China Health Resource 10-K/A 2009 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended:  December 31, 2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
	For the transition period from ________ to _________

Commission File Number:  000-50029

CHINA HEALTH RESOURCE, INC.

(Exact name of Registrant as specified 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 City, Sichuan Province, P.R. China

(Address of Principal Executive Offices)

+(86-825) 239-1788

(Issuer’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None	Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Class A, $.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes  o  No  x

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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.  See the definitions of the “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

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

As of December 31, 2009, there were 142,288,894 shares of the registrant’s Class A Common Stock, par value $0.001, issued and outstanding, of which approximately 76,965,906 are held by non-affiliates of the registrant.   The aggregate market value of securities held by non-affiliates is approximately $384,830 as of June 30, 2009, based upon the registrant’s closing bid price as quoted on the OTC Bulletin Board on June 30, 2009, of $0.005 per share.

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

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

Except for historical information, this report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words “expect,” “anticipate,” “intend,” “believe” and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed in Item 1. Business and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances taking place after the date of this document.

EXPLANATORY NOTE

We are filing this Amendment No. 1 to the Annual Report on Form 10-K (the “Form 10-K/A”) of China Health Resource, Inc. (the “Company”) for the fiscal year ended December 31, 2009 previously filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2010 (the “2009 Form 10-K”) to effect the following amendments:

(a)

Part II, Item 9A(T): Controls and Procedures.  The disclosure in this Item has been amended in light of the material weakness in internal control over financial reporting identified in connection with the restatement (the "Restatement") of the registrant’s financial statements contained in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2009 (the "Third Quarter 2009 Form 10-Q"), as described below.

(b)

Part IV, Item 15:  Exhibits and Financial Statement Schedules. The disclosure in this Item has been amended to correct certain errors appearing in our previously-filed financial statements as of December 31, 2009.

Except for the amendments described above, this Form 10-K/A does not revise, update, or in any way affect any information or disclosure contained in the 2009 Form 10-K and we have not updated the disclosures contained herein to reflect events that occurred at a later date. Accordingly, this Form 10-K/A should be read in conjunction with our SEC filings made subsequent to the 2009 Form 10-K.

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

Form 10-Q for the period ended September 30, 2009 - Part I:

Item 1:      Financial Statements (Unaudited)

Item 4T:   Controls and Procedures

Form 10-Q for the period ended March 31, 2010 - Part I:

Item 4T:   Controls and Procedures

Background of the Restatement of the Company's Financial Statements

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  the Company's Class A common stock (the "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 the 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.

During the preparation of the Company's 2009 Form 10-K, we discovered that the Third Quarter 2009 Form 10-Q erroneously reported 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.

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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.  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 Class A Common Stock issued and outstanding and, therefore, our unaudited consolidated financial statements required restatement.  Our Board of Directors and senior management, assisted by outside consultants and Lake & Associates, CPA, 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 II, Item 9A(T), 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 December 31, 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.

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Impact of Corrections on Previously-Issued Consolidated Financial Statements

As a result of the Additional Errors described above, the audited balance sheet appearing in the 2009 10-K has been amended as follows:

China Health Resource, Inc. and Subsidiary
Audited Consolidated Balance Sheets
As of December 31, 2009 and 2008
ASSETS	December 31, 2009				December 31, 2008
CURRENT ASSETS
Cash and Cash Equivalents		$	18,211			$	101,497
Accounts Receivable			889,020				441,047
Note Receivable			350,312				378,054
Employee Advances			14,916				3,016
Advances to Suppliers			55,630				162,158
Prepaid Expenses			-				59,648
Inventory			29,006				264,177
TOTAL CURRENT ASSETS			1,357,094				1,409,598
FIXED ASSETS
Property, Plant, and Equipment			959,557				6,912,234
Accumulated Depreciation			(126,507	)			(154,759	)
TOTAL NET FIXED ASSETS			833,050				6,757,475
TOTAL ASSETS		$	2,190,144			$	8,167,073
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities		$	268,849			$	238,275
Other Payables			113,592				87,678
Note Payable-Convertible Debt			-				3,500,000
Due to Shareholder			376,457				83,258
Taxes Payable			309,574				241,493
Notes Payable - Current Portion			234,322				412,773
TOTAL CURRENT LIABILITIES			1,302,794				4,563,477
LONG-TERM LIABILITIES
Notes Payable-Convertible debt			-				2,210,994
TOTAL LONG-TERM LIABILITIES			-			$	2,210,994
TOTAL LIABILITIES			1,302,794				6,774,471
STOCKHOLDERS' EQUITY
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			157,143				149,523
Retained earnings (deficit)			(557,914	)			(45,042	)
TOTAL STOCKHOLDERS' EQUITY			887,350				1,392,602
TOTAL LIABILITIES AND EQUITY		$	2,190,144			$	8,167,073
The accompanying notes are an integral part of these financial statements.

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The audited Consolidated Statement of Operations was not affected by the errors, but is presented here as follows:

China Health Resource, Inc. and Subsidiary
Audited Consolidated Statement of Operations
For the Year Ended December 31, 2009 and 2008
	For the 12 months
	2009			2008
REVENUES
Sales	$	4,377,463		$	2,646,111
Cost of Sales		3,736,867			1,760,035
GROSS PROFIT		640,596			886,076
OPERATING EXPENSES
Selling, General, and Administrative		1,184,213			505,058
Financial Expense
Interest Expense		69,508			50,537
Distribution Costs		-			-
TOTAL OPERATING EXPENSES		1,253,721			555,595
OPERATING INCOME (LOSS)		(613,125	)		330,481
OTHER INCOME / (EXPENSES)
Non-Operating Expenses		-			-
Government Grants		-			72,857
Debt Forgiveness		177,893
Other		2,167			3,197
TOTAL OTHER INCOME / (EXPENSE)		180,060			76,054
NET INCOME (LOSS) BEFORE TAXES		(433,065	)		406,535
INCOME TAX EXPENSE		79,807			149,635
NET INCOME (LOSS)	$	(512,872	)	$	256,900
INCOME FROM DISCONTINUED OPERATIONS		-			-
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation (Loss) Gain		7,620			73,406
COMPREHENSIVE INCOME (LOSS)	$	(505,252	)	$	330,306
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		142,288,894			99,523,815
Fully diluted		142,288,894			99,523,815
NET LOSS PER COMMON SHARE
Basic		**			**
Fully diluted		**			**
** Less than $.01
The accompanying notes are an integral part of these financial statements.

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The audited Consolidated Statement of Cash Flows was not affected by the errors, but is presented here as follows:

China Health Resource, Inc. and Subsidiary
Audited Consolidated Statement of Cash Flows
For the Year Ended December 31, 2009 and 2008
	For the 12 months
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income after income tax	$	(555,705	)	$	256,900
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation		(28,385	)		48,260
Amortization of prepaid expenses		-			-
Due from related party		-			533,824
Cancel Stock issued for lease contract		0			(1,965,256	)
Accounts receivable		(447,371	)		58,360
Employee Advances		(11,892	)		5,347
Other Receivable		106,635			48,814
Bad debt provision		-			-
Prepaid Expenses		124,647			1,641,413
Inventory		235,321			(226,448	)
Notes receivable		0			-
Intangible assets					-
Long term deferred assets					-
Accounts payable and accrued liabilities		411,786			116,268
Notes payable					-
Other payable		(202,699	)		38,061
Others		9,515			10,877
Tax payable		72,319			163,498
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(285,828	)		729,918
CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of Note Receivable					-
Notes Receivable Decrease (Increase)		28,085			(432,370	)
Disposal of property , plant, and equipment		168,158			-
Purchase of property, plant, and equipment		-			(1,054	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		196,243			(433,424	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of short-term note		-			-
Proceeds from shareholder loan		-			-
Note Payable from unrelated Party		-			(304,530	)
Payments on short-term-note payable		-			-
Capital contribution		-			-
Retirement of common stock		-			-
Proceeds from issuance of common stock		-			-
Bonds payable		-			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			(304,530	)
FOREIGN CURRENCY TRANSLATION		6,299			73,406
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(83,286	)		65,370
CASH AND CASH EQUIVALENTS:
Beginning of period		101,497			36,127
End of period	$	18,211		$	101,497
SUPPLEMENTAL CASH FLOW INFORMATION:
Common stock issued for settlement of certain accounts payable	$	-		$	-
Common stock issued for services	$	-		$	-
Cancellation of Notes Payable for purchase of land right	$	5,710,994		$	-
The accompanying notes are an integral part of these financial statements.

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As a result of the Additional Errors described above, the audited Consolidated Statement of Equity appearing in the 2009 10-K has been amended as follows:

China Health Resource, Inc. and Subsidiary
Audited Consolidated Statement of Equity
For the years Ended December 31, 2009 and 2008
																	Accumulated
																	Other
	Class A Shares		par value 0.001		Class B Shares			par value 0.01			Paid-in Capital			Earnings			Comprehensive Income		Total
Balances, December 31, 2007		99,288,842	$	99,289		2,000		$	20		$	3,089,069		$	(301,942	)	$	76,117	$	2,962,553
Issuance for lease of property		43,000,000		43,000								22,000								65,000
Cancellation of Class B common stock		-		-		(2,000	)	$	(20	)		(1,965,237	)		-			-		(1,965,257	)
Net Income (Loss) for the period														$	256,900					256,900
Other comprehensive income		-		-		-			-			-			-		$	73,406		73,406
Balances, December 31, 2008		142,288,842		142,289		-			-		$	1,145,832		$	(45,042	)	$	149,523	$	1,392,602
Proceed from shareholder
Fractional shares		52	$	-		-			-		$	-		$	-			-		-
Net Income(Loss) for the period														$	(512,872	)		-		(512,872	)
Other comprehensive income		-		-		-			-			-			-		$	7,620		7,620
Balances @ December 31, 2009		142,288,894	$	142,289		-		$	-		$	1,145,832	)	$	(557,914	)	$	157,143	$	887,350
The accompanying notes are an integral part of these financial statements.

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China Health Resource, Inc. and Subsidiary

Notes to Audited Financial Statements (revised)

For the Years Ended December 31, 2009 and 2008

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

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

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

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

Accordingly, the consolidated financial statements include the following:

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

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

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A GAP certificate means that the planning, quality, and manufacturing of DAR meet a high and certifiable standard.  The GAP certificate is in the name of Sichuan and the company manages the processing and sales of DAR. CHRI and its wholly owned subsidiary Yin Fa are hereafter referred to as (the “Company”).

Basis of Presentation

The financial statements included herein were prepared under the accrual basis of accounting.

Cash and Cash Equivalents

For purposes of the Consolidated Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.

Management’s Use of Estimates

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

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.

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Comprehensive Income (Loss)

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

Foreign Currencies

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

Company’s Future Operations Are Dependent on Foreign Operations

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

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

Inventory

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

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Property, Plant, and Equipment

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

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

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

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

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

Income Taxes

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

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

Fair Value of Financial Instruments

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

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Accounts Receivable

Accounts receivable are stated at estimated net realizable value.  Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts.  In determining the collectability of the account, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances.

Impairment of Long-Lived Assets

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

Stock-Based Compensation

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

Recently Issued Accounting Pronouncements

In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements.” ASU 2010-06 requires new disclosures regarding transfers in and out of the Level 1 and 2 and activity within Level 3 fair value measurements and clarifies existing disclosures of inputs and valuation techniques for Level 2 and 3 fair value measurements. ASU 2010-06 also includes conforming amendments to employers’ disclosures about postretirement benefit plan assets. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of this statement is not expected to have a material impact on our consolidated financial position or results of operation.

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In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement No. 162” (also issued as Accounting Standards Update “ASU” No. 2009-01). This standard establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles. This standard is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of ASU No. 2009-5 had no impact on the results of operations or the financial position of the Company.

In August 2009, the FASB issued ASU No. 2009-5, “Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value.” ASU No. 2009-5 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using a valuation technique that uses the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of ASC Topic 820. ASU No. 2009-5 is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of ASU No. 2009-5 did not have a material impact on the results of operations or financial position of the Company.

In May 2009, the FASB issued a new accounting standard (FASB ASC 855-10) on subsequent events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This accounting standard establishes: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This accounting standard also requires disclosure of the date through which an entity has evaluated subsequent events. The adoption of this statement is not expected to have a material impact on our consolidated financial position or results of operation.

In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” (FASB ASC 320-10-65), which amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This Staff Position was effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this statement did not have an impact on the results of operations or the financial position of the Company.

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NOTE B - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the period ended December 31, 2009 and 2008 is summarized as follows:

Cash paid during the period ended December 31, 2009 and 2008 for interest and income taxes:

	2009		2008
Income Taxes	$	-0-		-0-
Interest	$	69,508		50,537

 NOTE C - SEGMENT REPORTING

In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information.”

This statement requires companies to report information about operating segments in interim and annual consolidated financial statements.  It also requires segment disclosures about products and services, geographic areas, and major customers.  The Company determined that it did not have any separately reportable operating segments as of December 31, 2009 and 2008.

NOTE D - NOTE RECEIVABLE

As of December 31, 2008, the company has a note receivable from an unrelated-party with a total balance due of $378,054. The note is due on December 30, 2009 with interest payable quarterly at 10.395%. The loan is extended for another year from December 31, 2009 to December 30, 2010 with the same interest and payment schedule. As of December 31, 2009, the total balance due is $350,312.

As of December 31, 2009 & 2008, the company has no note receivable from any related-party.

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NOTE E - NOTES PAYABLE - CURRENT AND LONG-TERM

As of December 31, 2009 and 2008, notes payable consist of the following:

	2009		2008
Secured note payable to an unrelated party.
Bearing 8.6625 % interest Principal payments due
10/21/2010 one payment of $ 234,322	$	234,322		234,103
Unsecured note payable –unrelated party
Bearing 2.4% interest Principal payment due
10/31/2009				178,670
TOTAL	$	234,322		412,773

Future payments on note due as follow:

Before December 31, 2009		234,322		412,773
TOTAL	$	234,322	$	412,773

NOTE F - COMMITMENTS

During 2008 the company leased a warehouse for $2,043 per year, which expires on March 14, 2009. In 2009, this lease is renewed on similar terms.

The Company leased its office space of approximately 1,100 sq feet for approximately $440 per year, which expires May 21, 2010.

Future annual lease payments are as follows:
May 22, 2009 to May 21, 2010	$	440
TOTAL	$	440

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The Company leased its office space of approximately 1,320 sq feet for approximately $967 per year.  The lease expires in January 12, 2014. Total Rent Expense for December 31, 2009 was $967.

Future annual lease payments are as follows:
Year Ending December 31, 2009	$	967
2010		967
2011		967
2012		967
2013		967
2014		967
TOTAL	$	5,802

NOTE G - RELATED-PARTY TRANSACTIONS

The former shareholders of the Company were Sichuan Suining Yinfa Resource Development Group Co., Ltd., Suining Yinfa Construction Materials Company Ltd, and Sichuan Yinfa Resource Development Co., Ltd. (the Yinfa group). According to the Temporary Resolution of the Shareholders' Meeting of the Company held on January 20, 2006, the company has had a capital restructuring as mentioned in Note L.  Related-party transactions between the Company and Yinfa group from 2004 to January 20, 2006 are listed below:

The GAP certificate is owned by the Yinfa Group, namely Sichuan Yinfa Resource Development Co., Ltd. GAP is a quality standard for agricultural products such as DAR.  The GAP certificate means that the company’s DAR meets a high and certifiable standard. The Company is the virtual manufacturer and seller of DAR.

The Company trademark for its “Bailing Capsules” is “Zhiwang” which Sichuan owns and has applied for registration.  Sichuan is waiting for approval by State Industrial and Commercial Administration General Bureau Trademark Bureau.

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NOTE H -COMPREHENSIVE INCOME (LOSS)

Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income,” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying statement of changes in stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit. For the years ended December 31, 2009 and 2008, total comprehensive income (loss) was ($505,252) and $330,306 respectively. 

NOTE I - 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 and increase sales.  In terms of operating profit and cash flow analysis, the Company’s operating profit and cash flow are relatively poor compare to the prior year’s data. The reasons are that the Company has cost a lot in reorganizing the corporate operation, much higher cost of goods especially the raw material cost and the transportation cost, relative low sales price, tremendous increase of A/R, cancellation of stock issue for property lease. In the future, the Company will have a capital expansion plan and sales promotion plan which will give the advantage to the Company’s asset and profit level.

NOTE J - INCOME TAXES

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

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

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

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

Utilization of the net operating losses may be subject to certain annual limitations due to changes in control. This may result in the expiration of net operating losses before full utilization.

The Company’s total deferred tax asset as of December 31, 2009 is as follows:

	2009			2008
Net operating loss carry-forwards	$	200,755		$	0
Valuation Allowance		(200,755	)		(0	)
	$	0		$	0
Prevailing PRC tax rate		25	%		15	%

The Company is subject to income taxes on an entity basis, on income arising in, or derived from the tax jurisdiction in which it is domiciled and operates. The corporate accrued income taxes as of December 31, 2009 and 2008 were $79,807 and $149,635, respectively.

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

	Year Ended December 31
	2009			2008
U.S. Statutory rate		34	%		34	%
Foreign income not recognized in USA		(34	)		(34	)
China income taxes		25			33
Total provision for income taxes		25	%		16	%

The Company applies SFAS 109, “Accounting for Income Taxes”, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. The provision for income taxes consist of taxes currently due plus deferred taxes. Because the Company has no operations within the United States, there is no provision for US income taxes and there are no deferred tax amounts as of December 31, 2009 and 2008.

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

Deferred taxes are calculated at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.  Deferred taxes are charged or credited in the income statement, except when they relate to items credited or charged directly to equity, in which case the deferred taxes are also recorded in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

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The Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption of FIN 48 had no affect on the Company’s financial statements.

Value added tax (“VAT”)

Enterprises or individuals who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value added tax in accordance with the PRC laws. The value added tax standard rate is 17% of the gross sales price. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s products can be used to offset the VAT due on the sales of the products.

NOTE K - PLANT AND EQUIPMENT, NET

Plant and equipment, net as of December 31, 2009 and 2008 consists of the following:

	2009			2008
Building	$	905,083		$	6,564,133
Furniture, fixture and equipment		54,474			348,101
		959,557			6,912,234
Less: accumulated depreciation		(126,507	)		(154,759	)
Plant and equipment, net	$	833,050		$	6,757,475

Depreciation expense for the year ended December 31, 2009 and 2008 respectively was $30,049 and $48,260.

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NOTE L -EQUITY TRANSACTIONS

On January 10, 2007, the Company issued 6,500,000 shares (pre-forward split) of Class A Common stock for payment of consulting services to several companies and individuals. The fair value of this stock issuance was determined using the fair value of the Company’s common stock on the grant date or the specific terms of the applicable consulting agreements and booked pro rata due to the service periods. The Company calculated a stock-based compensation cost of total $699,554 and recognized $212,896 for the year ended December 31, 2007 and $84,024 for the year ended December 31, 2008. As of December 31, 2008, the balance of $59,647 is to be amortized on the straight-line method over the remaining contract periods of seven months.

On February 2, 2007, the Company issued 1,000,000 shares (pre-forward split) of Class A Common stock for payment of consulting services to Greentree Financial Group, Inc. for services in connection with general management consulting and advisory services. The fair value of this stock issuance was determined using the fair value of the Company’s common stock on the grant date or the specific terms of the applicable consulting agreements and booked pro rata due to the service periods. The Company calculated a stock-based compensation cost of total $51,225 and recognized $51,225 for the year ended December 31, 2007.

On June 8, 2007, Deng Shu Lan, the former president of Yin Fa, resigned from all positions in Yin Fa. Pursuant to an oral termination agreement, Deng Shu Lan transferred Zheng Zhimin, the new Vice President of Yin Fa, 2,000 shares of Class B Common stock of the Company, which were converted into 10,342,593 (pre-forward split) Class A Common Stock on July 9, 2007.

On July 23, 2007, the Company effected a forward stock split of the Company's Class A Common Stock, pursuant to the Delaware General Corporation Law, exchanging one (1) existing share of Class A Common Stock for two (2) shares of post-forward split Class A Common Stock. The number of outstanding shares of the Company’s Class A common stock was increased from 49,644,447 to 99,288,842 shares and par value of its Class A common stock was unchanged at $0.01.

On August 15, 2007, the Company's Board of Directors authorized the payment of the total rent of a 20-year leasing property by the issuance of 2,000 shares of Class B Common Stock to Lian, Xiao Jian, the owner of a property. Pursuant to the terms and conditions of the Contract of Lease Property, dated June 29, 2007, the total payment of the rent for 20 years leasing period is $2,023,121 and the leasing property is approximately 3,600 square feet. The lease commences in July 2007 and expires in June 2027. Total rent expense for the year ended December 31, 2007 was $23,146.

On December 15, 2008 the 2000 shares of Class B Common Stock shares were returned to the company and the above lease contract was cancelled.

On December 30, 2008 43,000,000 shares of Class A Common Stock shares were issued as a partial payment for land usage rights and forestry rights (see note M) the shares were valued at $65,000.

On April 15, 2009, the Company filed with the Delaware Secretary of State its Amended and Restated Articles of Incorporation, which changed the Class A Common Stock par value from $0.01 to $0.001, eliminated the Class B Common Stock, and authorized to issue 50,000,000 shares of undesignated Preferred Stock, at par value of $0.01.

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NOTE M –NOTE PAYABLE-CONVERTIBLE DEBT

On December 30, 2008 the Company issued a convertible note to an un-related party for the purchase of land usage rights and forestry rights to 3,261.79 acres valued at $5,775,994. The Note has a stated simple interest rate of 1.5% per year.  Interest is payable upon conversion dates.  The note has fixed conversion dates, share prices as follows:

On March 30, 2009 the company planned to issue 12,500,000 shares valued at $.20 per share total $2,500,000.

On December 30, 2009 the company planned to issue 2,500,000 shares valued at $.40 per share total $1,000,000

On March 30, 2010 the company will issue 1,000,000 shares valued at $1.00 per share total $1,000,000

On December 30, 2010 the company will issue 807,329 shares valued at $1.50 per share total $1,210,994

Current portion of Note	$	3,500,000
Non Current portion of Note		2,210,994
Total Note Payable	$	5,710,994

On December 19 2009, the total Note payable-convertible debt with interest was cancelled under the decision of the management board meeting. The scheduled issuance in 2009 has never been issued.

NOTE N – DEBT FORGIVENESS

The Company has an unsecured note payable to an unrelated party bearing 2.4% interest with principal payment due on 10/31/2009. As of December 31, 2008, the total balance due is $178,670. In 2009, the lender forgave the debt, and the total unpaid principal balance plus accrued interest is $117,893.

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NOTE O - CONCENTRATION AND RISK

(a)     Major customers

For the year ended December 31, 2009, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues and purchases were derived from customers and vendors located in the PRC.

The Company had two customer that individually comprised 84% and 10% of net revenue for the year ended December 31, 2009, respectively.

As of December 31, 2009

Customers		Revenues					Accounts Receivable
Customer A		$	3,595,368	84	%		$	752,877	85	%
Customer B			423,265	10	%			63,167	7	%
	Total:	$	4,018,633	94	%	Total:	$	816,044	92	%

(b)   Credit risk

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

NOTE P - SUBSEQUENT EVENTS

None. The Company has evaluated subsequent events through April 14, 2010, the date that the financial statements were available to be issued, and no such events have occurred.

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PART II, ITEM 9A(T): 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 below. 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. 

Based on the re-evaluation and because of the material weakness in internal control, our Chief Executive Officer and Chief Financial Officerhave concluded that the Company's disclosure controls and procedures were not effective as of December 31, 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, designed to ensure completeness and more effective control over disclosures.

Management's Report on Internal Control Over Financial Reporting (As Revised)

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).  Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and our Chief Financial Officer and effected by our Board of Directors and management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America ("GAAP").

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

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In connection with the Restatement described in the Explanatory Note, our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, re-assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. Management’s re-assessment of internal control over financial reporting was conducted using the criteria in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  In performing the re-assessment, our management concluded that, as of December 31, 2009, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP because of 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 another internal professional with accounting expertise. Our President does possess accounting expertise but our Board of Directors does not have an audit committee. This material weakness is due to the company's lack of working capital to hire additional staff.

As of the date of the filing of this report, we have remedied the material weakness in our internal control over financial reporting and the deficiencies in our disclosure controls and procedures by implementing additional controls and procedures, as described below.

We reviewed the results of management’s assessment with our Board of Directors and our independent registered public accounting firm, Lake & Associates, CPA’s LLC.

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.

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 GAAP 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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Inherent Limitations on the Effectiveness of Internal Controls

A system of internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP; however no control system, no matter how well designed and operated, can provide absolute assurance that financial statement errors and misstatements will be prevented or detected. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any within the Company, have been detected.

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

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SIGNATURES

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

CHINA HEALTH RESOURCE, INC.
By:  /s/    Wang, Jiayin	Date:  July 15, 2010
Wang, Jiayin
President

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

Signature	Title	Date
/s/ Jiang, Chen	Chief Executive Officer and Director	July 15, 2010
Chen, Jiang	(Principal Executive Officer)
/s/ Zhou, Yi	Chief Financial Officer and Director	July 15, 2010
Zhou, Yi	(Principal Financial Officer)
/s/ Wang, Jiayin	President and Director	July 15, 2010
Wang, Jiayin
/s/ Wang, Bing	Director	July 15, 2010
Wang, Bing
/s/ Wang, Geiwi	Director	July 15, 2010
Wang, Geiwi

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CHINA HEALTH RESOURCE, INC.

(the “Registrant”)

(Commission File No. 000-50029)

Exhibit Index

to

2009 ANNUAL REPORT ON FORM 10-K/A

31.1     Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer.

31.2     Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer.

32.1     Section 1350 Certifications of Chief Executive Officer.

32.2     Section 1350 Certifications of Chief Financial Officer.

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