The following discussion should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q.

Safe Harbor Regarding Forward-Looking Statements

The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

Overview of Operations

The company has achieved substantial growths in revenue and net income this quarter as compared with the same period last year. Our growth was driven by 1. The continued expansion of our network of franchisee owned retail stores all across the country, and 2. Successful execution of two acquisitions carried out during the first and second quarters.

We believe the fact that we are growing year over year both for the nine months and the three months periods show that our production and growth strategies are working.

Our general production strategy is to grow our revenue year over year at a healthy and steady rate, at the same time rationalizing our product portfolio.

Our growth strategies are to expand the chain of our franchisee owned retail stores, and at the same time to acquire other companies to break geographical barriers into new markets and to gain access to better products and technologies.

We classify the chain of franchisee owned retail stores into four levels: Order size over $30,000 makes the store provincial level store. $22,400 municipal level, $15,000 county level, and $5,910 trial stores. A trial store does not have physical store space and is usually an individual selling from his/her home. All store must pay a one time fee to register with the company, and reorder in every three months to keep the status as a franchisee. The company provides incentives, such as rebates to large orders.

Provincial stores are mostly stand alone shops or a counter in major supermarkets. Most of the stores open during the third quarter in Harbin are provincial stores. The stores opened in other cities are mostly county level and trial stores.

Our focus is on the nutritional food segment, that are more value-added and have larger market potentials, based on the research and market surveys done by reputable organizations.

Our operations have a pattern of seasonality. Usually the best quarter in terms of sales is the fourth quarter., when nutritional foods and dietary supplements sell well. The second quarter is the second best quarter, mostly because there are two months in the quarter that the cacti are harvested. The third and fourth quarters have only month, whereas the first quarter has almost no cactus harvest. Cactus is the largest segment of our products in terms of sales. Therefore the first quarter is the slowest quarter.

Results of Operations

Revenue

For the nine months ended September 30, 2008 and 2007

The Company generated $15,985,310 in sales for the nine months ended September 30, 2008, an increase of $5,604,597 or 53.99% as compared to the revenue of $10,380,713 for the nine months ended September 30, 2007.

The major reasons for the growth are: We added on a total number of 419 stores to our network of franchisee owned retail stores during the period while at the same time same store order sizes went up. In 2007 the average order for a store was $1,925.19. In 2008 by the end of Q3, it was $3,831.33. All the stores are required to place at least one order in every three months.
We are very close to reaching our target of adding 500 new stores this year.

We also acquired two companies, Guangzhou Chichi Network Companies and Shanghai Jinao Food Co. Ltd. during the first and second quarter.

For the three months ended September 30, 2008 and 2007

For the three months ended September 30, 2008, the sales totaled $7,457,814, an increase of $3,944,140, or 112.25% as compared to the net sales of $3,513,674 for the three months ended September 30, 2007.

Both new subsidiaries started to contribute their sales to China Yingxia, because the accounts of Shanghai Jinao that have been consolidated into Harbin Yingxia and Guangzhou Chichi was for the full three months of the third quarter instead of only two months of sales consolidated into Harbin Yingxia in the second quarter.

The number of franchisee owned retail stores increased during the third quarter is 146. Please see the table below for their distribution and contribution to the total sales of the Company.

During the third quarter, the Company continues to expand its distribution network and has created 146 new franchisees stores. The total sales contribution of these new stores in the quarter was $571,359. The distribution of the new stores is as follows:

    Region        City    # of stores Revenue contribution in Q3        Note
                                                                 P-Provincial level
                                                                    M-City level
                                                                   C-County level
  Northeast                        78                   $304,986
               Harbin              30                                    P
                 Daqing            17                                    C
                Qiqihar            13                                    C
               Mudanjiang          10                                    C
                 Suihua             8                                    C
Northern China                      7                    $27,326         C
                Beijing             7                                    C
Eastern China                      13                    $52,167         C
                Shanghai           10                                    C
                 Hefei              3                                    C
Southern China                     27                   $106,819         C
               Guangzhou           17                                    C
                Shenzhen           10                                    C
  Northwest                         3                    $12,575         C
                Lanzhou             3                                    C
  Southwest                        13                    $49,683         C
               Chongqing           13                                    C
 Southcentral                       5                    $17,802         C
                 Wuhan              5                                    C
    Total                         146                   $571,359         C

A breakdown of sales by product categories and as a percentage of total sales, as well as their respective gross margins for both first nine months of 2008 and the third quarter of 2008 are listed below:

                                                     Jan. to Sept
                                                     2008              Percentage of
                                                     Revenue           Revenue            Gross Margins

Nutritional Foods                                    $   3,445,742              21.56 %             50.38 %
Dietary Supplements                                  $   2,639,100              16.51 %             64.85 %
Cosmetic Products                                    $     233,064               1.46 %             68.78 %
Cactus Materials                                     $   7,933,170              49.63 %             57.60 %
Personal Care and Other Products                     $     226,452               1.42 %             69.72 %
Chichi Network Companies                             $     738,881               4.62 %             30.61 %
Shanghai Jinao Food Co.                              $     768,901               4.81 %             30.04 %
Total                                                $  15,985,310                100 %            55.00% %




                                                     Jul.-Sept. 2008       Percentage of
                                                     Revenue               Revenue            Gross Margins

Nutritional Foods                                    $       1,316,467              17.65 %             49.92 %
Dietary Supplements                                  $         813,213              10.90 %             62.75 %
Cosmetic Products                                    $          78,695               1.06 %             70.33 %
Cactus Materials                                     $       3,674,173              49.27 %             59.26 %
Personal Care and Other Products                     $          70,512               0.95 %             71.30 %
Chichi Network Companies                             $         737,424               9.89 %             38.00 %
Shanghai Jinao Food Co.                              $         767,330              10.29 %             30.04 %
Total                                                $       7,457,814                100 %             56.16 %

Within the two of the major categories:

                                                               Jul. -          Percentage of
                                                               Sept. 2008      Nutritional Food
Nutritional Foods                                              Revenue         Sales
 Organic Rice                                                  $   650,613                 49.42 %
  Soybean Milk and Yogurt                                      $   321,516                 24.42 %
  Long Gu Millet                                               $    29,339                  2.23 %



                                                               Jul. -          Percentage of
                                                               Sept. 2008      Dietary
Dietary Supplements                                            Revenue         Supplements Sales
  Alpha Roots                                                  $   302,396                  37.19 %
  Cactus and Other Herbal Tablets                              $   123,366                  15.17 %
  Wild Herbal Nutritional Pills                                $   111,570                  13.72 %

Besides the seasonality discussed above, the trends in the sales are: 1. Cactus products remain the largest segment of the revenue, at about 50% of the total. The nutritional foods come as the second, with a share of 25% - 30%. Because the newly acquired Shanghai Jinao Foods Co. produces soybean milk and yogurt, its revenue belongs to the nutritional food sales. The third major product category is the dietary supplements. Its share of the sales is between 10% to 20%.

Cost of Sales

The cost of sales was $7,192,816 for the nine months ended September 30, 2008, an increase of $3,189,027 or 79.65% as compared to the cost of sales of $4,003,789 for the nine months ended September 30, 2007.

For the three months ended September 30, 2008 and 2007

For the three months ended September 30, 2008, the cost of sales increased by $2,615,304, or 289.11%, as compared to the cost of sales of $904,604 for the three months ended September 30, 2007.

These increases are larger than the percentage increases in revenues. This shows we face margin pressure due to increasing raw material costs, such as fertilizers and energy costs, such as gasoline for our transportation vehicles. We have long term contracts with local farmers who supply the company with agricultural raw materials at pre-negotiated prices. We also grow many of our raw materials by ourselves.

Total Operating Expenses

For the nine months ended September 30, 2008 and 2007

Total operating expenses were $1,437,703 for the nine months ended September 30, 2008, a decrease of $222,971 or 13.43% as compared to total operating expenses of $1,660,674 for the nine months ended September 30, 2007. These decreases are the results of 1. The company has entered a slow phase of R & D activities and limited the related expenses. The company currently has enough new products to focus on their sales. 2. of the company's streamlining its management expenses and professional services fees.

For the three months ended September 30, 2008 and 2007

For the three months ended September 30, 2007 and 2008, the operating expense also dropped significantly, by $372,836, or 41.53%, from $897,699 in 2007 to $524,863. The reasons for this decline are similar to those for the nine-month period as outlined above.

Net Income

Net income for the nine months ended September 30, 2008 increased by $2,303,402 or 48.81% to $7,022,550 from $4,719,148 for the nine months ended September 30, 2007. For the three months ended September 2008, net income also increased by $1,508,480, or 88.01%, from $1,713,951 in 2007 to $3,222,431 in 2008. The increases in net income are the direct results of increase in revenue.

Liquidity and Capital Resources

As of September 30, 2008, the Company had cash and cash equivalents of $5,376,431, as compared to $736,683 at December 31, 2007. As of September 30, 2008, the Company had working capital of $21,163,045, as compared to $ 14,765,981 as of December 31, 2007.

Net cash provided by the operating activities totaled $1,488,985 for the nine months ended September 30, 2008, as compared to cash used by operating activities of $1,247,829 for the nine months ended September 30, 2007. The net cash provide in operations was largely affected by the increase in net income.

Net cash provided by investing activities totaled $1,836,908 for the nine months ended September 30, 2008 as compared to net cash used of $7,364,044 for the nine months ended September 30, 2007. During the nine month period ended September 30, 2008, we were able to collect short term loans of $2,194,774 and loans to related parties of $1,942,951. These collections are related to the short term loans we made to the farmers of our Hulan production base to finance the construction of well sinkers during the drought in 2007.

These collections offset purchase of property and equipment, investment advance to support India operations, Company's working capital, deposits on buildings and land along with investment made toward the development of our business in southern China with Chichi Wang companies.

On January 23, 2008, the Company registered 'China Xianhe India Private Limited" in New Deli, India. RMB2,000,000 (approximately US$283,322) was made an advance as initial start up cost as of June 30, 2008. The Company is expected to expand its dietary supplement products into Indian market in November of 2008. It has received the business license of direct sales from Indian authorities and is currently organizing logistics for shipping the products to India

Deposits on buildings and land of $1,564,042 were related to our sales office in Beijing along with land in Anhui. The office in Harbin has completed with the title transferred under China Yingxia and has been reclassified into Property, Plant and Equipment, as of the end of September 30, 2008.

Net cash used or provided in financing activities were nil for the nine months ended September 30, 2008 as compared to $9,306,743 provided for the nine months ended September 30, 2007.

As of September 30, 2008, the Company has loans receivable from related parties in the amount of $94,600. All related party loans are provided to the affiliated retail stores or companies to facilitate the initial establishment of their businesses for selling the Company's products. These loans are interest free and unsecured and are due upon demand. As many stores are closing down and turned into online stores, the loans have not increased significantly compared with the second quarter of 2008, even when the number of new stores has increased.

The Company made separate deposits in the total amount of $1,564,042 on one office space in Beijing and a piece of land in Anhui Province it intends to purchase. All purchases are evidenced by purchase agreements and the transactions were not finalized as of September 30, 2008. Once the Company completes the title transfers, the deposits will be reclassified to Property, Plant and Equipment account.