Benda Pharmaceutical, Inc. - FORM 10-Q

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EX-32.1 - Benda Pharmaceutical, Inc.	v167398_ex32-1.htm
EX-31.1 - Benda Pharmaceutical, Inc.	v167398_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

FORM 10-Q

_______________

x	QUARTERLY REPORT PURSUANT TO 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 SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to______.

BENDA PHARMACEUTICAL, INC.

(Exact name of registrant as specified in Charter

Delaware		000-16397		41-2185030
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

Taibei Mingju, 4th Floor,

6 Taibei Road, Wuhan, Hubei Province, 430015, PRC

(Address of Principal Executive Offices)

_______________

+86 (27) 85494916

(Issuer Telephone number)

_______________

(Former Name or Former Address if Changed Since Last Report)

Check whether the issuer (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 issuer 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 filer. See definition of “accelerated filer” and “large accelerated filer” 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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of November 23, 2009: 105,155,355 shares of common stock.

BENDA PHARMACEUTICAL, INC.

FORM 10-Q

September 30, 2009

INDEX

PART I-- FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition	4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9
Item 4T.	Control and Procedures	9

PART II-- OTHER INFORMATION

Item 1	Legal Proceedings	10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3.	Defaults Upon Senior Securities	12
Item 4.	Submission of Matters to a Vote of Security Holders	13
Item 5.	Other Information	13
Item 6.	Exhibits	13

SIGNATURE		14

Item 1. Financial Information

BENDA PHARMACEUTICAL, INC.

(an exploration stage company)

FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2009

CONTENTS

F1		CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 (UNAUDITED) AND AS OF DECEMBER 31, 2008 (AUDITED).

F2		CONDENSED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 AND FOR THE PERIOD FROM DECEMBER 17, 1999 (INCEPTION) TO SEPTEMBER 30, 2009 (UNAUDITED).

F5		CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY) FOR THE PERIOD FROM DECEMBER 17, 1999 (INCEPTION) TO SEPTEMBER 30, 2009 (UNAUDITED).

F3 - F4		CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 AND FOR THE PERIOD FROM DECEMBER 17, 1999 (INCEPTION) TO SEPTEMBER 30, 2009 (UNAUDITED).

F6 - F39		NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED).

Benda Pharmaceutical, Inc.

Consolidated Balance Sheets

(Amounts expressed in U.S. Dollars)

	September 30			December 31
	2009			2008
	(Unaudited)			(Audited)
Assets
Current Assets
Cash and cash equivalents	$	1,378,053		$	569,019
Trade receivables, net (Note 5)		8,683,364			9,336,915
Other receivables (Note 5)		678,528			504,349
Short-term loan receivables		-			146,685
Prepaid tax (Note 23)		1,509,892			771,549
Due from related parties (Note 18)		7,634			11,000
Inventories (Note 7)		2,343,783			2,344,562
Prepaid expenses and deposits (Note 5)		2,540,267			918,209
Total current assets		17,141,521			14,602,288
Due from related parties (Note 18)		3,063,153			2,961,744
Property and equipments, net (Note 8)		27,901,030			29,057,225
Intangible assets, net (Note 9)		5,454,525			6,003,102
Restricted cash (Note 11)		5,847,894			6,162,849
Refundable purchase price paid (Note 6)		1,200,000			1,200,000
Other assets (Note 12)		1,830,556			1,830,634
Debt issue costs (Note 24)		-			55,485
Total Assets	$	62,438,679		$	61,873,327

Liabilities & Shareholders' Equity
Current Liabilities
Bank indebtedness (Note 11)	$	1,199,965		$	1,288,257
Bank loans payable (current portion) (Note 13)		2,984,433			2,984,560
Short-term loans payable		1,042,955			-
Long term debt payable (current portion) (Note 14)		2,234,115			2,234,210
Accounts payable and accrued liabilities (Note 15)		9,757,230			7,228,400
Commercial notes payable (Note 11)		9,075,536			9,297,169
Taxes payable		262,761			516,302
Acquisition cost payable (Note 10)		1,426,430			1,426,491
Long-term convertible promissory notes (current portion) (Note 24)		7,260,000			6,395,951
Wages payable		1,180,027			630,475
Payable under redeemable common stock (Note 19)		7,376,366			7,376,366
Due to related parties (Note 18)		467,842			1,457,803
Total current liabilities		44,267,660			40,835,984
Due to related parties (Note 18)		960,406			997,593
Total Liabilities		45,228,066			41,833,577

Equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized;
None issued and outstanding		-			-
Common stock, $0.001 par value; 150,000,000 shares authorized;
105,155,355 shares issued and outstanding as of 9/30/2009
and 12/31/2008 respectively;		105,155			105,155
Additional paid in capital (Note 25)		22,108,427			22,108,427
Retained earnings (unrestricted)		(18,736,213	)		(16,047,561	)
Statutory surplus reserve fund (Note 17)		2,642,775			2,642,775
Accumulative other comprehensive income		6,344,117			6,347,547
Shares issuable for acquisition and services		503,860			503,860
Total Benda Pharmaceutical, Inc. Shareholders' Equity		12,968,121			15,660,203
Noncontrolling interest		4,242,492			4,379,547
Total Equity		17,210,613			20,039,750

Total Liabilities & Equity	$	62,438,679		$	61,873,327

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

F-1

Benda Pharmaceutical, Inc.

Consolidated Statements of Operations

(Amounts expressed in U.S. Dollars)

	Nine Months Ended September 30						Three Months Ended September 30
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue	$	17,345,065		$	19,860,057		$	5,904,653		$	6,634,434
Cost of goods sold		(9,770,370	)		(12,610,394	)		(3,071,291	)		(4,213,540	)
Gross profit		7,574,695			7,249,663			2,833,362			2,420,894

Selling expenses		(1,868,482	)		(2,122,689	)		(852,116	)		(691,477	)

General and administrative expenses
Amortization of intangible assets		(119,118	)		(148,591	)		(39,718	)		(50,643	)
Amortization of debt issue costs (Note 24)		(55,485	)		(198,360	)		-			(66,603	)
Depreciation		(707,622	)		(373,639	)		(328,327	)		(130,144	)
Bad debts		(3,080,334	)		(534,124	)		(271,472	)		239,769
Write-down of inventory to net realizable value (recovery)		(196,628	)		-			(72,389	)		-
Director remuneration		(67,500	)		(162,968	)		(22,500	)		(22,500	)
Penalty to investors		-			(1,380,173	)		-			(266,768	)
Other general and administrative expenses (Note 21)		(1,885,994	)		(2,764,256	)		(898,062	)		(743,982	)
Total general and administrative expenses		(6,112,681	)		(5,562,111	)		(1,632,468	)		(1,040,871	)
Research and development expenses		(283,473	)		(249,357	)		(165,390	)		(79,576	)
Total operating expenses		(8,264,636	)		(7,934,157	)		(2,649,974	)		(1,811,924	)
Operating income / (loss)		(689,941	)		(684,494	)		183,388			608,970

Interest income / (expenses) (Note 24)		(2,104,510	)		(3,339,457	)		(471,263	)		(998,877	)
Other income / (expenses) (Note 20)		106,161			10,140			60,388			(237,918	)
Government subsidies / grants (Note 22)		26,386			-			-			-

Loss before provision for income taxes and noncontrolling interest		(2,661,904	)		(4,013,811	)		(227,487	)		(627,825	)
Income taxes (Note 23)		(163,803	)		(907,176	)		(79,391	)		(382,368	)

Net loss		(2,825,707	)		(4,920,987	)		(306,878	)		(1,010,193	)

Net loss attributable to the noncontrolling interest		137,055			256,486			(65,519	)		168,270

Net loss attributable to Benda Pharmaceutical, Inc.	$	(2,688,652	)		(4,664,501	)	$	(372,397	)	$	(841,923	)

Basic and fully diluted loss per share

Net loss attributable to Benda Pharmaceutical, Inc. common shareholders	$	(0.03	)		(0.05	)	$	(0.00	)	$	(0.01	)

Weighted average shares outstanding (Note 26)		105,155,355			100,887,853			105,155,355			101,556,376

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

F-2

Benda Pharmaceutical, Inc.

Consolidated Statements of Cash Flows

(Amounts expressed in U.S. Dollars)

	Nine Months Ended September 30,
	2009			2008
	(Unaudited)			(Unaudited)
Cash Flows From Operating Activities
Net loss	$	(2,825,707	)	$	(4,920,987	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Bad Debt provision		3,080,334			534,125
Inventory written down to net realizable value (recovery)		196,628			-
Depreciation		1,609,314			1,414,763
Amortization of intangible assets		547,919			567,016
Amortization of debt issue costs (Note 24)		55,485			198,360
Interest expense (amortization of debt discount) (Note 24)		864,049			2,614,667
Penalty to investors settled by issuance of common stock		-			497,081
Directors remuneration settled by issuance of common stock		-			75,900
Changes in operating assets and liabilities:
Trade receivables		(2,427,968	)		(2,312,392	)
Other receivables		(174,180	)		239,155
Prepaid expenses and deposits		(1,622,058	)		(85,211	)
Inventories		(195,849	)		(835,895	)
Accounts payable and accrued liabilities		3,078,386			1,856,143
Taxes payable		(991,888	)		(281,668	)
Net cash provided by operating activities		1,194,465			(438,943	)

Cash Flows From Investing Activities
Purchases of property and equipment and construction-in-progress		(455,488	)		(210,254	)
Proceeds and repayments of borrowings under short-term loan receivables		146,685			(146,304	)
Net cash used in investing activities		(308,803	)		(356,558	)

Cash Flows From Financing Actives
Proceeds and repayments of borrowings under related parties, net		(1,125,192	)		(1,247,617	)
Proceeds and repayments of borrowings under government debts payable, net		(88,236	)		297,545
Proceeds and repayments of borrowings under commercial bank notes, net (Note 11)		93,266			1,876,424
Proceeds and repayments of borrowings under bank loans, net		1,042,955			(81,082	)
Net cash provided by (used in) financing activities		(77,207	)		845,270
Effect of exchange rate changes on cash		579			369,366
Net increase in cash and cash equivalents		809,034			419,135

Cash and cash equivalents, beginning of period		569,019			1,266,240

Cash and cash equivalents, end of period	$	1,378,053		$	1,685,375

Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	298,139		$	823,037
Cash paid for income taxes	$	935,208		$	954,431

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

F-3

Benda Pharmaceutical, Inc.

Statements of Consolidated Comprehensive Income

(Amounts expressed in U.S. Dollars)

	Nine Months Ended June 30,
	2009			2008
	(Unaudited)			(Unaudited)

Net loss	$	(2,825,707	)	$	(4,920,987	)

Other comprehensive income (loss)
Foreign currency translation adjustment		(3,430	)		2,997,021

Comprehensive loss		(2,829,137	)		(1,923,966	)
Comprehensive loss attributable to the noncontrolling interest		137,055			256,486

Comprehensive loss attributable to Benda Pharmaceutical, Inc.	$	(2,692,082	)	$	(1,667,480	)

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

F-4

Benda Pharmaceutical, Inc.

Consolidated Statement of Changes in Equity

(Amounts expressed in U.S. Dollars)

																					Shares
																					Issuable
	Common															Statutory		Accumulated			for
	Shares										Additional		Retained			Surplus		Other			Acquisition		Non-
	Issued and					Comprehensive			Common		Paid-in		Earnings			Reserve		Comprehensive			and		Controlling
	Outstanding		Total			Income			Stock		Capital		(Unrestricted)			Fund		Income			Services		Interest
Balance at December 31, 2008		105,155,355	$	20,039,750		$	-		$	105,155	$	22,108,427	$	(16,047,561	)	$	2,642,775	$	6,347,547		$	503,860	$	4,379,547

Comprehensive loss:
Net loss				(1,236,563	)		(1,236,563	)		-		-		(1,040,557	)		-		-			-		(196,006	)
Other comprehensive income (loss)
Foreign currency translation adjustment				(52,320	)		(52,320	)		-		-		-			-		(52,320	)		-		-

Comprehensive loss				(1,288,883	)	$	(1,288,883	)

Dividend paid				-

Balance at March 31, 2009 (unaudited)		105,155,355	$	18,750,868					$	105,155	$	22,108,427	$	(17,088,117	)	$	2,642,775	$	6,295,227		$	503,860	$	4,183,541

Comprehensive loss:
Net loss				(1,282,266	)		(1,282,266	)		-		-		(1,275,698	)		-		-			-		(6,568	)
Other comprehensive income (loss)
Foreign currency translation adjustment				5,169			5,169			-		-		-			-		5,169			-		-

Comprehensive loss				(1,277,098	)	$	(1,277,097	)

Dividend paid				-

Balance at June 30, 2009 (unaudited)		105,155,355	$	17,473,770					$	105,155	$	22,108,427	$	(18,363,816	)	$	2,642,775	$	6,300,396		$	503,860	$	4,176,973

Comprehensive loss:
Net loss				(306,878	)		(306,878	)						(372,397	)									65,519
Other comprehensive income (loss)
Foreign currency translation adjustment				43,721			43,721												43,721

Comprehensive loss				(263,157	)		(263,157	)

Dividend paid				-

Balance at September 30, 2009 (unaudited)		105,155,355	$	16,947,456					$	105,155	$	22,108,427	$	(18,736,213	)	$	2,642,775	$	6,344,117		$	503,860	$	4,242,492

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

F-5

Benda Pharmaceutical, Inc.

Notes to Consolidated Financial Statements

(Amounts expressed in U.S. Dollars)

1. Organization

Benda Pharmaceutical, Inc. (“Benda”) is a corporation organized under the Florida Laws and headquartered in Hubei Province, the People’s Republic of China (“PRC”).

Ever Leader Holdings Limited (“Ever Leader”), a wholly owned subsidiary of Benda, is a company incorporated under the laws of Hong Kong SAR.

On April 5, 2007, Benda Ebei entered into an Equity Transfer Agreements with Shenzhen Yuanzheng Investment Development Co., Ltd. and Shenzhen Yuanxing Gene City Development Co., Ltd., the then shareholders of Shenzhen SiBiono GeneTech Co., Ltd (“SiBiono”), to purchase 27.57% and 30% respectively of the shares of SiBiono’s common stock for total consideration of Rmb60 million (or $7.88 million) due and payable on or before April 30, 2007. On June 11, 2007, Benda Ebei entered into an Equity Transfer Agreements with Huimin Zhang and Yaojin Wang, the individual shareholders of SiBiono, and to purchase 1.6% and 0.96% respectively of the shares of SiBiono’s common stock for total consideration of Rmb2.56 million (or $0.34 million) due and payable on or before June 30, 2007. Altogether, the total consideration for 60.13% shares of SiBiono’s common stock was Rmb62.56 million or $9.18 million. As of September 30, 2009, an accumulated amount, approximately Rmb52.84 million or $7.76 million was paid and leaving a balance of Rmb 9.72 million or $1.42 million (please refer to Note 10 for the details).

Benda, Ever Leader, Benda Ebei, Jingling Benda, Yidu Benda, Beijing Shusai and SiBiono shall be referred to herein collectively as the “Group”. The Group is engaged principally in the business of identifying, discovering, developing, and manufacturing conventional medicines, active pharmaceuticals, bulk chemicals (or pharmaceutical immediates), and Traditional Chinese Medicines (“TCM”) for the treatment of some of the most widespread common ailments and diseases (e.g. common cold, diabetes, and cancer).

F-6

As of September 30, 2009, the organization and ownership structure of the Group is as follows:

2. Basis of Preparation, Consolidation and Going Concern

The unaudited consolidated financial statements of Benda and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information as of December 31, 2008 was derived from the audited consolidated financial statements included in the Group’s Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that report. We have reclassified amounts previously reported in the Group’s financial statements to conform to the current presentation related to redeemable common stock. The Group has evaluated subsequent events through the date that the financial statements were issued which was November 22, 2009, the date immediately preceding the date of the Group’s Quarterly Report on Form 10-Q for the period ended September 30, 2009.

In the Group’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about the Group’s ability to continue as a going concern. The Group’s interim financial statements for the three and nine months ended September 30, 2009 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Group reported a net loss of $2,825,707 for the nine months ended September 30, 2009 and has a working capital deficit of approximately $27,126,139 and accumulated deficit of approximately $18,736,213 as of September 30, 2009.

Currently, the Group does not have the ability to substantially increase its loan indebtedness with any financial institution , nor can the Group provide any assurance it will be able to enter into any loan agreements in the future, or be able to raise funds through further issuance of debt or equity in the Group. Moreover, the Group presently has little additional resources with which to obtain or develop new operations.

These factors raise substantial doubt about the Group’s ability to continue as a going concern. The financial statements do not contain any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Group be unable to continue as a going concern.

While the Group is attempting to produce sufficient revenues, the Group’s cash position may not be enough to support the Group’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taking to further implement its business plan and generate sufficient revenues provide the opportunity for the Group to continue as a going concern. While the Group believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurance to that effect. The ability of the Group to continue as a going concern is dependent upon the Group’s ability to further implement its business plan and generate sufficient revenues. The financial statements do not include any adjustments that might be necessary it the Group is unable to continue as a going concern.

F-7

3. Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates.

4. Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash on deposit with various financial institutions, and all highly-liquid investments with original maturities of three months or less at the time of purchase.

Estimates Affecting Trade Receivables, Other Receivables, Prepaid and Deposits and Inventories

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect our reporting of assets and liabilities (and contingent assets and liabilities). However, it is explicated that the changes in estimation were not material in the preparation of our consolidation financial statements.

As of September 30, 2009 and 2008, the Group provided a $6,867,978 and $1,552,068, respectively for the allowance of doubtful accounts against trade receivables (please refer to Note 5 for details). Management's estimate of the appropriate allowance on those accounts receivable for the reporting periods was based on the aged nature of these accounts. In making its judgment, management assessed its customers' ability to continue to pay their outstanding invoices and the collectibility of those accounts on a timely basis, and whether their financial position might deteriorate significantly in the future, which would result in their inability to pay their debts to the Company.

Inventories, which are primarily comprised of raw materials, packaging materials, and finished goods, are stated at the lower of cost or net realizable value. Cost being determined on the basis of a moving average. The Group evaluates the need for reserves associated with obsolete, slow-moving and non-salable inventory by reviewing net realizable values on a periodic basis.

As of September 30, 2009 and 2008, the Group provided a reserve against its obsolete, slow-moving or non-salable inventory amounting to $ 4,925,299 and $4,191,726, respectively (please refer to Note 7 for details).

F-8

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method, with an estimated 5% salvage value of original cost, over the estimated useful lives of the assets as follows:

Buildings	20-30years
Machinery and equipment	10-15 years
Motor Vehicles	5 years
Electronics and office equipment	5 years

Expenditures for repairs and maintenance, which do not improve or extend the expected useful lives of the assets, are expensed as incurred while major replacements and improvements are capitalized.

When property or equipment is retired or disposed of, the cost and accumulated depreciation are removed from the accounts, with any resulting gains or losses being included in net income or loss in the year of disposition, Impairment of Long-Lived Assets.

The Group evaluates potential impairment of long-lived assets, in accordance with Statement of FASB Accounting Standards Codification (“ASC”) 360, Propoerty, Plant and Equipment, which requires the Group to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset. As of September 30, 2009, the Group has provided a full reserve against its Goodwill in the amount of $7,904,613 (Please refer to Note 10 for details).

Intangible Assets

The Group’s intangible assets are stated at cost less accumulated amortization and are comprised of land-use rights, drug permits and licenses, patent and technology formulas know-how. Land-use rights are related to land the Group occupies in Hubei and Guangdong Province, PRC and are being amortized on a straight-line basis over a period of 40 years. Other intangible assets are being amortized on a straight-line basis over a period of 10 years.

Revenue Recognition

Among the most important accounting policies affecting the Group’s consolidated financial statements is its policy of recognizing revenue in accordance with the ASC 650, Under this policy, all of the following criteria must be met in order for us to recognize revenue:

1. Persuasive evidence of an arrangement exists;

2. Delivery has occurred or services have been rendered;

3. The seller's price to the buyer is fixed or determinable; and

4. Collectibility is reasonably assured.

The majority of the Group's revenue results from sales contracts with distributors and revenue is recorded upon the shipment of goods. Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuring collectibility. Based on these factors, the Group believes that it can apply the provisions of ASC 650 with minimal subjectivity. Sales are presented net of value added tax (VAT). No return allowance is made as products returns are insignificant based on historical experience.

F-9

Research and Development

Research and development (“R&D”) costs are expensed as incurred and consist primarily of salaries and related expenses of personnel engaged in research and development activities. The Group spent $283,473 and $249,357 on R&D efforts for the nine month ended September 30, 2009 and 2008, respectively.

Income Taxes

The Group accounts for income taxes under the liability method in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets. Deferred tax assets are reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized.

Comprehensive Income

The Group has adopted ASC 220, Comprehensive Income, which establishes standards for reporting and displaying comprehensive income, its components, and accumulated balances in a full-set of general-purpose financial statements. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.

Concentration of Credit Risk

A significant portion of the Group's cash at September 30, 2009 and 2008 is maintained at various financial institutions in the PRC which do not provide insurance for amounts on deposit.

The Group has not experienced any losses in such accounts and believes it is not exposed to significant credit risk in this area.

The Group operates principally in the PRC and grants credit to its customers in this geographic region. Although the PRC is economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Group’s operations.

The following table shows the individual customer’s revenue and account receivable balance which was higher than 5% of total revenue and total account receivables for the nine months and three months ended September 30, 2009 and 2008:

		NINE MONTHS ENDED SEPTEMBER 30,										THREE MONTH ENDED SEPTEMBER 30,
		2009					2008					2009					2008
		(Unaudited)					(Unaudited)					(Unaudited)					(Unaudited)
	Revenue	$	17,345,065	%			$	19,860,057	%			$	5,904,653	%			$	6,634,434	%
	Individual customer's revenue
1	Zhuhai Gongbei Pharmaceutical Co, Ltd.		4,195,255		24	%		3,711,204		19	%		1,234,516		21	%		784,911		12	%
2	Shenyang Pharmaceutical Co. Ltd.		2,234,332		13	%		1,985,584		10	%		661,749		11	%		711,963		11	%
3	Shenzhen Huihua Pharmaceutical Co. Ltd.		2,005,451		12	%		2,191,049		11	%		565,257		10	%		800,653		12	%
4	Jiangxi Huiren Pharmaceutical Co. Ltd.		1,149,220		7	%		1,602,885		8	%		263,982		4	%		647,020		10	%
5	Hubei Hengchuan Health Products Co.,Ltd.		1,388,420		8	%		2,221,744		11	%		687,044		12	%		578,655		9	%
6	Huhan Jiuding Pharmaceutical Co, Ltd.		1,106,645		6	%		-		-			676,870		11	%		-		-

	Account receivable, gross	$	15,551,342	%			$	13,222,313	%				15,551,342	%				13,222,313	%
	Individual customer's account receivable gross balance
1	Zhuhai Gongbei Pharmaceutical Co, Ltd.		2,326,483		15	%		1,769,557		13	%		2,326,483		15	%		1,769,557		13	%
3	Shenzhen Huihua Pharmaceutical Co. Ltd.		1,593,203		10	%		1,186,189		9	%		1,593,203		10	%		1,186,189		9	%
4	Shenyang Pharmaceutical Co. Ltd.		1,429,213		9	%		963,855		7	%		1,429,213		9	%		963,855		7	%
5	Hubei Hengchuan Health Products Co.,Ltd.		1,276,973		8	%		1,232,435		9	%		1,276,973		8	%		1,232,435		9	%
2	Jiangxi Huiren Pharmaceutical Co. Ltd.		923,509		6	%		519,536		4	%		923,509		6	%		519,536		4	%
6	Huhan Jiuding Pharmaceutical Co, Ltd.		944,909		6	%		-		-			944,909		6	%		-		-

F-10

Basic and Diluted Earnings Per Share

The Group adopted ASC 260, Earnings Per Share. ASC 260 requires the presentation of earnings per share (EPS) as Basic and Diluted EPS. Basic earnings per share are calculated by taking net income divided by the weighted average shares of common stock outstanding during the period. Diluted earnings per share is calculated by taking basic weighted average shares of common stock and increasing it for dilutive common stock equivalents such as warrants that are in the money.

Foreign Currency Translation

The functional currency of the Group is the Renminbi (“RMB”), the PRC’s currency. The Group maintains its financial statements using the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods.

For financial reporting purposes, the financial statements of the Group, which are prepared using the RMB, are translated into the Group’s reporting currency, United States Dollars. Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in stockholder’s equity.

The exchange rates in effect at September 30, 2009 and 2008 were stated as follows: (for RMB 1.00):

	September 30,		September 30,
	2009		2008
	(Unaudited)		(Unaudited)
Fixed rate	$	0.1467	$	0.1463
Average rate	$	0.1466	$	0.1434

For the nine months ended September 30, 2009 and 2008, the foreign exchange loss was $6,594 and $7,060 respectively; for the three months ended September 30, 2009 and 2008, the foreign exchange loss was $4,360 and $4,904, respectively.

Fair Value of Financial Instruments

ASC 825, Financial Instruments, defines financial instruments and requires fair value disclosures of those financial instruments. On January 1, 2008, the Group adopted ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. Current assets and current liabilities qualified as financial instruments and management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their current interest rate is equivalent to interest rates currently available. The three levels are defined as follow:

Level 1 -- inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

F-11

	·	Level 2 -- inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 -- inputs to the valuation methodology are unobservable and significant to the fair value.

As of the balance sheet date, the estimated fair values of the financial instruments were not materially different from their carrying values as presented due to the short maturities of these instruments and that the interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective period-ends. Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Group evaluates the hierarchy disclosures each quarter.

Recent Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued a standard that established the FASB Accounting Standards Codification (ASC) and amended the hierarchy of generally accepted accounting principles (ASC) and amended the hierarchy of generally accepted accounting principles (GAAP) such that the ASC became the single source of authoritative nongovernmental U.S. GAAP. The ASC did not change current U.S. GAAP, but was intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All previously existing accounting standard documents were superseded and all other accounting literature not included in the ASC is considered non-authoritative. New accounting standards issued subsequent to June 30, 2009 are communicated by the FASB through Accounting Standards Updates (ASUs). The Company adopted the ASC on July 1, 2009. This standard did not have an impact on the Company’s consolidated results of operations or financial condition. However, throughout the notes to the consolidated financial statements references that were previously made to various former authoritative U.S. GAAP pronouncements have been changed to coincide with the appropriate section of the ASC.

In September 2006, the FASB issued an accounting standard codified in ASC 820, Fair Value Measurements and Disclosures. This standard established a single definition of fair value and a framework for measuring fair value, set out a fair value hierarchy to be used to classify the source of information used in fair value measurements, and required disclosures of assets and liabilities measured at fair value based on their level in the hierarchy. This standard applies under other accounting standards that require or permit fair value measurements. One of the amendments deferred the effective date for one year relative to nonfinancial assets and liabilities that are measured at fair value, but are recognized or disclosed at fair value on a nonrecurring basis. This deferral applied to such items as nonfinancial assets and liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods) or nonfinancial long-lived asset groups measured at fair value for an impairment assessment. The adoption of the fair value measurement standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

F-12

In December 2007, the FASB issued and, in April 2009, amended a new business combinations standard codified within ASC 805, which changed the accounting for business acquisitions. Accounting for business combinations under this standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and change accounting practices for acquisition-related restructuring costs, in-process research and development, indemnification assets, and tax benefits. The Company adopted the standard for business combinations and adjustments to an acquired entity’s deferred tax asset and liability balances and it had no immediate impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued a new standard which established the accounting for and reporting of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case); that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements. The Company adopted the standard beginning January 1, 2009. The provisions of the standard were applied to all NCIs prospectively, except for the presentation and disclosure requirements, which were applied retrospectively to all periods presented. As a result, upon adoption, the Company retroactively reclassified the “Minority interest in subsidiaries” balance previously included in the “Other liabilities” section of the consolidated balance sheet to a new component of equity with respect to NCIs in consolidated subsidiaries. The adoption also impacted certain captions previously used on the consolidated statement of income, largely identifying net income including NCI and net income attributable to the Company. The adoption of this standard did not have a material impact on the Company’s consolidated financial position or results of operations.

In April 2009, the FASB issued an accounting standard which provides guidance on (1) estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have significantly declined and (2) identifying transactions that are not orderly. The standard also amended certain disclosure provisions for fair value measurements and disclosures in ASC 820 to require, among other things, disclosures in interim periods of the inputs and valuation techniques used to measure fair value as well as disclosure of the hierarchy of the source of underlying fair value information on a disaggregated basis by specific major category of investment. For 3M, this standard was effective prospectively beginning April 1, 2009. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

In April 2009, the FASB issued an accounting standard which modifies the requirements for recognizing other-than-temporarily impaired debt securities and changes the existing impairment model for such securities. The standard also requires additional disclosures for both annual and interim periods with respect to both debt and equity securities. Under the standard, impairment of debt securities will be considered other-than-temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). The standard further indicates that, depending on which of the above factor(s) causes the impairment to be considered other-than-temporary, (1) the entire shortfall of the security’s fair value versus its amortized cost basis or (2) only the credit loss portion would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. The standard requires entities to initially apply its provisions to previously other-than-temporarily impaired debt securities existing as of the date of initial adoption by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment potentially reclassifies the noncredit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

F-13

In April 2009, the FASB issued an accounting standard regarding interim disclosures about fair value of financial instruments. The standard essentially expands the disclosure about fair value of financial instruments that were previously required only annually to also be required for interim period reporting. In addition, the standard requires certain additional disclosures regarding the methods and significant assumptions used to estimate the fair value of financial instruments. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

In May 2009, the FASB issued a new accounting standard regarding subsequent events. This standard incorporates into authoritative accounting literature certain guidance that already existed within generally accepted auditing standards, with the requirements concerning recognition and disclosure of subsequent events remaining essentially unchanged. This guidance addresses events which occur after the balance sheet date but before the issuance of financial statements. Under the new standard, as under previous practice, an entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that did not exist at the balance sheet date. This standard added an additional required disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued. For the Company, this standard was effective beginning April 1, 2009.

In June 2009, the FASB issued a new standard regarding the accounting for transfers of financial assets amending the existing guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. The standard is effective for new transfers of financial assets beginning January 1, 2010. The adoption of this standard is not expected to have a material impact on the Company’s consolidated results of operations or financial condition.

In June 2009, the FASB issued an accounting standard that revised the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. The standard is effective January 1, 2010. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

F-14

In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, a entity may use, the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value. This ASU is effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

In September 2009, the FASB issued ASU No. 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), that amends ASC 820 to provide guidance on measuring the fair value of certain alternative investments such as hedge funds, private equity funds and venture capital funds. The ASU indicates that, under certain circumstance, the fair value of such investments may be determined using net asset value (NAV) as a practical expedient, unless it is probable the investment will be sold at something other than NAV. In those situations, the practical expedient cannot be used and disclosure of the remaining actions necessary to complete the sale is required. The ASU also requires additional disclosures of the attributes of all investments within the scope of the new guidance, regardless of whether an entity used the practical expedient to measure the fair value of any of its investments. This ASU is effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force, that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. The ASU is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on 3M’s consolidated results of operations and financial condition.

F-15

In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force, that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance: the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). The ASU is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on the Company’s consolidated results of operations and financial condition.

5. Trade Receivables, Other Receivables, Prepaid expenses and Deposits

As mentioned in Note 4 that the company estimates of the appropriate allowance on those accounts receivable for the reporting periods was based on the aged nature of these accounts. The table below shows the allowance for doubtful debts of the Group’s trade receivables, other receivables and prepaid expenses and deposits as of September 30, 2009 and December 31, 2008:

	September 30,			December 31,
	2009			2008
	(Unaudited)
Trade receivables, gross		15,551,342		$	13,123,374
Allowance for doubtful debts		(6,867,978	)		(3,786,459	)
Trade receivables, net		8,683,364		$	9,336,915

	September 30,			December 31,
	2009			2008
Other receivables, gross		678,528		$	504,349
Allowance for doubtful debts		-			-
Other receivables, net		678,528		$	504,349

	September 30,			December 31,
	2009			2008
Prepaid and deposits, gross		2,540,267		$	918,209
Allowance for doubtful debts					-
Prepaid and deposits, net		2,540,267		$	918,209

F-16

The change of the allowance for doubtful debts between the reporting periods, as of September 30, 2009 and 2008, is displayed as follows:

	NINE MONTHS ENDED SEPTEMBER 30,
	2009			2008
	(Unaudited)			(Unaudited)
Balance at beginning of period	$	(3,786,459	)	$	(943,647	)
Provision during the period		(3,080,334	)		(534,124	)
Foreign exchange difference		(1,185	)		(74,297	)
Balance at end of period	$	(6,867,978	)	$	(1,552,068	)

The Group set full allowance for trade receivables aged over 120 days which is general credit term granted to the customers. After deducting those allowances from the gross trade receivable, based on the management’s past experience, there would be no collectability issue on the net amount.

6. Refundable Purchase Price Paid

On, December 7, 2006, Benda Ebei paid $1.2 million to SECO (Shenzhen) Biotech Co., Ltd. (“SECO”) pursuant to a purchase agreement signed between SECO and Benda Ebei on December 3, 2006 to acquire a technology know-how and drug specifications and technical parameters in producing a Gastropathy drug owned by SECO. According to the signed contract:

·	The amount paid is refundable only if SECO fails to pass the examination conducted by Benda Ebei;

·	Altogether, there are three phases for the examination; however there is no specific time-table for the examination;


·	The contract is valid for 10 years upon the contract signed.

As at September 30, 2009, the deal has not been closed as the product is still under the process of development. As the date when could SECO pass the examination conducted by Benda Ebei cannot be determined, thus the amount paid is reported as non-current assets as of September 30, 2009.

7. Inventories, Net

The Group’s inventories at September 30, 2009 and December 31, 2008 comprised as follows:

	September 30,			December 31,
	2009			2008
	(Unaudited)
Raw materials	$	899,885		$	874,180
Packing materials		161,938			481,724
Other materials / supplies		83,510			88,412
Finished goods		626,561			754,838
Work-in-process		5,497,187			5,086,780
Total inventories at cost		7,269,082			7,285,934

Less: Reserves on inventories		(4,925,299	)		(4,941,372	)

Total inventories, net	$	2,343,783		$	2,344,562

F-17

A reserve for obsolete, slow-moving or non-salable inventory was made on raw materials, packing materials, other material and suppliers, finished goods and work-in-process at the amount of $82,026, $39,786, $54,563, $6,507 and $4,742,417 respectively as of September 30, 2009. As of December 31, 2008, there was a reserve made on raw materials, packing materials, finished goods and work-in-process at the amount of $122,433, $7,118, $269,749 and $4,542,072 respectively.

The provision of reserve on work-in-process was resulted from the manufacturing process of Gendicine, SiBiono’s sole product and SiBiono was acquired by the company in April 2007.

The following chart shows the manufacturing process of Gendicine (Ad-p53):

In the production process of finished goods, Gendicine, several working steps are needed: (i) large-scale culturing of adenovirus from master adenovirus bank; (ii) culturing of cell from master cell bank; (iii) purification. The whole process including step (i) to step (iii) takes approximately twenty-four days to make reagent (“original liquid”). This particular liquid can only be stored for approximately five years. It takes approximately another seven days for mixing and bottling original liquid to finished goods which is known as Gendicine.

Therefore, up to the stage of reagent, all the related production costs are treated as work-in-process. The major components of those production costs are: (i) direct labor; (ii) direct materials; (iii) power; (iv) supplies and other materials and (v) manufacturing overheads.

Before acquisition, as of March 31, 2007, the accumulated units of original liquid produced was 198,075 and which could be converted to approximately 226,736 vials of Gendicine. However, the accumulated vials of Gendicine sold throughout the years 2004 to three-months period ended March 31, 2007 were only approximately 18,424 vials. The accumulated production costs of $4,080,644 were remained as work-in-process as of three-month period ended March 31, 2007.

F-18

Furthermore, due to the special feature of the original liquid which can only be stored for five years, and most of the original liquid was produced in the year of 2004, and the provision of reserve on work in process was $3,696,083 as of three-month period ended March 31, 2007.

After the acquisition with the effective date April 1, 2007, the same accounting treatment was adopted for the treatment of the provision of reserve on work-in-process. As of September 30, 2009, the provision of reserve on work in process was $4,742,417.

8. Property and Equipment, Net

The Group’s property and equipment at September 30, 2009 and December 31, 2008 were comprised as follows:

	December 31, 2008			Addition			Disposal		Foreign Currency Translation Difference			September 30, 2009
				(Unaudited)			(Unaudited)		(Unaudited)			(Unaudited)
Buildings	$	9,692,441			-			-		3,261			9,695,702
Machinery and equipment		16,769,328			10,444			-		(890	)		16,778,882
Office equipment		40,728			3,356			-		(3,779	)		40,305
Motor Vehicles		252,163			-			-		(14	)		252,149
Cost		26,754,660			13,800			-		(1,421	)		26,767,039

Less: Accumulated Depreciation

Buildings	$	(1,559,511	)		(341,070	)		-		(367	)		(1,900,948	)
Machinery and equipment		(4,160,667	)		(1,221,246	)		-		(480	)		(5,382,393	)
Office equipment		(30,839	)		(17,970	)		-		(9	)		(48,818	)
Motor Vehicles		(89,863	)		(29,028	)		-		(14	)		(118,905	)
Accumulated Depreciation		(5,840,880	)		(1,609,314	)		-		(870	)		(7,451,064	)

Construction in progress	$	8,143,445			441,765			77		(78	)		8,585,055

Total property and equipment, net	$	29,057,225											27,901,030

As mentioned in Note 11, Benda Ebei entered into a commercial bank note issuance agreement with Shanghai Pudong Development Bank on August 14, 2007 and a supplementary agreement on January 21, 2008. Under the agreements the credit facility is secured by the buildings, machinery and equipment of Benda Ebei and Jiangling Benda. As of September 30, 2009, the net book value of pledged property and equipment was approximately Rmb123.40 million (or $18.1 million) in total.

The depreciation expense for the nine months ended September 30, 2009 was calculated as follows:

	Original Cost
	December 31,		September 30									Depreciation		Deprecation
	2008		2009		Average		Salvage			Estimate		Calculated		Reported		Difference
			(Unaduited)		(Unaduited)		Value			Useful Lives		(Unaduited)		(Unaduited)		(Unaduited)
Building	$	9,692,441		9,695,702		9,694,071		5	%		20		345,351		341,070		4,281
Property and equipment		16,769,328		16,778,882		16,774,105		5	%		11		1,138,243		1,221,246		(83,003	)
Office equipment		40,728		40,305		40,517		5	%		5		5,774		17,970		(12,196	)
Motor vehicle		252,163		252,149		252,156		5	%		5		35,932		29,028		6,904
Total property and equipments	$	26,754,660		26,767,039		26,760,849							1,525,300		1,609,314		(84,014	)

The above table shows the calculation of depreciation expenses for the nine months ended September 30, 2009. The difference between the depreciation calculated and depreciation reported was due to the changes of foreign exchange translation.

F-19

The estimated useful lives for buildings and property and equipments vary from 20 to 30 years and 10 to 15 years, respectively. For the nine months ended September 30, 2009, the majority of the building subjected to depreciation had useful lives of 20 years and property and equipment had useful lives of 11 years.

The total depreciation expense was $1,609,314 and $490,915 for the nine months and three months ended September 30, 2009, respectively, and is broken down as follows:

	NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,
	2009		2008		2009		2008
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cost of sales	$	901,692	$	1,041,124	$	300,598	$	381,947
Operating expenses		707,622		373,639		328,327		130,144
Balance at end of period	$	1,609,314	$	1,414,763	$	628,925	$	512,091

9. Intangible Assets, Net

The Group’s intangible assets at September 30, 2009 and December 31, 2008 were comprised as follows:

	December 31, 2008			Addition			Foreign Currency Translation Difference			September 30, 2009
				(Unaudited)			(Unaudited)			(Unaudited)
Land-use rights	$	3,117,135			-			(157	)	$	3,116,978
Drugs permits and licenses		2,780,254			-			(140	)		2,780,114
Technology formulas		1,012,129			-			(43	)		1,012,086
Patent		1,803,829			-			(77	)		1,803,752
Cost		8,713,347			-			(417	)		8,712,930


Land-use rights	$	(279,127	)		(46,556	)		(20	)	$	(325,703	)
Drugs permits and licenses		(1,664,541	)		(206,261	)		(72	)		(1,870,874	)
Technology formulas		(254,681	)		(75,860	)		(38	)		(330,579	)
Patent		(511,896	)		(219,242	)		(111	)		(731,249	)
Accumulated amortization		(2,710,245	)		(547,919	)		(241	)		(3,258,405	)

Total intangible assets, net	$	6,003,102			(547,919	)		(658	)	$	5,454,525

The amortization expense for the nine months ended September 30, 2009 was calculated as follows:

	Original Cost
	December 31,		September 30						Amortization		Amortization
	2008		2009		Average		Estimated		Calculated		Reported		Difference
			(Unaudited)		(Unaudited)		Useful lives		(Unaudited)		(Unaudited)		(Unaudited)
Land-use rights	$	3,117,136		3,116,978		3,117,057		40	$	58,445		46,556		11,889
Drugs permits and licenses		2,780,254		2,780,114		2,780,184		10		208,514		206,261		2,253
Technology formulas		1,012,129		1,012,086		1,012,108		10		75,908		75,860		48
Patent		1,803,829		1,803,752		1,803,791		6		225,474		219,242		6,232
Total Intangible assets	$	8,713,348		8,712,930		8,713,139			$	568,341		547,919		20,422

The above table shows the calculation of amortization expenses for the nine months ended September 30, 2009. The difference between the amortization calculated and amortization reported was due to the changes of foreign exchange translation.

F-20

The total amortization expense for the nine months and the three months ended September 30, 2009, and 2008 are broken down as follows:

	NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,
	2009		2008		2009		2008
	(Unaudited)				(Unaudited)
Cost of sales	$	428,801	$	418,425	$	142,976	$	142,758
Operating expenses		119,118		148,591		39,718		50,643
Balance at end of period	$	547,919	$	567,016	$	182,694	$	193,401

10. Goodwill and Acquisition Cost Payable

ASC 805, Business Combinations, requires all acquisitions must be accounted for by allocating the acquisition consideration to the assets acquired based upon the fair market value of those assets. Consideration value that cannot be allocated to the acquired assets must be assigned to goodwill. In addition, it also requires eliminating the pooling treatment and eliminating the amortization of goodwill. ASC 350, Intangibles – Goodwill and Others, requires that a company carrying goodwill on its books must revalue the assets acquired in a business combination. If there is an overall decline in the value of the acquired assets, then earlier booked goodwill is deemed “impaired” and must be written down. ASC 350 requires a two step impairment test. The fair value of a reporting unit is first compared to its carrying value, including goodwill. Then the implied fair value of the goodwill is compared to the carrying value of the goodwill. If the fair value is lower, it is considered to be impaired.

As of September 30, 2009, there was an amount approximately $7.9 million was recorded as goodwill. Meanwhile, the Group made an impairment charge at full amount on the goodwill due to the following facts (please read in conjunction with Note 13):

	a.	SiBiono has a bank loan matured and was in default, which has been sued and the court has issued a judgment on November 23, 2008 to SiBiono which required SiBiono to repay all loan balance plus penalty and interest approximately Rmb24 million immediately. As SiBiono has not paid anything yet, thus the land use right of SiBiono on its new production plant may be foreclosed for sales by the lender bank has been frozen unless the amount has been settled between the lender bank and SiBiono;

	b.	SiBiono has serious working capital deficit situation and has reported accumulated loss of $3.4 million as of September 30, 2009;

The management has not yet located or confirmed any feasible re-financing plan and / or equity placement as of the report date. The follow up action is still under the discussion with the lender bank.

As of September 30, 2009, out of the total acquisition cost Rmb62.56 million (or $9.18 million), the following payments were made:

In the year of 2006, Benda, through its subsidiaries Everleader and Benda Ebei, paid Rmb19.52 million and Rmb13.03 million or totaling Rmb32.55 million to the selling shareholders of SiBiono and reported in the consolidated balance sheet and cash flow statement as “refundable purchase price paid”. It was recorded as refundable assets due to the fact that the deal was not concluded as of December 31, 2006. The acquisition was closed on April 5, 2007, and thus the total refundable amount of Rmb32.55 or $4.17 million was reclassified as investment cost.

F-21

In the year of 2007, an additional amount Rmb20.28 million was paid. The remaining balance was reported as “acquisition cost payable” on the balance sheet. As of September 30, 2009, the total amount paid was Rmb52.83 million (or $7.76 million) and the outstanding balance was Rmb9.72 million (or $1.42 million).

The Group has already obtained the oral consent from the selling shareholders of SiBiono that the remaining balance could be settled within the year of 2009.

11. Restricted Cash, Bank Indebtedness and Commercial Notes Payable

The Group’s restricted cash at September 30, 2009 and December 31, 2008 was comprised as follows:

	September 30,		December 31,
	2009		2008
	(Unaudited)
Deposits for issuance of commercial notes	$	4,544,447	$	4,859,346
Funds from government technolgy agencies		1,303,447		1,303,503
Total restricted cash	$	5,847,894	$	6,162,849

A)	On August 14, 2007, Benda Ebei entered into a commercial bank note issuable agreement with Shanghai Pudong Development Bank. Pursuant to this agreement, the following terms are included:

	a)	Duration of the agreement is three years;

	b)	It is non-interest bearing;

	c)	The repayment period of each commercial note payable is six months;

	d)	The total commercial note issuable limit is Rmb 60 million; however 50% of deposit should be made into the bank in order to secure the issuance of commercial bank note, thus the net available amount is Rmb 30 million;

	e)	If the net amount of each commercial bank note payable is not settled on the due date, the penalty will be the penalty rate of the PRC bank loan on daily and compound basis.

	f)	As mentioned in Note 8, this credit facility is guaranteed by SiBiono and secured by the buildings, machinery and equipment of Benda Ebei. On December 15, 2007, Benda Ebei received a consent letter from Pudong Bank that Pudong Bank agreed to cancel SiBiono’s guarantee toward this credit facility.

On January 21, 2008, Benda Ebei entered into a supplementary agreement with Shanghai Pudong Development Bank, to supplement the commercial bank note issuance agreement dated on August 14, 2007. According to this supplementary agreement, the credit facility is further secured by the buildings, machinery and equipment of Jiangling Benda.

As of September 30, 2009, Benda Ebei and Jiangling Benda deposited an amount $ 4,544,447 in Shanghai Pudong Development Bank as deposit for the issuance of commercial bank notes. Such deposits will be released when the commercial bank notes are cleared. As of September 30, 2009, the balance of the commercial bank notes payable was $ 9,075,536. Thus the net commercial bank notes payable was $4,531,089 as of September 30, 2009.

F-22

B)	The bank indebtedness was resulted from the acquisition of SiBiono with the effective date April 1, 2007. The reasons for causing bank indebtedness were stated as follows:

Among the cash and cash equivalents balances of SiBiono were composed of two parts; (i) unrestricted cash, which were generated from either operations, or loans from bank and financial institutions, or invested capital; (ii) restricted cash, which were obtained from the various government technology agencies as long term debt payable (see note 14 for the related details).

The cash obtained from the various government technology agencies as long term debt payable could only be dedicated to the related project’s research and development activities and purchase of fixed assets and construction in progress, therefore the cash balances for that part will be classified as restricted cash.

Due to the above reasons, SiBiono relocated the balances of restricted cash from the cash and cash equivalents balances for the reporting periods.

However, since the balance of the restricted cash was larger than the balance of cash and cash equivalents balances, thus bank indebtedness were resulted for the reporting periods.

Due to the above reasons, SiBiono relocated the balances of restricted cash from the cash and cash equivalents balances with an amount $1,303,447 as of September 30, 2009. However, since the balances of the restricted cash were larger than the balance of cash and cash equivalents balances, bank indebtedness were resulted with an amount $1,199,965 as of September 30, 2009.

12. Other Assets

On November 23, 2006, Benda Ebei entered into an Equity Transfer Agreement with Xiaozhi Zhang (“Zhang”), to purchase approximately 6.24% of SiBiono’s common stock for a total consideration of Rmb12.48 million (Rmb6.24 million in cash and shares of our common stock equal to Rmb6.24 million) (or $1.71 million) which was due and payable on or before March 31, 2007.

Due to the fact that the signed agreement on November 23, 2006 was not practically executable according to the PRC regulations, Benda Ebei asked Zhang to terminate the signed agreement and sign a new agreement that was feasible under PRC regulations with essentially the same terms.

However, Zhang refused to sign the new agreement and applied to the Shenzhen Arbitration Commission (the “Commission”) in April 2007 for enforcement of the original agreement. Zhang requested the Commission to require Benda Ebei to pay for the total consideration, penalty for late payment and the related legal and arbitration expenses.

On November 27, 2007, Shenzhen Arbitration Commission determined that:

Benda Ebei should pay for the consideration of Rmb6.24 million, equal to 50% of the total consideration set forth in the Equity Transfer Agreement. For the other 50% of the total consideration which was supposed to be settled in the form of issuing common stock, since Zhang did not make an arbitration request on how to execute the arrangement, the Arbitration Commission did not make an award on this particular part.

2.	Benda Ebei should pay for the penalty of Rmb46,800;

3.	Benda Eebi should pay for legal and arbitration expenses of Rmb268,971.

F-23

Following this arbitration decision, Benda Ebei recognized the liability as total acquisition cost payable of Rmb12.48 million, plus the penalty and related legal and arbitration expenses, totaling approximately Rmb12.80 million or ($1.87 million) (Note 15). Accordingly Benda Eebi recognized the right to purchase the 6.24% equity shares in SiBiono and recorded as other assets at Rmb12.48 million or $1.83 million.

On May 22, 2008, Benda Ebei applied to Shenzhen People Court to terminate above mentioned arbitration. The termination is based on the ground that Xiaozhi Zhang does not own all 6.24% of SiBiono’s common stock. In fact, he only owns 3.28% of SiBiono’s stock. The application has been accepted by Shenzhen People Court and is waiting for its further investigation. Please also see the note descriptions in Note 29, Subsequent Events.

13. Bank Loans Payable

As of September 30, 2009 and December 31, 2008, SiBiono, had one outstanding bank loan with an amount of $ 2,984,433 and $2,984,560 respectively, which was used primarily to fund construction in progress projects and for general working capital purposes. This loan carries annual interest rate of 6.34% and matures on April 29, 2008. This loan is personal guaranteed by Zhaohui Peng, the former Chairman and a shareholder of SiBiono.

For the nine months ended September 30, 2009, SiBiono has been sued for default on the bank loans and judgment has been made as follows:

On or before November 23, 2008 (10 days after the judgment date of November 13, 2008), SiBiono needs to repay the bank for the principal of Rmb20,346,672, accrued interest and penalty up to August 15, 2008 for Rmb1,506,994 and accrued interest from August 16, 2008 through repayment date. However, as SiBiono has not yet repaid anything yet, the accrued interest for the later period will be estimated at Rmb1,176,362, or total accrued interest as of September 30, 2009 was Rmb2,683,358;

b.	Should SiBiono did not make the full repayment; the lender bank can apply for selling the land use rights owned by SiBiono (as the collateral of the loan). Any balance after full repayment of the bank loan principal and accrued interest and penalty from the net proceeds will be returned to SiBiono;

c.	Zhaohui Peng should have liability to repay any insufficient amount should the net proceeds of selling the above land use rights are insufficient to repay the bank debts and then reclaimed from SiBiono;

d.	SiBiono and Zhaohui Peng have the obligation to repay the legal fees for this lawsuit of Rmb156,068 immediately.

As of November 15, 2009, the Group is still under the negotiation with the bank on arranging the settlement of the bank loan. Furthermore, as of November 15, 2009, the bank has not taken any further actions to against SiBiono.

Total interest expense paid related to the Group’s outstanding bank loans was $157,482 and $140,547 for the nine months ended September 30, 2009 and 2008, respectively.

F-24

14. Long Term Debt Payable

As of September 30, 2009, long term debt payable was raised due to the fact that various technology funds were obtained from various government technology agencies to support its gene therapy research and development activities during the past years and recorded as long term debt payable.

The obligations will be discharged once the examination by the various government technology agencies is conducted and most of the examination will be carried out and completed.

During the nine months ended September 30, 2009, there was no long term debt payable discharged and recorded as government subsidies (see Note 22 for the related details).

15. Accounts Payable and Accrued Liabilities

The Group’s accounts payable and accrued liabilities as of September 30, 2009 and December 31, 2008 were comprised as follows:

	September 30,		December 31,
	2009		2008
	(Unaudited)
Trade payable		2,402,254	$	605,316
Deposits paid by customer		218,453		1,055
Acquisition cost payable following the arbitration (Note 12)		1,876,873		1,876,953
Accrued liabilities		4,908,004		3,999,155
Miscellaneous payables		351,646		745,921
Total account payables and accrued liabilities		9,757,230	$	7,228,400

16. Welfare and Employment Liabilities

As stipulated by the relevant laws and regulations for enterprises operating in the PRC, the Group’s PRC entities are required to maintain a welfare plan for all of its employees who are residents of the PRC. Based on the wages payable and according to the labor law of the PRC, the Group accrued 14% on a monthly basis, for employees’ welfare, labor union fees, and education and training programs, respectively. As of September 30, 2009 and December 31, 2008, the Group accrued approximately $387,360 and $486,000 for the employees’ welfare respectively.

17. Statutory Surplus Reserve Fund

As stipulated by the relevant laws and regulations for enterprises operating in the PRC, the Group is required to make annual appropriations to a statutory surplus reserve fund for each of its PRC subsidiaries. Specifically, the Group is required to allocate 15% its profits after taxes at the fiscal year end, as determined in accordance with the PRC accounting standards applicable to the Group’s PRC subsidiaries, to a statutory surplus reserve until such reserve reaches 50% of the registered capital of the Group’s PRC subsidiaries. As of September 30, 2009 and December 31, 2008, the registered capital of the Group’s PRC subsidiaries was $22,108,427.

F-25

18. Related Party Transactions

		September 30,
		2009		December 31,
	Relationship	(Unaudited)		2008
Current
Qin Yu	Vice president
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			1,736	$	4,314
Xiaoji Zhang	Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			5,438		5,439
Hsieh, Chang	Supervisor, VP, HR & Admin.
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			5		-
Rong He	Manager
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			455		1,247
		$	7,634	$	11,000
Non current
Yiqing Wan	CEO & Director
Due to Ever Leader Holdings Co. Ltd.		$	650,760	$	650,791
Due to Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			491,767		439,719
Hubei Benda Science and Technology Co. Ltd	Controlled by CEO
Due to Yidu Benda Chemicals Co. Ltd.			1,607,105		1,607,173
Due to Ever Leader Holdings Co. Ltd.			231,701		231,713
Feng Wang	Minority shareholder
Due to Beijing Shusai Pharyngitis Research Co. Ltd.			32,345		32,348
Hua Xu
Due to Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			49,475		-
		$	3,063,153	$	2,961,744

		September 30,
		2009		December 31,
Current	Relationship	(Unaudited)		2008
Wei Xu	Vice President, CEO's Spouse & Director
Due from Shenzhen SiBiono Gene Tech Co. Ltd.		$	230,378	$	188,065
Due from Everleader Holding Ltd.					967,999
Hua Xu	General Manager's Sister
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			21,219		25,523
Yiqing, Wan	CEO & Director
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			211,426		237,780
Hua Shen	Vice president
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			-		33,253
Dongyi Tien	Manager
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			-		364
Pong Tsaiohuei	Minority shareholder
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			4,819		4,818
Total due to related parties		$	467,842	$	1,457,803
Non current
Hubei Benda Science and Technology Co. Ltd	Controlled by CEO
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.		$	28,602	$	28,602
Due from Jiangliang Benda Pharamaceutical Co. Ltd.			795,923		811,073
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			14,148		14,262
Wei Xu
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.	Vice President, CEO's Spouse & Director		27,183		48,922
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			65,508		65,691
Yiqing, Wan	CEO & Director
Due from Yidu Benda Chemicals Co. Ltd.			560		560
Hui Xu	Manager
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			28,483		28,483
		$	960,406	$	997,593

Except for the loans from the shareholder Wei Xu by Everleader which bears interest rate at 12% per annum, unsecure and matures within six months, the above advances bear no interest and the above loans due to related parties are unsecured, non-interest bearing and are not convertible into equity. Proceeds from the above loans were used primarily for general working capital purposes, among which the current portion does not have definitive terms and for those portions which are long-term debts in nature, due on December 31, 2012.

F-26

19. Redeemable Common Stock

On April 5, 2007, Benda Ebei entered into Equity Transfer Agreements with certain shareholders of SiBiono to purchase a total of approximately 57.57% of the shares of SiBiono’s common stock for total consideration of RMB 60,000,000 due and payable on or before April 30, 2007.

On June 11, 2007, Benda Ebei entered into additional Equity Transfer Agreements with Yaojin Wang (“Wang”) and Huimin Zhang “(Zhang”), also shareholders of SiBiono, for the purchase of an additional 2.56% of the shares of SiBiono’s common stock for total consideration of RMB 2,560,000 due and payable on or before June 30, 2007.

In connection with the above Equity Transfer Agreements, Benda entered into a Financial Consultancy Agreement with Super Pioneer International Limited (“Super Pioneer”) and Technical Consultancy Agreements with Wang and Zhang for financial and technical consultancy services to be rendered. Pursuant to the Financial and Technical Consultancy Agreements (the “Agreements”), Benda agreed to issue an aggregate of 2,189,560 shares of its common stock to Super Pioneer (2.1 million shares, out of which 1.96 million shares is redeemable), Wang (33,585 shares, redeemable) and Zhang (55,975 share, redeemable) within three months from the date of the Agreements. Since the issuance of common shares to Super Pioneer, Wang and Zhang was in the form of financial and technical consultancy services to be rendered, thus the corresponding amount $7,882,416 was recorded as consulting and professional fees.

Super Pioneer, Wang and Zang also agreed to refrain from selling shares of Benda’s common stock for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from expiration of the Lock-up Period, in the event that the public trading price of Benda’s common stock has not reach $3.60 per share and Benda’s common stock has not been listed on either the NASDAQ or AMEX stock exchanges, Super Pioneer, Wang, and Zang will have the option to require Benda to redeem an aggregate 2,049,560 shares of Benda’s common stock owned by Super Pioneer, Wang, and Zhang at a price of $3.60 per share.

In accordance ASC 480, Distinguishing Liabilities from Equity,, as the Agreements governing the issuance of the 2,189,560 shares of common stock to Super Pioneer, Wang, and Zang contain provisions requiring Benda to repurchase 2,049,560 of these shares at a redemption price of $3.60 per share at the option of the holders (if certain events outside of control of the Group do not occur), these 2,049,560 shares have been classified as redeemable common stock, at their redemption price of $3.60 per share or totaling $7,376,366, outside of permanent equity at December 31, 2009.

According to the signed agreements mentioned in above, the redemption would be required to perform in September 2008. However the company has already obtained an oral consent from Super Pioneer, Wang and Zhang that the redemption would be deferred to the year of 2009. Therefore, the redeemable common stock was reclassified as current liability as of September 30, 2009.

F-27

20. Other Income (expenses)

In accordance with ASC 825, Financial Instruments,, the Group recorded $1,113,405 in Registration Delay Expense, for the nine month ended September 30, 2008. Out of the total penalty, $230,312 was settled by issuance of $523,438 shares of common stock. There was no penalty to investors incurred for the nine months ended September 30, 2009.

21. Other General and Administrative Expenses

For the nine months and three months ended September 30, 2009 and 2008, the amount of other general and administrative expenses mainly composed of the following events:

	NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,
	2009		2008		2009		2008
	(Unaudited)				(Unaudited)
Audit and accounting	$	102,013	$	232,509	$	32,330	$	30,680
Legal fees		194,084		166,800		56,860		52,096
Office expenses		174,122		451,979		109,735		159,449
Salaries and wages		646,570		712,810		207,431		197,817
Consulting fee		320,421		637,409		245,619		202,636
Rent & Utilities		38,036		75,848		35,343		20,018
Investor relation, Transfer agent and filing fees		2,720		30,843		-		2,720
Travel and transportation		149,228		185,379		102,071		25,045
Repair and maintanence		21,131		136,890		9,774		17,791
Miscellaneous		237,669		133,789		98,901		35,730
Total other general & administrative	$	1,885,994	$	2,764,256	$	898,062	$	743,982

22. Government Subsidies and Grants

As mentioned in the Note 14, long term debt payable, various technology funds were obtained from various government technology agencies to support its gene therapy research and development activities during the past years and recorded as long term debt payable. According to the technology fund agreements, the various government technology agencies will examine the results of research and development according to the status of the projects. Once the examination takes place, the obligation of a particular debt payable is discharged accordingly.

According to US GAAP, once the obligation of a particular debt payable is discharged, the amount of this particular debt payable should be treated as government subsidies / grants. During the nine months ended September 30, 2009, there were no long term debt payable discharged and government subsidies / grants recognized as revenue

Besides, during the nine months ended September 30, 2009, there was Rmb180,000 or $26,386 received by Jiangling Benda from the local financial bureau as subsidy for support of the enterprise with small and medium size.

23. Income Taxes

Benda is subject to Delaware, United State of America tax, but no provision for income taxes were made for the nine months ended September 30, 2009 and 2008 as Benda did not have reportable taxable income for the period.

F-28

Ever Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax, but no provisions for income taxes were made for the nine months ended September 30, 2009 and 2008 as Ever Leader did not have reportable taxable income for the periods.

Benda Ebei was registered as a Sino-Foreign Equity Joint Venture on May 26, 2004 and is subject to the tax laws applicable to Sino-Foreign Equity Joint Ventures in the PRC. Benda Ebei, starting from 2005, is fully exempt from PRC enterprise income tax for two years starting from the first profit-making year, followed by a 50% redsuction in income taxes, for the following three years.

Jiangling Benda and Yidu Benda are cross-municipal investment entities and enjoy the same tax treatment as Sino-Foreign Joint Ventures, starting from 2005, and were therefore exempt from PRC enterprise income tax for two years starting from the first profit-making year, followed by a 50% reduction in income taxes, for the following three years. Cross-municipal investments entities refer to entities that are incorporated in one municipal region but have investments in another municipal region.

The exemption periods for Benda Ebei, Jiangling Benda and Yidu Benda expired in the year of 2006, after which they are subject to 50% reduction in income taxes; whereas the full income tax rate is 33%. The remaining tax holidays will be expired in 2009.

However, starting and effective from January 1, 2008, the full income tax rate would be changed from 33% to 25% according to the new PRC taxation regulations. Therefore these subsidiaries will be subject to the regular full income tax rate at 25% after the tax holidays expire.

According to the new taxation regulations starting and effective from January 1, 2008, Beijing Shuhai is subject to the full income tax rate of 25%.

According to the new taxation regulations starting and effective from January 1, 2008, SiBiono, which is located in Shenzhen, a Special Economic District of PRC, is subject to the full income tax rate of 25% gradually in five years as following:

Year	Tax rate
2008		18	%
2009		20	%
2010		22	%
2011		24	%
2012 and thereafter		25	%

Benda Ebei recorded $163,803 income tax for the nine months ended September 30, 2009. The prepaid income tax by the Group as of September 30, 2009 at amount of $1.66 million was recorded as taxes recoverable.

F-29

The provision for taxes on earnings consisted of:

	NINE MONTHS ENDED SEPTEMBER 30,				THREE MONTHS ENDED SEPTEMBER 30,
	2009		2008		2009		2008
	(Unaudited)				(Unaudited)
Crurrent income taxes expenses:
PRC Enterprise Income	$	163,803	$	907,176	$	79,391	$	382,368
United States Federal Income Tax		-		-		-		-
	$	163,803	$	907,176	$	79,391	$	382,368

A reconciliation between the income tax computed at the U.S statutory rate and the Groups provision for Income tax for the nine month ended September 30, 2009 and 2008 are as follows:

	NINE MONTHS ENDED SEPTEMBER 30,						THREE MONTHS ENDED SEPTEMBER 30,
	2009			2008			2009			2008
U.S Statutory rate		34.0	%		34.0	%		34.0	%		34.0	%
Foreign income not recognized in the U.S		-34.0	%		-34.0	%		-34.0	%		-34.0	%
PRC statuory rate		25.0	%		25.0	%		25.0	%		25.0	%
Tax relief and holidy granted to the Subsidary		0.0	%		-12.5	%		0.0	%		-12.5	%
Provision for income tax		25.0	%		12.5	%		25.0	%		12.5	%

24. Long Term Convertible Promissory Notes

Our financial statements include enhanced note disclosure addressing the fair value of the convertible promissory notes and warrants and the appropriate accounting treatment for the overall transaction.

Additionally, the enhanced note disclosure includes a detailed discussion of the accounting for the debt discount resulting from the relative fair value of the warrants issued in conjunction with the convertible promissory notes (calculated in accordance with ASC 470, Debt) and the debt discount resulting from the beneficial conversion feature / conversion discount associated with the convertible promissory notes (calculated in accordance with ASC 470) as follows:

In March and April of 2007, the Group entered into Investment Agreements (“Agreements”) with certain accredited and institutional investors (“Investors”) pursuant to which the Investors purchased from the Group a total of 252 Units (“Units”), resulting in aggregate gross proceeds to the Group $7,560,000, with each Unit consisting of: (i) a Convertible Promissory Note (“Note”) in the principal amount of $30,000 and convertible into 54,087 shares of the Group's common stock; and (ii) a Common Stock Warrant (“Warrant”) to acquire 54,087 shares of the Group’s common stock at an exercise price of $0.555 per share and expiring on November 14, 2011. The Notes are immediately convertible at the option of each Investor, bear interest at a rate of 4% per annum and mature on March 28, 2009.

The Group has accounted for the Warrants issued in conjunction with the Notes in accordance with the provisions of ASC 470, Debt. Accordingly, the Warrants were valued using a Black-Scholes option pricing model with the following assumptions: (i) a risk free interest rate of 4.63%, (ii) a contractual life of 4.6 years, (iii) an expected volatility of 25%, and (iv) a dividend yield of zero. The relative fair value of the Warrants, based on an allocation of the value of the Notes and the value of the Warrants issued in conjunction with the Notes, was recorded as a debt discount (with a corresponding increase to additional paid-in capital) in the amount of $5,174,911, and is being amortized to interest expense over the expected term of the Notes.

F-30

Additionally, the difference between the effective conversion price of the Notes into shares of the Group’s common stock, and the fair value of the Group’s common stock on the date of issuance of the Notes, resulted in a beneficial conversion feature of $2,385,089 (capped at the $7,560,000 of gross proceeds raised less the previously calculated $5,174,911 debt discount associated with Warrants issued in conjunction with the Notes) and was calculated in accordance with ASC 470. This beneficial conversion feature was recorded as an additional debt discount (with a corresponding increase to additional paid-in capital) and is being amortized to interest expense over the expected term of the Notes.

On July 10, 2008, 10 units of were converted to shares of 540,870. Therefore, as of September 30, 2009, the aggregate $7,260,000 principal balance of the notes remained outstanding and for the nine months ended September 30, 2009, the Group recorded $ 816,750 of interest expense related to the Notes.

During the nine months ended September 30, 2009, the Group recorded $864,049 in interest expense related to the amortization of the debt discount associated with the Warrants and the debt discount associated with the beneficial conversion feature.

The Group also incurred $529,200 in placement agent commissions related to the issuance of the Notes and Warrants. This amount was recorded by the Group as debt issue costs and is being amortized over expected term of the Notes. For the nine months ended September 30, 2009, the Group recorded $55,485 in amortization expense related to debt issue costs.

The securities underlying the Notes and Warrants issued to the Investors are also subject to the terms of a Make Good Agreement entered into in connection with a financing the Group executed in November of 2006 (the “Make Good Agreement”). The Group further represented to the Investors that its target net income for fiscal year 2007 (“FY07 Net Income”) will be greater than or equal to $10.0 million (adjusted for a variety of non-cash charges) (the “Performance Threshold”). In the event the Performance Threshold is not attained, the Group is required to issue to the Investors a pro rata portion of 1,000,000 shares of the Group’s common stock for every one (1) cent by which the Group’s earnings per share, determined on a fully diluted basis, is less than $0.065. During the year ended December 31, 2008 the Group issued shares 3,810,976 shares of common stock in lieu of the non-achievement of the Performance Threshold at $0.07 per share, totaling to $266,768 and none for the nine months ended September 30, 2009.

In the accounting for the Long Term Convertible Promissory Note, the Group’s analysis of the Performance Threshold had no effect because of the cap of the debt discounted and beneficial conversion feature as calculated in accordance with ASC 470.

The Group is also required to register for resale: (i) the shares of common stock underlying the Notes; and (ii) 150% of the shares of common stock underlying the Warrants, on a registration statement to be filed with the Securities and Exchange Commission (“Registration Statement”) and such Registration Statement is required to be declared effective by August 15, 2007 (the “Effectiveness Deadline”). If the Registration Statement does not become effective by the Effectiveness Deadline, or if the Group fails to maintain the effectiveness of the Registration Statement, for any reason, the Group is required to pay the Investors in cash an amount equal to 1% of the purchase price of each Unit held by the Investors on such Effectiveness Deadline or the first day of such failure to maintain the Registration Period, as applicable, and for every 30 day period (or part) thereafter, in each case until cured (“Registration Delay Payments”), provided that the Registration Delay Payments will not exceed 10% of the purchase price of the Units. In the event that the Registration Delay Payments are not made in a timely manner, such Registration Delay Payments will bear interest at a rate of 1.5% per month until paid in full.

F-31

The calculated fair value of the warrants (issued in conjunction with the convertible promissory notes) was recorded as a debt discount (reduction to the carrying value of the convertible promissory notes) with a corresponding increase (credit) to additional paid in capital.

In accordance with the registration rights granted to investors who purchased the convertible promissory notes and warrants, we are required to file a registration statement with the Securities and Exchange Commission (“Registration Statement”) attempting to register the potentially issuable shares of common stock underlying the convertible promissory notes and warrants. There is no cash settlement requirement, in the event the Company cannot deliver Registered Shares.

Specifically, in the event the Registration Statement is not declared effective by August 15, 2007 (“Effectiveness Deadline”), we are required to pay to the investors in cash an amount equal to 1% of the purchase price paid by each investor for the convertible promissory notes and warrants (“Registration Delay Payments”). Additionally, for every 30 day period (or part) thereafter that the Registration Statement is not declared effective, we are required to continue to make Registration Delay Payments, provided that such Registration Delay Payments shall not exceed 10% of the purchase price paid by each investor for the convertible promissory notes and warrants.

In the event the Registration Statement is never declared effective, the Registration Delay Payments are capped at 10% (of the purchase price paid by each investor for the convertible promissory notes and warrants). As a result, the initial requirement for the Company to deliver registered shares upon conversion of the convertible promissory notes or exercise of the warrants is negated and paragraphs 14 – 18 of EITF 00-19 are not applicable (for purposes of classifying the fair value of the warrants issued in conjunction with the convertible promissory notes as a liability with changes in fair value recorded in earnings).

25. Common Stock, Preferred Stock, Additional Paid-in Capital, Warrants and Options

As of September 30, 2009, and December 31, 2008, the Group had an aggregate of:

(a)	None shares of preferred stock issued and outstanding;

(b)	The share of common stock issued and outstanding was 105,155,355 as of September 30, 2009 and December 31, 2008 respectively.

F-32

(c)	The following tables shows the events occurred in additional paid-in capital:

				Events
				occurred
				during the
				reporting		Septebmer 30,
	December 31,			period		2009
Events	2008			(Unaudited)		(Unaudited)
To record the changes of par value from $0.01 to $0.001
of the outstanding common stock as of 11/17/2005	$	584,481		$	-	$	584,481

To adjust the par value of outstanding common stock as of 3/31/2006		(5,354	)		-		(5,354	)

Waiver of shareholder loan on 9/5/2006		2,298,434			-		2,298,434

To eliminate the common stock and additional paid-in capital of the former shell
company "Applied Spectrum Technologies, Inc." on 11/15/2006		16,215,770			-		16,215,770

To eliminate the accumulated deficit of the former shell company
"Applied Spectrum Technologies, Inc." on 11/15/2006		(16,209,962	)		-		(16,209,962	)

Issuance of common stock, 25,961,760 shares at $0.4622 per share, on 11/15/2006		11,974,038			-		11,974,038

Issuance of common stock, 64,942,369 shares at $0.001 per share on 11/15/2006		(64,942	)		-		(64,942	)

To relocate the original common stock of Ever Leader on 11/15/2006		1,285			-		1,285

To record the placement agent commission and transaction related fee
of reverse merger on 11/15/2006		(1,694,326	)		-		(1,694,326	)

Issuance of common stock 706,195 at $0.4622 per share		325,697			-		325,697

Debt discount on beneficial conversion feature on convertible promissory notes		2,385,089			-		2,385,089

Debt discount on warrants issued with convertible promissory notes		5,174,911			-		5,174,911

Placement agent exercised 849,007 warrants at strike price through cashless arrangement		470,347			-		470,347

Issuance of common stock to PIPE investors as penalty for late submission of 10KSB		92,461			-		92,461

Issuance of common stock to directors in lieu of their remuneration		75,790			-		75,790

Issuance of common stock to PIPE investors as penalty for registeration delay expenses		229,789			-		229,789

Conversion of convertible promissory notes		(8,039	)		-		(8,039	)

Issuance of common stock to investors under "Make Good Agreement"		262,957			-		262,957

Additional paid-in capital, balance for the period ended	$	22,108,427		$	-	$	22,108,427

(d)	As of September 30, 2009 and December 31, 2008, 30,264,249 Warrants, each convertible into one (1) share of the Group’s Common Stock, issued and outstanding.

(e)	None options issued and outstanding.

26. Weighted Average Shares Outstanding

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares outstanding during the period.

Diluted net income (loss) per share is computed by using the weighted-average number of shares of common stock outstanding and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method.

F-33

The following table illustrates the computation of basic and dilutive net income (loss) per share and provides a reconciliation of the number of weighted-average basic and diluted shares outstanding:

	NINE MONTHS ENDED SEPTEMBER 30,						THREE MONTHS ENDED SEPTEMBER 30,
										2008
	2009			2008			2009			Restated
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Numerator:
Net income (loss)	$	(2,688,652	)	$	(4,664,501	)	$	(372,397	)	$	(841,923	)

Denominator:
Basic weighted-average shares outstanding		105,155,355			100,887,853			105,155,355			101,556,376
Effect of dilutive stock options & warrants		-			-			-			-
Diluted weighted-average shares outstanding		105,155,355			100,887,853			105,155,355			100,803,509

Net income (loss) per share:
Basic	$	(0.03	)	$	(0.05	)	$	(0.00	)	$	(0.01	)
Diluted	$	(0.03	)	$	(0.05	)	$	(0.00	)	$	(0.01	)

27. Commitments and Contingencies

As of September 30, 2009, there was an operating lease commitment and the amounts are stated as follows;

	September 30
	2009
	(Unaudited)
Rental and Property Management Fee
Within one year	$	50,764
One to two year		35,203
Two to three year		35,203
Over three years		52,805
Total commitments payable	$	173,975

28. Segment Information

The Group states the segment information according to the requirement stated in ASC 280, Segment Reporting. The Group produces five different categories of products and each category of product is produced in different subsidiaries or operation plants. The details are stated as follows:

1.	Benda Ebei produces conventional medicines which including banded and generic medicines;

2.	Jiangling Benda produces active pharmaceutical ingredients, APIs;

3.	Yidu Benda produces bulk chemicals;

4.	Beijing Shusai produces pharyngitis killer therapy; and

5.	SiBiono produces gene therapy medicines, Gendicine.

Since each subsidiary produces the corresponding products by using the same production facilities of each subsidiary, therefore according to the requirement stated in ASC 280, the Group reports the segment information according to the un-identical products that produced in each subsidiary.

F-34

Selected financial information for each of these segments for the nine months and three months ended September 30, 2009 and 2008 were as follows:

	NINE MONTHS ENDED SEPTEMBER 30,						THREE MONTHS ENDED SEPTEMBER 30,
	(Unaudited)						(Unaudited)
Branded/Generic medicine segment	2009			2008			2009			2008
Revenue from external customers	$	13,617,252			17,439,205		$	4,887,566		$	5,973,012
Cost of sales		(8,600,569	)		(11,479,479	)		(3,051,518	)		(3,831,922	)
Gross profit		5,016,683			5,959,726			1,836,047			2,141,090
Gross margin		37	%		34	%		38	%		36	%
Research and development		-			-			2,301			-
Selling expense		(942,604	)		(1,093,119	)		(529,292	)		(319,636	)
General and administrative expense		(2,848,745	)		(516,513	)		(762,307	)		(29,908	)
Segment contribution	$	1,225,334			4,350,094		$	546,750		$	1,791,546
Contribution margin		9	%		25	%		11	%		30	%

Total assets, segment	$	30,252,879			39,164,262		$	39,164,262		$	38,243,467

Active pharmaceutical ingredients segment	2009			2008			2009			2008
Revenue from external customers	$	817,137			609,139		$	27,075		$	28,807
Cost of sales		(901,431	)		(669,313	)		66,164			(30,784	)
Gross profit		(84,294	)		(60,174	)		93,238			(1,977	)
Gross margin		-10	%		-10	%		344	%		-7	%
Research and development		(143	)		-			(70	)		-
Selling expense		(16,576	)		(3,716	)		(1,851	)		-3,359
General and administrative expense		(526,094	)		(1,154,333	)		(205,085	)		(127,767	)
Segment contribution	$	(627,107	)		(1,218,223	)	$	(113,768	)	$	(133,103	)
Contribution margin		-77	%		-200	%		-420	%		-462	%

Total assets, segment	$	9,654,558			8,545,875		$	8,545,875		$	8,436,445

Bulk chemicals segment	2009			2008			2009			2008
Revenue from external customers	$	-			-		$	-		$	-
Cost of sales		-			-			-			-
Gross profit		-			-			-			-
Gross margin		-			-			-			-
Research and development		-			-			-			-
Selling expense		-			-			-			-
General and administrative expense		(469,567	)		(438,355	)		(249,393	)		(132,387	)
Segment contribution	$	(469,567	)		(438,355	)	$	(249,393	)	$	(132,387	)
Contribution margin		-			-			-			-

Total assets, segment	$	6,990,800			7,553,516		$	7,553,516		$	7,694,510

Pharynigitis killer therapy segment	2009			2008			2009			2008
Revenue from external customers	$	-			3,106		$	-		$	978
Cost of sales		-			(3,397	)		-			(3,280	)
Gross profit		-			(291	)		-			(2,302	)
Gross margin		-			(0	)		-			-235	%
Research and development		-			-			-			-
Selling expense		(733	)		(4,346	)		(733	)		(1,692	)
General and administrative expense		(19,609	)		(24,548	)		(5,134	)		(4,321	)
Segment contribution	$	(20,342	)		(29,185	)	$	(5,867	)	$	(8,315	)
Contribution margin		-			(9	)		-			-850	%

Total assets, segment	$	76,653			99,744		$	99,744		$	108,332

Gendicine (Ad-p53) segment	2009			2008			2009			2008
Revenue from external customers	$	2,910,676			1,808,607		$	990,013		$	631,637
Cost of sales		(268,370	)		(458,205	)		(85,937	)		(347,554	)
Gross profit		2,642,306			1,350,402			904,076			284,083
Gross margin		91	%		75	%		91	%		45	%
Research and development		(283,330	)		(249,357	)		(167,621	)		(79,576	)
Selling expense		(908,569	)		(1,021,508	)		(320,240	)		(366,790	)
General and administrative expense		(1,582,201	)		(518,651	)		(216,189	)		(33,311	)
Segment contribution	$	(131,794	)		(439,114	)	$	200,026		$	(195,594	)
Contribution margin		-5	%		-24	%		20	%		-31	%

Total assets, segment	$	12,169,195			13,808,709		$	13,808,709		$	14,048,551

	NINE MONTHS ENDED SEPTEMBER 30,					THREE MONTHS ENDED SEPTEMBER 30,
	2009					2009			2008
	(Unaudited)					(Unaudited)			(Unaudited)
Total revenue from external customers	$	17,345,065		19,860,057		$	5,904,653		$	6,634,434
Cost of sales		(9,770,370	)	(12,610,394	)		(3,071,291	)		(4,213,540	)
Gross profit		7,574,695		7,249,663			2,833,362			2,420,894
Gross margin		44	%	37	%		48	%		36	%
Research and development		(283,473	)	(249,357	)		(165,390	)		(79,576	)
Selling expense		(1,868,482	)	(2,122,689	)		(852,116	)		(691,477	)
General and administrative expense		(5,446,216	)	(2,652,400	)		(1,438,108	)		(327,694	)
Segment contribution	$	(23,476	)	2,225,217		$	377,748		$	1,322,147
Contribution margin		0	%	11	%		6	%		20	%

Total assets, segment	$	59,144,085		69,172,106		$	69,172,106		$	68,531,305

F-35

The results of the total consolidated net profit before income taxes for the reporting periods are as follows:

	NINE MONTHS ENDED SEPTEMBER 30,						THREE MONTHS ENDED SEPTEMBER 30,
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Total segment contribution	$	(23,476	)		2,225,217		$	377,748		$	1,322,147
Unallocated amounts:
Interest income/(expenses)		(2,104,510	)					(471,263	)		-
Government subsidy		26,386						-			(237,918	)
Other income/(expenses)		106,161			10,140			60,388			-
Other corporate expenses		(666,465	)		(6,249,168	)		(194,360	)		(1,712,054	)

Total income / (loss) before noncontrolling interest and income taxes	$	(2,661,904	)		(4,013,811	)	$	(227,487	)	$	(627,825	)

The other corporate expenses for the nine months and three months ended September 30, 2009 and 2008 composed of the following events:

	NINE MONTHS ENDED SEPTEMBER 30,			THREE MONTHS ENDED SEPTEMBER 30,
	2009			2009		2008
	(Unaudited)			(Unaudited)		(Unaudited)
Penalty to investor	$	-	1,380,173	$	-	$	266,768
Wages and salaries		283,817	295,421		88,801		102,746
Audit and accounting		74,995	130,735		24,998		24,672
Amortization of debt issue cost		55,485	198,360		-		66,603
Consulting fee		9,336	560,040		3,120		188,080
Investor relation, transfer agent and filing fees		2,720	30,843		-		2,720
Director renumeration		67,500	162,968		22,500		22,500
Legal fee		158,134	107,315		53,567		30,640
Travel and transportation		2,446	4,844		303		-
Office expense		-	1,120		-		-
Interest expense		-	3,339,457		-		998,877
Miscellaneous		12,029	37,892		1,070		8,448
Total	$	666,465	6,249,168	$	194,360	$	1,712,054

For the details of information of this particular, it should be read in conjunction with the management discussion and analysis section.

The following table shows the reconciliation between the segments assets and the total assets as of September 30, 2009 and 2008:

F-36

	September 30,		September 30,
	2009		2008
	(Unaudited)		(Unaudited)
Total assets, segment	$	59,144,085		69,172,106

Total assets of corporate:
Cash and cash equivalent		12,168		39,615
Bank indebtedness		1,199,965		1,259,525
Prepaid expesnes and deposit		-		5,672
Refundable purchase price paid		1,200,000		1,200,000
Due from related parties		882,461		670,541
Debit issue costs:
placement agent commission		-		129,585

Total assets	$	62,438,679		72,477,044

The following table shows how the noncontrolling interest for nine months ended September 30, 2009 and 2008 was derived:

	Nine Months Ended September 30, 2009 (Unaudited)
	Benda			Jiangling			Yidu			Beijing
	Ebei			Benda			Benda			Shusai			SiBiono			Total
Segment operating profit / (loss)	$	1,225,334			(627,107	)		(469,567	)		(20,342	)		(131,794	)	$	(23,476	)
Interest income/ (expenses)		(186,293	)		(253	)		4			-			(150,390	)		(336,932	)
Other income / (expenses)		(15,329	)		(175	)		2,968			-			118,697			106,161
Government subsidy		-			26,386			-			-			-			26,386
Income taxes		(163,803	)		-			-			-			-			(163,803	)
Income / (loss) before minority interest	$	859,909			(601,149	)		(466,595	)		(20,342	)		(163,487	)	$	(391,664	)

Noncontrolling interest percentage		5.00	%		9.75	%		9.75	%		28.75	%		42.88	%
Noncontrolling interest	$	42,995			(58,612	)		(45,493	)		(5,848	)		(70,097	)	$	(137,055	)

	Nine Months Ended September 30, 2008 (Unaudited)
	Benda			Jiangling			Yidu			Beijing
	Ebei			Benda			Benda			Shusai			SiBiono			Total
Segment operating profit / (loss)	$	4,350,094			(1,218,223	)		(438,355	)		(29,185	)		(439,114	)	$	2,225,217
Interest income/ (expenses)		(339,014	)		1,010			6			(8	)		(142,689	)		(480,695	)
Other income / (expenses)		(13,874	)		228			2,953			6,820			14,013			10,140
Income taxes		(907,176	)		-			-			-			-			(907,176	)
Income / (loss) before minority interest	$	3,090,030			(1,216,985	)		(435,396	)		(22,373	)		(567,790	)	$	847,486

MI percentage		5.00	%		9.75	%		9.75	%		28.75	%		42.88	%
MI interest	$	154,502			(118,656	)		(42,451	)		(6,432	)		(243,448	)	$	(256,486	)

29. Subsequent Events

(a)	SiBiono patents - on January 29, 2007, SiBiono entrusted Grandall Legal Group Shenzhen Law Firm to issue a legal letter to Zhaohui Peng, one of the shareholders of Sibiono and the inventor of Gendicine, requesting him to transfer all the title of patents to SiBiono.

On June 18, 1999, during the formation of SiBiono, Zhaohui Peng transferred the rights to the patent “A new method for manufacturing recombinant adenovirus” and related research results to SiBiono as a payment for the registered capital. In return, Zhaohui Peng was granted 32.03% of the common stock of SiBiono.

From 1999 to 2007, SiBiono successfully obtained various technology funds from various government technology agencies to support the further research and development activities of Gendicine. Due to this significant funding obtained by SiBiono, Sibiono developed five additional patents which are summarized as follows:

Name of Patent Inventor (6)

Name of Applicant (6)

Patent Assignees

A new method for manufacturing recombinant adenovirus

A recombinant constructed by a virus vector and a human tumor suppressor gene and its use

Recombinant gene medicine of adenovirus vector and and gene p54 for treating proloferative diseases

The application of recombinant adenoviral p53 as cancer vaccine (tentative title)

Human Embryonic Kidney (HEK) sub-clone cell line

The complex of polypeptide liposome and human VGEF gene, and its use and human VGEF gene, and its use

Application number is obtained when application is submitted;

(2)

Publication number is obtained after the first phase examination;


	(3)	Approved patent number is obtained after the final examination;


	(4)	PCT is referred to an International Patent Organization in Paris;


	(5)	US is referred to the application is made in United States of America alone;


	(6)	Peng is referred to Zhaohui Peng; Zhang is referred to Xiaozhi Zhang; Zhu is referred to Jinya Zhu.

As indicated in the above table, Item 1, the patent “A new method for manufacturing recombinant adenovirus” had been assigned to SiBiono; however, the other approved patents (item 2 through item 4) in PRC still have not been assigned to SiBiono. The Group believes that all the above mentioned patents should be rightfully transferred to SiBiono, a subsidiary of the Group. Accordingly, the above mentioned legal letter was issued on this ground.

On August 27, 2008, the Group through its subsidiary, SiBiono filed an application to the Guongdong Province Shenzhen City (Middle) Peoples’ Court to demand Zhaozhu Peng to transfer back all the above mentioned patents to SiBiono. The case has been accepted by the Court and is waiting for its further investigation. As of September 30, 2009, no further progress has occurred.

(b)	As mentioned in Note 12, following this arbitration decision, Benda Ebei has the obligation to pay the total acquisition cost payable of Rmb12.48 million, plus the penalty and related legal and arbitration expenses, totaling approximately Rmb12.80 million (or $1.88 million).

On May 22, 2008, Benda Ebei applied to Shenzhen People Court to terminate above mentioned arbitration. The termination is based on the ground that Xiaozhi Zhang does not own all 6.24% of SiBiono’s common stock. In fact, he only owns 3.28% of SiBiono’s stock. The application has been accepted by Shenzhen People Court and is waiting for its further investigation. As of September 30, 2009, no further progress has occurred.

(c)

The Company has become aware that Excalibur Limited Partnership and Excalibur Limited Partnership II (the "Plaintiffs") filed a motion for summary judgment in lieu of a complaint pursuant to CPLR § 3213 (the "Motion") with the Supreme Court of the State of New York (the "Court"), alleging that the Company has been delinquent on the payment of an aggregate sum of $600,000 and accrued interest and costs arising from the Convertible Promissory Notes that were issued to the Plaintiffs in April 2007 in connection with a $7,560,000 private placement. Pursuant to the motion, the Plaintiffs requested that the Court (1) enter summary judgment in favor of Excalibur Limited Partnership (“Excalibur Limited”) in the amount of $390,000 plus all accrued interest and costs, and, (2) enter summary judgment in favor of Excalibur Small Cap Opportunities LP (“Excalibur Small Cap”) in the amount of $210,000 and accrued interest and costs. As of September 30, 2009, the Company has not received service of such notice, and therefore, the Company does not have details regarding the content of the complaint made by the Plaintiffs.

(d)

On March 4, 2009, the Company received a Notice and Default and Payment Demand letter (the "Default Letter") from Pope Investments LLC ("Pope") in connection with its convertible promissory note in the amount of $5,520,000 (the "Note") purchased in our April 2007 private placement offering. The Default Letter provided notice of default based on the Company's failure to make a required interest payment on the Note by February 20, 2009. The Default Letter further demanded full payment of all interest, liquidated damages and accrued interest thereon in the amount of $130,364.37 by March 14, 2009, or Pope will accelerate the maturity date of the full principal amount of the Note. On April 7, 2009, the Company received further Default Letters and Payment Demand from Pope, Excalibur Limited and Excalibur Small Cap demanding payment in full of the balance of the Notes, which matured on March 28, 2009. The Group has been negotiating with Pope and all of the other noteholders listed above since then and no conclusions have been reached as of September 30, 2009.

F-39

Item 2. Management’s Discussion and Analysis or Plan of Operation

Critical Accounting Policies

Accounting policies discussed in this section are those that we consider to be most critical to an understanding of our financial statements because they inherently involve significant judgment and uncertainties. For all of these estimates, we caution that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue Recognition

Among the most important accounting policies affecting the Group’s consolidated financial statements is its policy of recognizing revenue in accordance with the SEC's Staff Accounting Bulletin ("SAB") No. 104. Under this policy, all of the following criteria must be met in order for us to recognize revenue:

Persuasive evidence of an arrangement exists;

Delivery has occurred or services have been rendered;

The seller's price to the buyer is fixed or determinable; and

Collectibility is reasonably assured.

The majority of the Group's revenue results from sales contracts with distributors and revenue is recorded upon the shipment of goods. Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuring collectibility. Based on these factors, the Group believes that it can apply the provisions of SAB 104 with minimal subjectivity. Sales are presented net of value added tax (VAT). No return allowance is made as products returns are insignificant based on historical experience.

Estimates Affecting Accounts Receivable and Inventories

As of September 30, 2009 and 2008, the Group provided a $6,867,978 and $1,552,068, respectively for the allowance of doubtful accounts against trade receivables. Management's estimate of the appropriate allowance on those accounts receivable for the reporting periods was based on the aged nature of these accounts. In making its judgment, management assessed its customers' ability to continue to pay their outstanding invoices and the collectibility of those accounts on a timely basis, and whether their financial position might deteriorate significantly in the future, which would result in their inability to pay their debts to the Company.

For the nine months ended September 30, 2009 and 2008, the Group provided a reserve against its obsolete, slow-moving or non-salable inventory amounting to $4,925,299 and $4,191,726, respectively.

The provision of reserve was mainly resulted from the manufacturing process of Gendicine, SiBiono’s sole product and SiBiono was acquired by the company in April 2007.

The following chart shows the manufacturing process of Gendicine (Ad-p53):

Therefore, up to the stage of reagent, all the related production costs are treated as work-in-progress. The major components of those production costs are: (i) direct labor; (ii) direct materials; (iii) power; (iv) supplies and other materials; and (v) manufacturing overheads.

Before acquisition, as of March 31, 2007, the accumulated units of original liquid produced was 198,075 and which could be converted to approximately 226,736 vials of Gendicine. However, the accumulated vials of Gendicine sold throughout the years 2004 to three-month period ended March 31, 2007 were only approximately 18,424 vials. Thus the accumulated production costs of $4,080,644 were remained as work-in-process as of March 31, 2007.

After the acquisition with the effective date April 1, 2007, the same accounting treatment was adopted for the treatment of the provision of reserve on work-in-progress. As of September 30, 2009, the provision of reserve on work-in-process was$4,742,417.

Management determination of this allowance was based on potential impairments to the current carrying value of the inventories due to potential obsolescence of aged inventories. In making its estimate, management considered the probable demand for our products in the future and historical trends in the turnover of our inventories. While the Company currently believes that there is little likelihood that actual results will differ materially from these current estimates.

Operational Results

Nine months and three months ended September 30, 2009 Compared to Nine months and three months ended September 30, 2008

The following table provides key components of our operational results for the nine months and three months ended September 30, 2009 and 2008 for Benda Pharmaceutical, Inc.

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Net Revenue:

The Company has five core operating segments: Benda Ebei, Jiangling Benda, Yidu Benda, Beijing Shusai and SiBiono. Benda Ebei manufactures branded/generic medicines; Jiangling Benda manufactures active pharmaceutical ingredients (API); Yidu

Benda manufactures bulk chemicals; Beijing Shusai operates and distributes Pharyngitis Killer Therapy; and SiBiono is a gene therapy company dedicated to the development, manufacturing and commercialization of gene therapy product, Gedicine.

Net revenue decreased by $2.51 million (or 12.6%) to $17.35 million for the nine months ended September 30, 2009 from $19.86 million for the nine months ended September 30, 2008, while the net revenue decreased by $0.73 million (or 11.0%) to $5.90 million for three months ended September 30, 2009 from $6.63 million for three months ended September 30, 2008 Decrease in revenue is principally attributed by the following factors:

One of the Benda’s subsidiaries, Benda Ebei’s net revenue decreased $3.82 million (or 21.9%) and $1.09 million (or 18.2%) to $13.62 million and $4.89 million for the nine months and three months ended September 30, 2009 respectively from $17.44 million and $5.97 million for the nine months and three months ended September 30, 2008 respectively. It was mainly due to the keen competition in generic medicine and the seasonal factors; however the management believes that the overall year revenue of 2009 will remain the same level as year 2008.

2.	One of the Benda’s subsidiaries, Jiangling Benda which resumed its production in October 2007 and achieved $0.8 million and $0.6 million for the nine months ended September 30, 2009 and 2008, respectively.

Jiangling Benda plans to produce four types of active pharmaceutical ingredients and they are Ribavirin, Asarin, Levofloxacin and Ribose whereas the production of Ribose does not require the GMP certificate, but the production of the other three products do require the GMP certificate.

On April 9, 2008, Jiangling Benda received the approved GMP Certificate from the Chinese State Food and Drug Administration ("SFDA") which authorizing the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still under the stage of GMP certificate approving process. The management could not estimate the exact timing for obtaining those certificates.

3.	One of the Benda’s subsidiaries, Yidu Benda ceased operation due to the fact that the plant was closed since mid January of 2007 to upgrade its waster water treatment system to comply with new environmental standards enforced by PRC local government.

Yidu Benda has completed its upgrading of the waster water system and passed the government’s verification and testing of equipments in October 2007. It is now permitted for the testing on actual production process. Once the actual products are produced, then the environmental government bodies will re-test the production results. The management could not estimate the exact timing for obtaining the final approval on the actual production process. Furthermore, the management is searching for new products to be produced in Yidu Benda which with higher profit margin.

One of the Benda’s subsidiaries, Beijing Shusai which incorporated on July 15, 2006. China’s State Food and Drug Administration (SFDA) recently experienced an overhaul in its policies and regulatory systems in an effort to fight against corruption in Chinese pharmaceutical industry. Beijing Shusai’s operation has been adversely affected by this recent policy changes which prohibits some state-owned hospitals from forming alliances with private companies. The management could not estimate that such situation could be resolved in the coming future.

One of the Benda’s subsidiaries, SiBiono, acquired and effective since April 1, 2007, net revenue increased $1.10 million (or 60.9%) and $0.36 million (or 56.7%) to $2.91 million and $0.99 million for the nine months and three months ended September 30, 2009 respectively from $1.81 million and $0.63 million for the nine months and three months ended September 30, 2008 respectively. The main reason for the increase in net revenue is mainly due to the fact that SiBiono was previously underwent a process of re-engineering of the production department during the year of 2008 which improved its production process and also the company put more effort in the marketing

SiBiono GMP - On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 4, 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in China. Gendicine ® is the commercialized gene therapy product approved in the PRC government agency. On May 19, 2008, SiBiono received an official notice from the PRC State of SFDA in which it mentioned that during the random inspection performed by the PRC State of SFDA on April 8 to April 10, 2008, the PRC State of SFDA discovered there were several production procedures that did not meet the requirement stated in GMP, thus it required SiBiono to perform necessary improvements in order to fulfill the GMP requirements and the PRC State of SFDA collected back the distributed GMP certificate until the necessary improvements being carried out and passed the examination that conducted by SFDA. On June 10, 2008, SiBiono received another official notice from Guangdong Province SFDA and they demanded the same requirements as stated in the official notice which issued by the PRC State of SFDA dated on May 19, 2008. On November 24, 2008, SiBiono received another official notice from Guangdong Province SFDA which mentioned that after the examination conducted by Shenzhen City SFDA, the Guangdong Province SFDA consent SiBiono to carry out production on a trial basis. It further required SiBiono strictly to follow the requirements of GMP to organize trail production and follow the procedures to apply for GMP Certificate verification.

On July 14, 2009, SiBiono obtained the final approved GMP Certificate, in order words, the SFDA allows SiBiono to resume its production and sales.

Cost of Goods Sold

Cost of goods sold decreased $2.84 million (or 22.5%) and $1.14 million (or 27.1%) to $9.8 million and $3.1 million for the nine months and three months ended September 30, 2009 respectively from $12.6 million and $4.2 million for the nine months and three months ended September 30, 2008 respectively, primarily due to the decreased in the sales volume in Benda Ebei.

Gross Profit

Gross profit increased $0.32 million (or 4.4%) and $0.41 million (or 16.9%) to $7.57 million and $2.83 million for the nine months and three months ended September 30, 2009 respectively from $7.25 million and $2.42 million for the nine months and three months ended September 30, 2008 respectively, which was mainly due to improved material management causing a slightly decrease in cost.

Selling Expenses:

Selling expenses slightly decreased $0.25 million (or 11.80%) to $1.87 million for the nine months ended September 30, 2009 from $2.12 million for the nine months ended September 30, 2008, but increased slightly $0.16 million to $0.85 million for the three months ended September 30, 2009 from $0.69 million for the three months ended September 30, 2008, primarily due to the management performed cost control in the reporting period.

General and Administrative Expenses:

General and administrative increased $0.55 million (or 9.9%) and $0.59 million (or 45%) to $6.11 million and $1.63 million for the nine months and three months ended September 30, 2009 respectively from $5.56 million and $1.04 million for the nine months and three months ended September 30, 2008. It was primary due to the fact that the company was facing a global financial crisis, thus an amount approximately $3.08 million and $0.27 million was provided for bad debt provision, for the nine months and three months ended September 30, 2009, increase by $2.5 million and $0.5 million respectively, compared with the same period in 2008. However, the company will put more efforts to improve and manage the situation onwards.

Operating Income / (Loss):

The Company resulted an operating loss $0.69 million for the nine months ended September 30, 2009, at the same level as for the nine months ended September 30, 2008. But the Company reported an operating income $0.18 million for the three months, ended September 30, 2009, while the operating income from comparative period for 2008 was $0.61 million. which was mainly due to increase in net profit during the reporting periods.

Interest Expenses:

Interest expenses was $2.1 million and $0.47 million for the nine months and three months ended September 30, 2009 respectively while the interest expenses was $3.34 million and $1.00 million for the comparative period of 2008 respectively. The main component of it was the financing cost associated with the issuance of convertible promissory note.

For the three months ended September 30, 2009, $0.27 million was incurred for the interest of the notes

Other Income / (Expenses)

Due to the Registration Delay Penalty, the Group incurred an expense for the nine months ended September 30, 2008. Out of the total penalty, $230,312 was settled by issuance of 523,438 shares of common stock. There was no penalty to investors incurred for the nine months ended September 30, 2009.

Income Taxes:

Benda is subject to Delaware, United State of America tax, but no provision for income taxes were made for the nine months and three months ended September 30, 2009 and 2008 as Benda did not have reportable taxable income for the period.

Ever Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax, but no provisions for income taxes were made for the nine months and three months ended September 30, 2009 and 2008 as Ever Leader did not have reportable taxable income for the periods.

Benda Ebei was registered as a Sino-Foreign Equity Joint Venture on May 26, 2004 and is subject to the tax laws applicable to Sino-Foreign Equity Joint Ventures in the PRC. Benda Ebei, starting from 2005, is fully exempt from PRC enterprise income tax for two years starting from the first profit-making year, followed by a 50% reduction in the state income taxes, for the following three years, commencing from the first profitable year.

Jiangling Benda and Yidu Benda are cross-municipal investment entities and enjoy the same tax treatment as Sino-Foreign Joint Ventures, starting from 2005, and were therefore exempt from PRC enterprise income tax for two years starting from the first profit-making year, followed by a 50% reduction in the state income taxes, for the following three years, commencing from the first profitable year. Cross-municipal investments entities refer to entities that are incorporated in one municipal region but have investments in another municipal region.

The exemption periods for Benda Ebei, Jiangling Benda and Yidu Benda expired in the year of 2006, after which they are subject to a 50% reduction in state income taxes, at 18%; whereas the full income tax rate is 33%. The remaining tax holidays will be expired in 2010.

According to the new taxation regulations starting and effective from January 1, 2008, Beijing Shusai is subject to the full income tax rate of 25%.

Year		Tax rate
2008		18%
2009		20%
2010		22%
2011		24%
2012 and thereafter		25%

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by the operating activities was $1.19 million for the nine months ended September 30, 2009, while for the nine months ended September 30, 2008 was negative $0.44 million

a)	Non-cash operating activities, reconciliation items to the net income

For the nine months ended September 30, 2008, an amount about $4.48 million non-cash operating activities was reconciled back to the net income and which mainly included amortization of debt discount and debt issue cost, penalty payment made in form of share issuance, bad debt provision, amortization of intangible assets, and depreciation.

However, for the nine months ended September 30, 2009, about $4.02 million of non-cash operating activities was reconciled back to the net income and summarized as follows:

$0.86 million that incurred as interest expenses related to the amortization of discount on long-term debt and issuance cost associated with the warrants and the beneficial conversion features (please refer to Note 24 of the Notes to Consolidated Financial Statements for details); and

Other factors: $3.08 million incurred on bad debt provision; $1.61 million incurred on depreciation; and $0.55 million incurred on amortization of intangible assets.

b)	Trade receivables

The net change of trade receivable was increased by $2.43 million for the nine months ended September 30, 2009. The management also noticed that the net balance of the trade receivable, as of September 30, 2009, was a significant asset to the company. However, the management believes that the above situation is temporarily due to the following reasons:

Trade receivables

Customers whom have sales relationship with our company are all relatively big business wholesale enterprises and they have all passed the examination of GMP Certificate so that the collectibility from those is out of question;

The management realized that it did affect the cash flow situation of the company; therefore the company will put more efforts to reduce the balance of trade receivables.

For the nine months ended September 30, 2009 and 2008, the amount spent in investing activities were $0.46 million and $0.21 million respectively. It was mainly because most of the settlements were made in the year of 2007, thus the investing activities were relatively small for the reporting periods.

Financing cash outflow was $0.07 million for the reporting period nine months ended September 30, 2009 while the financing cash inflow was $0.70 million for the reporting period nine months ended September 30, 2008. The major of it was a net amount

$1.8 million was received from the commercial bank notes in the nine months ended September 30, 2008. (Please refer to the Note 11 of the Notes to Consolidated Financial Statements for the details)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.

Item 4T. Evaluation of Disclosure Controls and Procedures

a) Evaluation of Disclosure Controls. Our Chief Executive Officer and Chief Accounting Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of our third fiscal quarter 2009 pursuant to Rule 13a-15(b) of the Securities and Exchange Act. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure. Based on his evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective as of September 30, 2009.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions

(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our management team will continue to evaluate our internal control over financial reporting in 2009 as we implement our Sarbanes Oxley Act testing.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company has become aware that Excalibur Limited Partnership and Excalibur Limited Partnership II (the "Plaintiffs") filed a motion for summary judgment in lieu of a complaint pursuant to CPLR § 3213 (the "Motion") with the Supreme Court of the State of New York (the "Court"), alleging that the Company has been delinquent on the payment of an aggregate sum of $600,000 and accrued interest and costs arising from the Convertible Promissory Notes that were issued to the Plaintiffs in April 2007 in connection with a $7,560,000 private placement. Pursuant to the motion, the Plaintiffs requested that the Court (1) enter summary judgment in favor of Excalibur Limited Partnership (“Excalibur Limited”) in the amount of $390,000 plus all accrued interest and costs, and, (2) enter summary judgment in favor of Excalibur Small Cap Opportunities LP (“Excalibur Small Cap”) in the amount of $210,000 and accrued interest and costs. On July 29, 2009, the Court entered a judgment against the Company in favor of the Plaintiffs in the amount of $674,251.65 in connection with the Convertible Promissory Notes issued to the Plaintiffs in April 2007 in a private placement.

On March 4, 2009, the Company received a Notice and Default and Payment Demand letter (the "Default Letter") from Pope Investments LLC ("Pope") in connection with its convertible promissory note in the amount of $5,520,000 (the "Note") purchased in our April 2007 private placement offering. The Default Letter provided notice of default based on the Company's failure to make a required interest payment on the Note by February 20, 2009. The Default Letter further demanded full payment of all interest, liquidated damages and accrued interest thereon in the amount of $130,364.37 by March 14, 2009, or Pope will accelerate the maturity date of the full principal amount of the Note. On April 7, 2009, the Company received further Default Letters and Payment Demand from Pope, Excalibur Limited and Excalibur Small Cap demanding payment in full of the balance of the Notes, which matured on March 28, 2009. We were notified on June 15, 2009, that on May 11, 2009 Pope filed a motion for summary judgment in lieu of a complaint against us pursuant to CPLR § 3213 (the “Motion”) with the Supreme Court of the State of New York (the “Court”), alleging that we have been delinquent on the payment of an aggregate sum of $5,520,000 and accrued interest and costs arising from the Note that we issued to the Pope in April 2007. Pursuant to the motion, the Plaintiffs requested that the Court enter summary judgment in favor of Plaintiff in the amount of $5,994,617.53 constituting principal and interest, plus costs.

On June 23, 2009, we filed an Affidavit in Opposition to Motion for Summary Judgment in Lieu of Complaint with the Court requesting that Plaintiff’s Motion be denied. On October 14, 2009, this motion was denied, and the court entered a judgment in favor of Pope in the amount of $5,520,000 plus interest.

On July 30, 2009, we received a Notice of Default from three additional investors in the April 2007 private placement offering holding Notes totaling $90,000.

On November 27, 2007, Shenzhen Arbitration Commission determined that:

	1.	Benda Ebei should pay for the consideration of Rmb 6.24 million, equal to 50% of the total consideration set forth in the Equity Transfer Agreement. For the other 50% of the total consideration which was supposed to be settled in the form of issuing common stock, since Zhang did not make an arbitration request on how to execute the arrangement, the Arbitration Commission did not make an award on this particular part.

	2.	Benda Ebei should pay for the penalty of Rmb 46,800;

	3.	Benda Eebi should pay for legal and arbitration expenses of Rmb 268,971.

3.	SiBiono patents - on January 29, 2008, SiBiono entrusted Grandall Legal Group Shenzhen Law Firm to issue a legal letter to Zhaohui Peng, one of the shareholders of Sibiono and the inventor of Gendicine, demanding that he transfer all the title of patents to SiBiono.

Approved Patent Number (3)

Name of Patent Inventor (6)

A new method for manufacturing recombinant adenovirus

A recombinant constructed by a virus vector and a human tumor suppressor gene and its use

Recombinant gene medicine of adenovirus vector and and gene p54 for treating proloferative diseases

The application of recombinant adenoviral p53 as cancer vaccine (tentative title)

Human Embryonic Kidney (HEK) sub-clone cell line

The complex of polypeptide liposome and human GEF gene, and its use and human VGEF gene, and its use

(1)	Application number is obtained when application is submitted;

(2)	Publication number is obtained after the first phase examination;

(3)	Approved patent number is obtained after the final examination;

(4)	PCT is referred to an International Patent Organization in Paris;

(5)	US is referred to the application is made in United States of America alone;

(6)	Peng is referred to Zhaohui Peng; Zhang is referred to Xiaozhi Zhang; Zhu is referred to Jinya Zhu.

On August 27, 2008, the Group through its subsidiary, SiBiono filed an application to the Guongdong Province Shenzhen City (Middle) Peoples’ Court and demand Zhaozhu Peng to transfer back all the mentioned patents that mentioned in above to SiBiono. The case has been accepted by the Court and is waiting for its further investigation.

Except as disclosed above, we are not aware of any pending or threatened legal proceedings in which we are involved.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

The Company has become aware that Excalibur Limited Partnership and Excalibur Limited Partnership II (the "Plaintiffs") filed a motion for summary judgment in lieu of a complaint pursuant to CPLR § 3213 (the "Motion") with the Supreme Court of the State of New York (the "Court"), alleging that the Company has been delinquent on the payment of an aggregate sum of $600,000 and accrued interest and costs arising from the Convertible Promissory Notes that were issued to the Plaintiffs in April 2007 in connection with a $7,560,000 private placement. Pursuant to the motion, the Plaintiffs requested that the Court (1) enter summary judgment in favor of Excalibur Limited Partnership (“Excalibur Limited”) in the amount of $390,000 plus all accrued interest and costs, and, (2) enter summary judgment in favor of Excalibur Small Cap Opportunities LP (“Excalibur Small Cap”) in the amount of $210,000 and accrued interest and costs. On July 29, 2009, the Court entered a judgment against the Company in favor of the Plaintiffs in the amount of $674,251.65 in connection with the Convertible Promissory Notes issued to the Plaintiffs in April 2007 in a private placement.

On March 4, 2009, the Company received a Notice and Default and Payment Demand letter (the "Default Letter") from Pope Investments LLC ("Pope") in connection with its convertible promissory note in the amount of $5,520,000 (the "Note") purchased in our April 2007 private placement offering. The Default Letter provided notice of default based on the Company's failure to make a required interest payment on the Note by February 20, 2009. The Default Letter further demanded full payment of all interest, liquidated damages and accrued interest thereon in the amount of $130,364.37 by March 14, 2009, or Pope will accelerate the maturity date of the full principal amount of the Note. On April 7, 2009, the Company received further Default Letters and Payment Demand from Pope, Excalibur Limited and Excalibur Small Cap demanding payment in full of the balance of the Notes, which matured on March 28, 2009. We were notified on June 15, 2009, that on May 11, 2009 Pope filed a motion for summary judgment in lieu of a complaint against us pursuant to CPLR § 3213 (the “Motion”) with the Supreme Court of the State of New York (the “Court”), alleging that we have been delinquent on the payment of an aggregate sum of $5,520,000 and accrued interest and costs arising from the Note that we issued to the Pope in April 2007. Pursuant to the motion, the Plaintiffs requested that the Court enter summary judgment in favor of Plaintiff in the amount of $5,994,617.53 constituting principal and interest, plus costs.

On July 30, 2009, we received a Notice of Default from three additional investors in the April 2007 private placement offering holding Notes totaling $90,000.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None

Item 6. Exhibits and Reports of Form 8-K.

(a)	Exhibits

31.1	Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1	Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002

(b)	Reports on Form 8-K

	On July 7, 2009, the Company filed a Form 8-K updating the status of litigation.

	On August 19, 2009, the Company filed a Form 8-K disclosing the Company’s new address.

	On August 19, 2009, the Company filed a Form 8-K disclosing a judgment against the Company.

	On September 22, 2009, the Company filed a Form 8-K disclosing the resignation of an officer.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

	BENDA PHARMACEUTICAL, INC.
	Registrant

Date: November 23, 2009	By:	/s/ Yiqing Wan
		Yiqing Wan
		President, Chief Executive Officer, Chief Financial and Accounting Officer
		Chairman of Board of Directors

Attached files

Benda Pharmaceutical, Inc. Reports

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