009 10-K filed on April 15, 2010.

The Additional Errors are not significant, individually or in the aggregate.

Determinations

We announced on April 15, 2010 that the Board of Directors had determined that we would restate our financial statements for the fiscal quarter ended September 30, 2009 as a result of errors in those financial statements.  Our Board of Directors and senior management, assisted by outside consultants and Lake & Associates, CPA’s LLC, the Company’s independent registered public accounting firm, commenced, and have now completed, a review of the facts and circumstances that gave rise to the erroneous recording of the withdrawal and cancellation of 43,000,000 shares of Class A Common Stock and the Additional Errors appearing in the financial statements as described above.

As a result of the review and as described in Part I, Item 4T, Controls and Procedures, in this report, the Company identified a material weakness in our internal control over financial reporting due to a shortage of experienced accounting staff and the lack of segregation of duties in financial reporting, as our financial reporting and all accounting functions are performed by the Chief Financial Officer with no oversight by other members of management with appropriate accounting experience. Our President does possess accounting expertise, but the Board of Directors does not have an audit committee. This material weakness was due to the Company's lack of working capital to hire additional staff.  The Company also concluded that its disclosure controls and procedures were not effective as of September 30, 2009.  As of the date of this report, we have remediated the material weakness in our internal control over financial reporting and deficiencies in our disclosure controls and procedures.

- 3 - -

Impact of Corrections on Previously-Issued Consolidated Financial Statements

As a result of the Restatement, the unaudited balance sheet and unaudited statement of operations appearing in the Third Quarter 2009 Form 10-Q have been restated as follows:

China Health Resource, Inc. and Subsidiary
Unaudited Consolidated Balance Sheets
As of The Nine Months Ended September 30, 2009 and 2008
ASSETS	September 30, 2009			December 31, 2008
CURRENT ASSETS
Cash and Cash Equivalents	$	14,561		$	101,497
Accounts Receivable		1,211,190			441,047
Note Receivable		365,185			378,054
Employee Advances		16,128			3,016
Advances to Suppliers		-			162,158
Prepaid Expenses		(0	)		59,648
Inventory		120,219			264,177
TOTAL CURRENT ASSETS		1,727,283			1,409,598
FIXED ASSETS
Property, Plant, and Equipment		968,962			6,912,234
Accumulated Depreciation		(115,233	)		(154,759	)
TOTAL NET FIXED ASSETS		853,729			6,757,475
TOTAL ASSETS		2,581,011			8,167,073
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities		199,554			238,275
Other Payables		161,570			87,678
Note Payable -Convertible Debt		-			3,500,000
Due to Shareholder		83,258			83,258
Taxes Payable		227,761			241,493
Notes Payable - Current Portion		413,111			412,773
TOTAL CURRENT LIABILITIES		1,085,254			4,563,477
LONG-TERM LIABILITIES
Notes Payable-Convertible debt		-			2,210,994
TOTAL LONG-TERM LIABILITIES					2,210,994
TOTAL LIABILITIES		1,085,254			6,774,471
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock Class A ( 500,000,000 shares authorized,
142,288,894 issued and outstanding, par value $0.001)		142,289			142,289
Undesignated preferred stock (50,000,000 shares authorized,
0 issued and outstanding, par value $0.01)		-			-
Additional paid in capital		1,145,832			1,145,832
Accumulated other comprehensive income		189,030			149,523
Retained earnings (deficit)		18,606			(45,042	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		1,495,757			1,392,602
TOTAL LIABILITIES AND EQUITY	$	2,581,011		$	8,167,073
The accompanying notes are an integral part of these financial statements.

- 4 - -

China Health Resource, Inc. and Subsidiary
Unaudited Consolidated Statement of Operations
For the period Ended September 30, 2009 and 2008
	For the three months ended September 30					For the 9 months ended
	2009			2008		2009		2008
REVENUES
Sales		1,535,111		$	625,656	$	2,818,426	$	860,222
Cost of Sales		1,266,501	��		390,679		2,289,858	$	545,541
GROSS PROFIT		268,610			234,977		528,568	$	314,681
OPERATING EXPENSES
Selling, General, and Administrative		176,764			121,711		405,502	$	267,667
Financial Expense		-			-
Interest Expense		4,074			4,654		37,817	$	31,479
Distribution Costs		-			-		-	$	-
TOTAL OPERATING EXPENSES		180,838			126,365		443,319		299,146
OPERATING INCOME (LOSS)		87,772			108,612		85,249	$	15,535
OTHER INCOME / (EXPENSES)
Non-Operating Expenses					-		-	$	-
Government Grants					14,315		-	$	14,315
Other		-			12		7,254	$	2,695
TOTAL OTHER INCOME / (EXPENSE)		-					7,254		17,009
					-
NET INCOME (LOSS) BEFORE TAXES		87,772			122,939		92,503		32,544
INCOME TAX EXPENSE		2			-		24,567	$	-
					-
NET INCOME (LOSS)		87,770			122,939		67,936	$	32,544
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation (Loss) Gain		15,426			14,824		16,002	$	73,570
COMPREHENSIVE INCOME (LOSS)		103,196		$	123,436	$	83,938	$	106,114
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		142,288,894			99,288,842		142,288,894		99,288,842
Fully diluted		142,288,894			109,631,435		142,288,894		109,631,435
NET LOSS PER COMMON SHARE
Basic		**			**		**		**
Fully diluted		**			**		**		**
** Less than $.01
The accompanying notes are an integral part of these financial statements.

- 5 - -

The following items in this report have been amended as a result of the Restatement:

Part I:

Item 1:        Financial Statements (Unaudited)

Item 4T:     Controls and Procedures

Concurrently with the filing of this report, we are also amending the following previously-filed reports:

2009 10-K

Part II:        Item 9A(T): Controls and Procedures

Part IV:       Item 15: Exhibits and Financial Statement Schedules

Quarterly Report on Form 10-Q for the period ended March 31, 2010

Part I:          Item 4T: Controls and Procedures

For convenience of the reader, this Form 10-Q/A sets forth the Third Quarter 2009 Form 10-Q in its entirety, as amended by, and to reflect, the Restatement.  We have not modified or updated disclosures presented in the Third Quarter 2009 Form 10-Q, except as required to reflect the effects of this Restatement. Accordingly, this Form 10-Q/A should be read in conjunction with our SEC filings made subsequent to the Third Quarter 2009 Form 10-Q.

- 6 - -

TABLE OF CONTENTS

		Page
	PART I.   FINANCIAL INFORMATION
		8
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED) (RESTATED)
		9
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS
		16
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
		16
ITEM 4T.	CONTROLS AND PROCEDURES
PART II.   OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	18
ITEM 1A.	RISK FACTORS AFFECTING FUTURE RESULTS	18
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	18
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	18
ITEM 5.	OTHER INFORMATION	18
ITEM 6.	EXHIBITS	18
SIGNATURES
INDEX TO EXHIBITS

- 7 - -

PART I.   FINANCIAL INFORMATION

		Page
ITEM 1.	FINANCIAL STATEMENTS
	Our unaudited consolidated financial statements included in this Form 10-Q/A are as follows:
	Unaudited Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008	F-1
	Unaudited Consolidated Statements of Operations for the Nine Months ended September 30, 2009 and 2008	F-2
	Unaudited Consolidated Statements of Cash Flows for the Nine months ended September 30, 2009 and 2008	F-3
	Notes to Unaudited Consolidated Financial Statements for the Nine months ended September 30, 2009 and 2008	F-4

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended September 30, 2009 are not necessarily indicative of the results that can be expected for the full year or in the future.

- 8 - -

China Health Resource, Inc. and Subsidiary
Unaudited Consolidated Balance Sheets
As of The Nine Months Ended September 30, 2009 and 2008
ASSETS	September 30, 2009			December 31, 2008
CURRENT ASSETS
Cash and Cash Equivalents	$	14,561		$	101,497
Accounts Receivable		1,211,190			441,047
Note Receivable		365,185			378,054
Employee Advances		16,128			3,016
Advances to Suppliers		-			162,158
Prepaid Expenses		(0	)		59,648
Inventory		120,219			264,177
TOTAL CURRENT ASSETS		1,727,283			1,409,598
FIXED ASSETS
Property, Plant, and Equipment		968,962			6,912,234
Accumulated Depreciation		(115,233	)		(154,759	)
TOTAL NET FIXED ASSETS		853,729			6,757,475
TOTAL ASSETS		2,581,011			8,167,073
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities		199,554			238,275
Other Payables		161,570			87,678
Note Payable -Convertible Debt		-			3,500,000
Due to Shareholder		83,258			83,258
Taxes Payable		227,761			241,493
Notes Payable - Current Portion		413,111			412,773
TOTAL CURRENT LIABILITIES		1,085,254			4,563,477
LONG-TERM LIABILITIES
Notes Payable-Convertible debt		-			2,210,994
TOTAL LONG-TERM LIABILITIES					2,210,994
TOTAL LIABILITIES		1,085,254			6,774,471
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock Class A ( 500,000,000 shares authorized,
142,288,894 issued and outstanding, par value $0.001)		142,289			142,289
Undesignated preferred stock (50,000,000 shares authorized,
0 issued and outstanding, par value $0.01)		-			-
Additional paid in capital		1,145,832			1,145,832
Accumulated other comprehensive income		189,030			149,523
Retained earnings (deficit)		18,606			(45,042	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		1,495,757			1,392,602
TOTAL LIABILITIES AND EQUITY	$	2,581,011		$	8,167,073
The accompanying notes are an integral part of these financial statements.

F - 1

China Health Resource, Inc. and Subsidiary
Unaudited Consolidated Statement of Operations
For the period Ended September 30, 2009 and 2008
	For the three months ended September 30				For the 9 months ended
	2009		2008		2009		2008
REVENUES
Sales		1,535,111	$	625,656	$	2,818,426	$	860,222
Cost of Sales		1,266,501		390,679		2,289,858	$	545,541
GROSS PROFIT		268,610		234,977		528,568	$	314,681
OPERATING EXPENSES
Selling, General, and Administrative		176,764		121,711		405,502	$	267,667
Financial Expense		-		-
Interest Expense		4,074		4,654		37,817	$	31,479
Distribution Costs		-		-		-	$	-
TOTAL OPERATING EXPENSES		180,838		126,365		443,319		299,146
OPERATING INCOME (LOSS)		87,772		108,612		85,249	$	15,535
OTHER INCOME / (EXPENSES)
Non-Operating Expenses				-		-	$	-
Government Grants				14,315		-	$	14,315
Other		-		12		7,254	$	2,695
TOTAL OTHER INCOME / (EXPENSE)		-				7,254		17,009
				-
NET INCOME (LOSS) BEFORE TAXES		87,772		122,939		92,503		32,544
INCOME TAX EXPENSE		2		-		24,567	$	-
				-
NET INCOME (LOSS)		87,770		122,939		67,936	$	32,544
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation (Loss) Gain		15,426		14,824		16,002	$	73,570
COMPREHENSIVE INCOME (LOSS)		103,196	$	123,436	$	83,938	$	106,114
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		142,288,894		99,288,842		142,288,894		99,288,842
Fully diluted		142,288,894		109,631,435		142,288,894		109,631,435
NET LOSS PER COMMON SHARE
Basic		**		**		**		**
Fully diluted		**		**		**		**
** Less than $.01
The accompanying notes are an integral part of these financial statements.

F - 2

China Health Resource, Inc. and Subsidiary
Unaudited Consolidated Statement of Cash Flows
For the nine months ended September 30, 2009 and 2008
	For the nine months ended September 30, 2009 and 2008
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income after income tax	$	67,936		$	32,544
Adjustments to reconcile net income to
net cash used in operating activities:
Shares issued for services		84,251
Depreciation		25,474			31,269
Accounts receivable		(770,146	)		(188,597	)
Other Receivable		149,047			(506	)
Prepaid Expenses		59,647			97,872
Inventory		143,958			(64,340	)
Accounts payable and accrued liabilities		(38,721	)		3,706
Other payable		74,230			84,952
Tax payable		(13,732	)		(28,645	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(218,055	)		(31,745	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Notes Receivable		12,869			-
Proceeds from sale of property and equipment		102,248
Purchase of property, plant, and equipment		-			(48,597	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		115,117			(48,597	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term-note payable		-			(116,081	)
Proceeds from issuance of short-term note		-			147,278
Proceeds from note receivable
Proceeds from shareholder loan		-			-
Payments on short-term-note payable		-			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			31,197
FOREIGN CURRENCY TRANSLATION		16,002			73,570
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(86,936	)		24,425
CASH AND CASH EQUIVALENTS:
Beginning of period		101,497			36,127
End of period	$	14,561		$	60,552
SUPPLEMENTAL CASH FLOW INFORMATION:
Common stock issued for settlement of certain accounts payable	$	-		$	-
Common stock issued for services	$	-		$	-
The accompanying notes are an integral part of these financial statements.

F - 3

CHINA HEALTH RESOURCE, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended September 30, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements have been prepared in accordance with Form 10-Q instructions and, in the opinion of management, include all normal adjustments considered necessary to present fairly the financial position as of September 30, 2009 and the results of operations for the Nine months ended September 30, 2009 and 2008.  The results have been determined on the basis of generally accepted accounting principles and practices and applied consistently with those used in the preparation of the Company's financial statements and notes for the Nine months ended September 30, 2009, as filed on Form 10-Q.

Certain information and footnote disclosures normally included in the financial statements presented in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that the accompanying unaudited interim financial statements be read in conjunction with the financial statements and notes thereto contained in the Company's 2008 Annual Report on Form 10-K.  Our results for the nine months ended September 30, 2009 may not be indicative of our results for the twelve months ended December 31, 2009.

Recently Issued Accounting Pronouncements

FASB Accounting Standards Codification

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

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

As a result of the Company’s implementation of the Codification during the quarter ended September 30, 2009, previous references to new accounting standards and literature are no longer applicable. In the current quarter financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

F - 4

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

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

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP SFAS No. 142-3 became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the Company’s financial statements.

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Non-controlling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

SFAS No. 160 changed the accounting and reporting for minority interests such that they will be re-characterized as non-controlling interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer records an intangible asset when the purchase price of a non-controlling interest exceeds the book value at the time of buyout.

The adoption of SFAS No. 160 did not have any other material impact on the Company’s financial statements.

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

SFAS No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity.  The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited.  The Company will adopt SFAS No. 167 in fiscal 2010 and does not anticipate any material impact on the Company’s financial statements.

F - 5

NOTE B - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the nine months ended September 30, 2009 and 2008 is summarized as follows:

Cash paid during the nine months ended September 30, 2009 and 2008 for interest and income taxes:

	9/30/2009		9/30/2008
Income Taxes	$	-		-0-
Interest	$	-		-0-

NOTE C - GOING CONCERN

As shown in the accompanying audited financial statements, the Company has a deficit book value and a negative cash flow from operations that have placed a doubt as to whether the Company can continue as a going concern. The ability of the Company to continue as a going concern is dependent on developing operations, increasing revenues, and obtaining new capital. Management has enacted a plan to raise capital and increase sales.  In terms of operating profit and cash flow analysis, the Company’s operating profit and cash flow are relatively worsen compare to the previous quarter mainly due to the increase of account receivable. In the future, the Company will launch a sales promotion plan which will give the advantage to the Company’s profit level.

NOTE D – NOTE PAYABLE

On July 30, 2009, the Company agreed to terminate the following agreement or instruments: (1) Contract of Lease of Property entered into between CHRI and Trustee, dated December 19, 2008, with respect to the 3,262 acres of leased forest area property; and (2) the Amended and Restated Convertible Promissory Note, issued on January 21, 2009, as rent for the Lease Property. Pursuant to the termination of the Lease Property and Note, effective July 30, 2009, the 12,605,615 shares of the Company’s Class A Common Stock issued to the Trustee, on March 30, 2009, were withdrawn and cancelled, but the Trustee was allowed to retain the 43,000,000 shares of the Common Stock issued December 30, 2008.

NOTE E – RESTATEMENT

On April 15, 2010, the Company determined that a restatement of its financial statements for the nine months ended September 30, 2009 was necessary to properly state the par value of its stock and to reflect 43,000,000 shares of stock that were outstanding as of September 30, 2009 but previously reported as canceled shares.

F - 6

The effect of these restatements on the Company’s previously issued unaudited September 30, 2010 financial statements is detailed below:

Balance Sheet as of September 30, 2009
	Previously
	Reported			Adjustments					As Restated
STOCKHOLDERS' EQUITY
Par Value of Common Stock		992,889			(850,600	)	(1	)		142,289
Additional paid in capital		210,981			934,851		(1,2	)		1,145,832
Accumulated other comprehensive income		189,030			-					189,030
Retained earnings		102,857			(84,251	)	(2	)		18,606
TOTAL STOCKHOLDERS' EQUITY		1,495,757			-					1,495,757
Statement of Operations for the Three Months Ended September 30, 2009
	Previously
	Reported			Adjustments					As Restated
Selling, General and Administrative Expenses		111,764			65,000		(2	)		176,764
Interest Expense		(15,177	)		19,251		(2	)		4,074
TOTAL OPERATING EXPENSES		96,587			84,251					180,838
NET INCOME BEFORE INCOME TAXES		172,024			(84,251	)	(2	)		87,772
NET INCOME		172,022			(84,251	)	(2	)		87,770
COMPREHENSIVE INCOME		187,448			(84,251	)	(2	)		103,197
Statement of Operations for the Nine Months Ended September 30, 2009
	Previously
	Reported			Adjustments					As Restated
Selling, General and Administrative Expenses		340,502			65,000		(2	)		405,502
Interest Expense		18,565			19,251		(2	)		37,816
TOTAL OPERATING EXPENSES		359,067			84,251					443,318
NET INCOME BEFORE INCOME TAXES		176,754			(84,251	)	(2	)		92,503
NET INCOME		152,187			(84,251	)	(2	)		67,936
COMPREHENSIVE INCOME		168,189			(84,251	)	(2	)		83,938
Statement of Cash Flows for the Nine Months Ended September 30, 2009
	Previously
	Reported			Adjustments					As Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income after income tax		152,187			(84,251	)	(2	)		67,936
Adjustment for shares not withdrawn		-			84,251		(2	)		84,251
TOTAL OPERATING EXPENSES		(218,055	)		-					(218,055	)

(1)	The Company erroneously stated the par value of the Company's Class A Common Stock to be $0.01 per share.  Effective April 15, 2009, the Company amended and restated its Certificate of Incorporation to decrease the Class A Common Stock's par value to $0.001 per share.
(2)	The Company erroneously reported 43,000,000 shares of Class A Common Stock had been withdrawn and canceled.

F - 7

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Forward Looking Statements

Certain statements in this report on Form 10-Q for the fiscal quarter ending September 30, 2009, including statements of our expectations, intentions, plans and beliefs, including those contained in or implied by “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to Consolidated Financial Statements, are “forward-looking statements”, within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that are subject to certain events, risks and uncertainties that may be outside our control.  The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”, “will”, and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. These forward-looking statements include statements of management's plans and objectives for our future operations and statements of future economic performance, information regarding our expansion and possible results from expansion, our expected growth, our capital budget and future capital requirements, the availability of funds and our ability to meet future capital needs, and the assumptions described in this report underlying such forward-looking statements. Actual results and developments could differ materially from those expressed in or implied by such statements due to a number of factors, including, without limitation, those described in the context of such forward-looking statements, our expansion and acquisition strategy, our ability to achieve operating efficiencies, our ability to successfully develop, manufacture and deliver Dahurian Angelica Root and related products on a timely basis and in the prescribed condition, evolving standards in the Traditional Chinese Medicine industry, domestic and international regulatory matters, general economic and business conditions, the strength and financial resources of our competitors, our ability to raise sufficient capital in order to effectuate our business plan, our ability to find and retain skilled personnel and key executives, the political and economic climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed with the Securities and Exchange Commission (the “Commission”).

There may be events in the future that we are unable to accurately predict or control, including weather conditions and other natural disasters which may affect demand for our products, and the product–development and marketing efforts of our company and our competitors. Examples of these events are more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 under “Risk Factors.”

Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the reports and documents the Company files from time to time with the SEC, particularly its Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, Current Reports on Form 8-K and all amendments to those reports.

General

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

- 9 - -

We were incorporated in the State of Delaware on February 26, 2002.  In June and July 2002, we acquired approximately 99% of the outstanding shares of Voice Diary Ltd., an Israeli corporation (“VDL”), through an exchange of shares of the Company with shareholders of VDL ("Plan of Exchange").  On June 13, 2006, we, as the acquirer, executed a Plan of Exchange with Yinfa (acquiree), the shareholders of Yinfa and the Company’s then majority shareholders, pursuant to which we issued 30,000,000 (post-split) new shares of our Class A Common Stock to the Yinfa shareholders in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, in reliance upon Regulation S thereunder, in exchange for all of their shares of registered capital of Yinfa. As a result, Yinfa became our wholly-owned subsidiary.  Yinfa was founded on April 24, 2001, with registered capital of US $125,500 (RMB 1,000,000) and total assets of US $1,475,795.  Yinfa’s business incorporates a self-owned production base and a network of DAR (as defined below) associates, farmers and research and development affiliates.  The transaction was treated for accounting purposes as a capital transaction and recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree.  We disposed of VDL on August 22, 2006 pursuant to the agreement between the Company, VDL and Arie Hinkis, our former president.  On May 21, 2007, we changed our name to "China Health Resource, Inc." to more accurately reflect our business operations.

Our Business

Since the completion of the Plan of Exchange with Yinfa, our core business has been in pharmaceuticals and the continued operations of Yinfa.  Yinfa is a Chinese pharmaceutical company focused on developing and commercializing Dahurian Angelica Root (“DAR”), a popular traditional Chinese medicine (“TCM”).  Our business plan includes distributing DAR and its related products for the treatment of pain, swelling and pustule.  DAR is a popular herb employed extensively as an ingredient in food, medicine and cosmetics.  The Suining district in China’s Sichuan Province is the major planting and production area in China for DAR as a result of the local climate and soil properties.  Over 70% of DAR for general use and 100% of DAR for pharmaceutical use in China is produced in Suining.

In May 2005, we applied for and obtained Good Agricultural Practice of Medical Plants and Animals (“GAP”) certification in China for DAR, in cooperation with Sichuan Yinfa Resource Development Group Co. Ltd., our affiliate (“Yinfa Resource”).  The standards which must be met to obtain certification include the study of our environment quality, seed quality, minimum pesticides, and fertilizer.  These standards were adopted by the Chinese State Food and Drug Administration ("SFDA").  Our GAP project involves approximately 133,334 square meters of experimental planting fields, and 1,333,340 square meters of fields run by companies we have hired, all of which passed inspection by the Chinese State Food and Drug Administration, or SFDA, on February 26, 2006.  The GAP certificate has been issued in name of our partner Yinfa Resource. GAP certification means that our planning, quality, and manufacturing of DAR have met the requisite high and certifiable standard of SFDA.

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

We believe our business model will help facilitate the process of growing and commercializing DAR, research and development, sales and marketing.  Our current DAR-related products include the Bailing Capsule, Yisheng Capsule, Kimchee-Mate and Fragrant Bag, all of which have been certified by the  SFDA and are being sold into the market via regional distributors throughout China.  We will continue to explore the development and addition of DAR in a range of foods, medicines and cosmetics. In addition, we continue to consider and explore opportunities to expand our current asset base and product offerings to increase our revenues and enhance shareholder value.  These opportunities may include from time to time and in addition to other means of efforts to grow our business, but are not limited to, possible acquisitions or in-licensing of additional products and the combination or merger of Yinfa with other Chinese companies in synergistic or complementary industries.  Our ability to consummate any acquisitions will depend on available resources, market price of our common stock and other factors customary and usual to acquisitions, including the availability of affordable financing and funding for such acquisitions or post-acquisition business development.

- 10 - -

Seasonality

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

Critical Accounting Policies

Revenue recognition

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

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

FASB Accounting Standards Codification

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

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

As a result of the Company’s implementation of the Codification during the quarter ended September 30, 2009, previous references to new accounting standards and literature are no longer applicable.  In the current quarter financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

- 11 - -

Inventory

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

Property, Plant, and Equipment

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

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

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

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

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

Results of Operations for the Nine Months Ended September 30, 2009

Balance Sheet

Our total assets at September 30, 2009 were US $2,581,011 compared to US $8,167,073 at December 31, 2008.  Our total liabilities were US $1,085,254 at September 30, 2009 compared to US $6,774,470 at December 31, 2008, principally due to a decrease in our current liabilities for our convertible note payable.  As a result, net assets for the period under review have increase from US $1,392,603 at December 31, 2008 to US $1,495,757 at September 30, 2009.

Balance Sheet	September 30, 2009		December 31, 2008
Total Assets	$	2,581,011	$	8,167,073
Total Liabilities		1,085,254		6,774,470
Net Assets		1,495,757		1,392,603

- 12 - -

Results of Operations

Profit/Loss	For the Nine Months Ended
	September  30, 2009		September 30, 2008
Operating Income	$	85,249	$	15,535
Net Income  Before Tax		92,503		32,544
Corp. Income Tax		24,567		-
Net Income		67,936		32,544

Revenues

Our revenues for the nine months ended September 30, 2009 were US $2,818,426 an increase compared to revenues of US $860,222 the nine months ended September 30, 2008.  Unlike the first quarter of 2008, during the first quarter of 2009 we began selling our DAR-related products, such as the Yisheng Capsule, which accounts for this increase.

Cost of Sales; Gross Profit

Cost of sales includes expenses directly related to manufacturing and selling our products, including costs of raw materials purchased from farmers, product delivery and direct labor costs. Our cost of sales for the nine months ended September 30, 2009 was US $2,289,858, or approximately 81% of revenues, compared to US $545,541 for the nine months ended September 30, 2008, or approximately 63%.  Revenues earned during the nine months ended September 30, 2009 was US $528,568, which significantly increased compared to US$314,681 for the nine months ended September 30, 2008.  As discussed above, unlike during the third quarter of 2008, we received increased revenues from sales in the third quarter of 2009, thus increasing cost of sales accordingly.

Gross profit for the nine months ended September 30, 2009 was US $528,568, compared to US $314,681 for the nine months ended September 30, 2008.

Operating Expenses

Operating expenses for the nine months ended September 30, 2009 increased by approximately 20% to US $359,068 from US $299,146 for the nine months ended September 30, 2008.  The largest component of operating expenses is attributable to selling, general and administrative (“SG&A”) expense consisting primarily of administrative expenses, which totaled US $340,502.  SG&A increased to US $340,502 for the nine months ended September 30, 2009 compared to US $267,667 for the nine months ended September 30, 2008.  The increase is primarily due to the increased expenses relating to the research, development and sales of our DAR-related products, specifically the Yisheng Capsule.  Additionally, interest expense for the nine months ended September 30, 2009 decreased to US $18,566 from $31,479 for the nine months ended September 30, 2008.

- 13 - -

Other Income/Expense

We received US $7,254 in total other income / expenses during the nine months ended September 30, 2009, compared to US $17,009 during the nine month period ended September 30, 2008.

Impact of Inflation

We believe that inflation has had a negligible effect on operations during the period under review. The inflation rate in the Sichuan Province has been lower than the average national inflation rate for China.  None of our operations were effected by the earthquake and related aftershocks.  We believe that we can offset any inflationary increases in the cost of sales by continuing to increase our sales of DAR in response to continued demand and by improving operating efficiencies.

Taxes

According to the Corporate Income Tax Law of China, companies without any tax abatement programs are charged at a 25% income tax rate.  For the nine months ended September 30, 2009, we accrued income taxes of US $24,567.  This tax expense arises due to operating income earned by our subsidiary Yinfa. Due to operating losses, we accrued no income tax during the nine months ended September 30, 2008.

Net Income

We had a net loss for the nine months ended September 30, 2009 of US $152,187, compared to a net income for the nine months ended September 30, 2008 of US $32,544.  We had a comprehensive net income for the nine months ended September 30, 2009 of US $168,189, compared to a comprehensive gain of US $106,114 for the nine months ended September 30, 2008.  The improvement in our operating results for the nine months ended September 30, 2009 is attributable principally to earning revenues during the first and second quarter of 2009 and offset primarily increases in operating expenses and a foreign currency translation gain of US $16,002 during the nine months ended September 30, 2009, compared to a foreign currency translation gain of US $73,570 during the nine months ended September 30, 2008.

We are working to strengthen our internal management processes and to grow our sales revenues, while maintaining an efficient cost structure.  However, there can be no assurance that we will achieve or maintain continuing profitability, or that revenue growth will continue in the future.

- 14 - -

Liquidity and Capital Resources

Cash flows used in operating activities were US $218,055 during the nine months ended September 30, 2009, compared to cash flows provided by operating activities of US $31,745 during the nine months ended September 30, 2008.  The significant increase in cash flows during the nine months ended September 30, 2009 was primarily due to a significant increase in accounts receivable

Cash flows provided by investing activities during the nine months ended September 30, 2009 was US $115,117, compared to cash flows used in investing activities during the nine months ended September 30, 2009 of US $48,597.  During the nine months ended September 30, 2009, US $102,248 was provided investing activities through the sale of property, plant and equipment and US $-0- was used in financing activities, through the payment on a capital contribution.

Overall, we have funded our cash needs from inception through September 30, 2009 with a series of debt and equity transactions, primarily with related parties.  If we are unable to receive additional cash from our related parties, we may need to rely on financing from outside sources through debt or equity transactions, which funding may not be available under current economic conditions or available on affordable terms and conditions. Our related parties are under no legal obligation to provide us with capital infusions.  Failure to obtain such financing could have a material adverse effect on operations and financial condition.

We have cash of US $14,561 on hand as of September 30, 2009, a decrease of US $86,936 from the beginning of the year and attributable in substantial part to a significant decrease in accounts receivable and an unfavorable foreign currency translation.  Currently, we have enough cash to fund our operations for about two (2) months.  This is based on current cash flows from financing activities and projected revenues.   If the projected revenues fall short of needed capital we may not be able to sustain our capital needs.  We will then need to obtain additional capital through equity or debt financing to sustain operations for an additional year.  Our current level of operations would require capital of approximately US $100,000 to sustain operations through the year 2009 and each year thereafter.

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

PRC Risks

Substantially all of the Company’s business operations are conducted in China and governed by Chinese laws and regulations. Because these laws and regulations are relatively new, the interpretation and enforcement of these laws and regulations involve uncertainties.

- 15 - -

The Chinese government imposes controls on the convertibility of Chinese currency, or “RMB,” into foreign currencies and, in certain cases, the remittance of currency out of China.  We receive substantially all of our revenues in RMB, which is currently not a freely convertible currency.  Under existing Chinese foreign exchange regulations, payment of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the Chinese State Administration of Foreign Exchange by complying with certain procedural requirements.  However, approval from appropriate governmental authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of bank loans denominated in foreign currencies.  The Chinese government may also at its discretion restrict access in the future to foreign currencies for current account transactions.

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

Our success will be dependent upon implementing our plan of operations and the risks associated with our business plans.  We manage the processing and DAR distribution business to retail consumers and wholesale buyers.  Subject to sufficient cash flow from operations or funding, we plan to strengthen our position in these markets and to expand our operations through aggressively marketing our products and our concept.

Off-Balance Sheet Arrangements

As of September 30, 2009, we did not have any off-balance sheet arrangements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934 and we are not required to provide the information under this item.

ITEM 4T.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures (As Revised)

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the Restatement described in the Explanatory Note, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, re-evaluated the effectiveness of  our disclosure controls and procedures and determined that there was a material weakness in our internal control over financial reporting as of December 31, 2009 as more fully described in “Management’s Report on Internal Control over Financial Reporting (As Revised)” in Amendment No. 1 to our Annual Report on 10-K on Form 10-K/A filed concurrently with this report.  A material weakness is a deficiency, or combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. 

- 16 - -

Based on the re-evaluation and because of the material weakness in internal control, our Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective as of September 30, 2009.

As of the date of the filing of this report, we have remedied this deficiency in our disclosure controls and procedures by implementing additional controls and procedures, as described below.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.   During the second quarter of 2010, certain remedial efforts to address the material weakness in our internal control and deficiency in our disclosure controls and procedures have been undertaken, or will be undertaken, as described below.

We are aware that any system of controls, however well designed and operated, can only provide reasonable, and not absolute, assurance that the objectives of the system are met, and that maintenance of disclosure controls and procedures is an ongoing process that may change over time.  Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected. 

Remediation

Subsequent to April 15, 2010 through the filing date of this report, we have undertaken or will undertake the following remedial efforts to address the material weakness in our internal control over financial reporting and deficiencies in our disclosure controls and procedures:

·   We have hired an accountant experienced with generally accepted accounting principles in the United States of America and related reporting requirements to assist the Chief Financial Officer with the preparation of the Company's financial statements.

·   We intend to raise additional capital to hire additional accountant staff where needed to assist with financial reporting as soon as our finances will allow.

·   We have implemented a revised review process by using the internal control worksheet we developed to insure that disclosure of all required information is included in future company regulatory filings.

·   We have provided guidance and additional training to the Chief Financial Officer regarding the appropriate accounting treatment for complex transactions of the type involved in the Restatement and the proper recording of changes in the Company's capital stock.

·   We have hired additional, outside consultants and accounting professionals to assist management with the preparation of financial statements to be included in reports required under U.S. securities law.

·   The Company's outside consultants and Lake & Associates, CPA’s LLC, the Company’s independent registered public accounting firm, have reviewed applicable reporting obligations required under U.S. securities law with the Chief Financial Officer and other members of senior management and have developed an internal control worksheet designed to ensure that required disclosures are made on a timely basis.

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PART II.   OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

None.

ITEM 1A.  RISK FACTORS

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

ITEM 2.     UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.     OTHER INFORMATION

None.

ITEM 6.      EXHIBITS

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

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SIGNATURES

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

	CHINA HEALTH RESOURCE, INC.
Dated:  July 15, 2010	By: /s/    Jiang Chen
	Jiang Chen
	Chief Executive Officer and Director
	(Principal Executive Officer)
Dated:  July 15, 2010	By: /s/    Yi Zhou
	Yi Zhou
	Chief Financial Officer and Director (Principal Financial Officer)

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CHINA HEALTH RESOURCE, INC.

(the “Registrant”)

(Commission File No. 000-50029)

Exhibit Index

to

Quarterly Report on Form 10-Q/A

for the Quarter Ended September 30, 2009

Exhibit No.	Description	Incorporated Herein by Reference to	Filed Herewith
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		X

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