Benda Pharmaceutical, Inc. - FORM 10-K/A

Attached files

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EX-31 - Benda Pharmaceutical, Inc.	v185527_ex31.htm
EX-32 - Benda Pharmaceutical, Inc.	v185527_ex32.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x	ANNUAL REPORT UNDER PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________

Commission File Number: 0-16397

BENDA PHARMACEUTICAL, INC.

(Exact name of small business issuer as specified in its charter)

Delaware		41-2185030
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Taibei Mingju, 4th Floor,

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

(Address of principal executive offices)

+86 (27) 85494916

(Issuer’s telephone number)

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

Common Stock, Par Value $.001 Per Share

(Title of Class)

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

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

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

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 (Section 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 ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer (Do not check if a smaller reporting company)	¨	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 ¨ NO x

As of May 17, 2010, 105,155,355 shares of the registrant's Common Stock were outstanding. The aggregate market value of the voting common equity held by non-affiliates (based on the closing bid price of such stock as reported on May 13, 2010 by the Over-the-Counter Bulletin Board) was approximately $1,525,209.

Documents Incorporated by Reference:

None.

TABLE OF CONTENTS

Item Number and Caption		Page

PART I

Item 1.	Description of Business	1

Item 1A.	Risk Factors

Item 2.	Description of Properties	46

Item 3.	Legal Proceedings	48

Item 4.	(Removed and Reserved)	49

PART II

Item 5.	Market for Common Equity and Related Stockholder Matters	49

Item 6.	Selected Financial Data

Item 7.	Management's Discussion and Analysis or Plan of Operations	51

Item 7A	Quantitative and Qualitative Disclosures About Market Risk

Item 8.	Financial Statements	60

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	61

Item 9A(T).	Controls and Procedures	62

PART III

Item 10.	Directors, Executive Officers, and Corporate Governance	62

Item 11.	Executive Compensation	66

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	67

Item 13.	Certain Relationships and Related Transactions and Director Independence	69

Item 14.	Principal Accountant Fees and Services	74

PART IV		77

Item 15.	Exhibits, Financial Statement Schedules

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Summary

Benda Pharmaceutical, Inc. (“we”, “us”, “our”, “Benda” or the “Company”), through our wholly owned subsidiary Ever Leader Holdings Limited (“Ever Leader”), is a pharmaceutical company that identifies, discovers, develops and manufactures both conventional medications and Traditional Chinese Medicines (“TCMs”) for the treatment of some of the largest common ailments and diseases (e.g., common cold, diabetes, cancer). We are also dedicated to the development, manufacturing and commercialization of gene therapy products.

Benda owns all of the capital stock of Ever Leader Holdings Limited, a holding company incorporated under the laws of Hong Kong SAR on October 29, 2005. Ever Leader owns 95% of the issued and outstanding capital stock of Hubei Tongji Benda Ebei Pharmaceutical Co., Ltd. (“Benda Ebei”), a Sino-Foreign Equity Joint Venture company incorporated under the laws of the PRC. Benda Ebei owns: (i) 95% of the issued and outstanding capital stock of Jiangling Benda Pharmaceutical Co., Ltd. (“Jiangling Benda”), a company formed under the laws of the PRC; (ii) 95% of the issued and outstanding capital stock of Yidu Benda Chemical Co., Ltd. (“Yidu Benda”), a company incorporated under the laws of the PRC; (iii) 75% of the issued and outstanding capital stock of Beijing Shusai Pharyngitis Research Co., Ltd. (“BJ Shusai”), a company incorporated under the laws of the PRC; and (iv) 60.13% of the issued and outstanding capital stock of Shenzhen SiBiono Gene Technology Co., Ltd. (“SiBiono”), a company incorporated under the laws of the PRC.

We distribute our high value, branded medicines, through agents who sell them to hospitals that administer them to patients. We sell generics to medical wholesalers for resale to hospitals. The company sells its Over the Counter (“OTC”) medicines to wholesalers specializing in selling to retail chain drug stores. Our “Active Pharmaceutical Ingredients” (“APIs”) are typically sold to large drug manufacturers under long-term supply contracts. The bulk chemicals are purchased by other Chinese drug companies.

History and Recent Developments

We were organized as a Minnesota corporation on February 17, 1982. The technology on which our original products were based, including Spread Spectrum Technology, permit data and telemetry to be transmitted simultaneously over telephone wire without interfering with normal voice service. Our products were known as data/voice multiplexing (“DVM”) equipment and were aimed at operating telephone companies in the telecommunications market. Our lack of financial resources caused us to pursue a plan of dissolution as approved by our Board of Directors and approved by our shareholders on November 30, 1993.

During fiscal 1994, we began implementing a plan of voluntary dissolution pursuant to Minnesota law that was approved by our shareholders at a Special Shareholders’ Meeting held on November 30, 1993. Under our plan of dissolution, most of our assets were sold during 1994 with some payments deferred into 1995 and beyond. The recovery period ran through 1997. During fiscal 1995, most of the tangible asset sales were collected and only technology licenses remained to be collected. During fiscal 1996, we continued to collect license fees and payments on one equipment lease. The results of the plan of dissolution were successful and all liabilities and expenses were either paid or were covered in reserves.

On November 17, 2000, a Special Meeting of the shareholders of the Company was held at which time the plan of dissolution was revoked. Pursuant to the proposal for revocation, a liquidating dividend of approximately $212,000 was paid pro-rata to our shareholders in August 2001. We have been inactive since 1994.

On October 7, 2005, we and Applied Spectrum Technologies, Inc., a Delaware corporation (“Applied - Delaware”) entered into a certain Agreement and Plan of Merger (“Plan of Merger”). Pursuant to the Plan of Merger, subject to stockholder approval, we were to merge with and into Applied - Delaware for the purposes of the redomestication from the State of Minnesota to the State of Delaware (the “Merger”). On October 24, 2005, we filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission for the purpose of voting on the Merger.

On November 14, 2005, the holders of a majority of our outstanding shares of common stock approved the Merger. The Merger was completed on November 17, 2005, and the Articles of Merger were filed with the States of Minnesota and Delaware on November 17, 2005.

On December 14, 2005, Norwood Venture Corp. (“Norwood”), a former shareholder of the Company and KI Equity Partners III, LLC (“KI Equity”) entered into a certain securities purchase agreement, as amended, under which KI Equity agreed to purchase and Norwood agreed to sell an aggregate of 2,281,302 shares of common stock of the Company, representing approximately 77.2% of the Company’s outstanding shares of common stock, to KI Equity at a price of $175,000. The closing of the transactions under the Purchase Agreement occurred on December 29, 2005.

Kevin R. Keating, our former President and sole officer and director who resigned on November 15, 2006, is the father of Timothy J. Keating, the majority member of Keating Investments, LLC. Keating Investments, LLC is the managing member of KI Equity Partners III, LLC, which is the party that acquired the controlling interest in us pursuant to the Purchase Agreement. Keating Investments, LLC is also the managing member and 90% owner of Keating Securities, LLC, a registered broker-dealer. Kevin R. Keating is not affiliated with and has no equity interest in Keating Investments, LLC, KI Equity Partners III, LLC or Keating Securities, LLC and disclaims any beneficial interest in the shares of Applied Spectrum’s common stock to be acquired by KI Equity Partners III, LLC.

We did not become engaged in the pharmaceutical business until November of 2006. Before closing a share exchange transaction in November 2006, we were a shell company with nominal assets and operations, whose sole business was to identify, evaluate and investigate various companies with the intent that, if such investigation warrants, a business combination be negotiated and completed pursuant to which we (formerly known as Applied Spectrum Technologies, Inc.) would acquire a target company with an operating business with the intent of continuing the acquired company's business as a publicly held entity. We entered in an Exchange Agreement dated September 7, 2006 (the “Exchange Agreement”) with KI Equity Partners II, LLC (“KI Equity”), Ever Leader, a company incorporated under the laws of Hong Kong, and the owners of 100% of the capital shares of Ever Leader. The closing of the Exchange Agreement occurred on November 15, 2006. At the closing of the Exchange Agreement, we acquired all of Ever Leader's capital shares (the “Ever Leader Shares”) from the Ever Leader Shareholders, and the Ever Leader Shareholders transferred and contributed all of their Ever Leader Shares to us. In exchange, we issued 64,942,360 shares of our Common Stock to the Ever Leader Shareholders.

As a result of the closing of the Exchange Agreement, Ever Leader became our wholly owned subsidiary and we adopted Ever Leader’s main operational business. The Exchange transaction, for accounting and financial reporting purposes, is deemed to be a reverse acquisition, where we (the legal acquirer) are considered the accounting acquiree and Ever Leader (the legal acquiree) is considered the accounting acquirer, and thus the historical financial statements of Ever Leader are the financial statements of Benda.

Financing

The closing of the Exchange Agreement described above was contingent on a minimum of $10,000,000 (or such lesser amount as mutually agreed to by Ever Leader and the placement agent) being subscribed for, and funded into escrow, by certain accredited and institutional investors ("Investors") in a private placement offering for the purchase of Units, each Unit consisting of 54,087 shares of our Common Stock ("Common Stock") and 54,087 common stock purchase warrants promptly after the closing of the Exchange transaction under terms and conditions approved by our board of directors immediately following the Exchange (the “Financing”). The closing of the Financing was contingent on the closing of the Exchange transaction, and the Exchange transaction was contingent on the closing of the Financing. On November 15, 2006, we completed this private placement offering. We received gross proceeds of approximately $12 million in connection with the Financing from the Investors. Pursuant to Subscription Agreements entered into with these Investors, we sold 480 Units for a total of 25,961,760 shares of its Common Stock and warrants to purchase an additional 25,961,760 shares of our common stock to the Investors. The price per Unit in the Financing was $25,000.

Keating Securities, LLC (“Placement Agent”), an affiliate of Keating Investments, LLC, acted as placement agent in connection with the Financing. For their services, the Placement Agents received a commission equal to 7.5% of the gross proceeds from the offering and a non-accountable expense allowance equal to 1.5% of the gross proceeds. In addition, the Placement Agents received, for nominal consideration, warrants to purchase 10% of the number of shares of common stock sold in connection with the Financing, which in the aggregate totaled 2,596,176 shares of our common stock at an exercise price of $0.555 per share. The warrants are fully vested and have a term of five years. The Placement Agent warrants will have registration rights similar to the registration rights afforded to the holders of Common Stock and Warrants subscribed for in the Financing. We also paid for the out-of-pocket expenses incurred by the Placement Agent and all purchasers in the amount of $100,000.

In order to finance the acquisition of a majority of the shares of Shenzhen SiBiono GeneTech Co., Ltd. (“SiBiono”), on April 5, 2007, we entered into an Investment Agreement (“April Financing”) with certain accredited and institutional investors (“Investors”) who had also participated in the subscription for $12,000,000 of our common stock pursuant to certain Securities Purchase Agreements dated November 15, 2006 (“November Financing”). Pursuant to the Investment Agreement, the Investors purchased a total of 252 Units for $7,560,000 with each Unit consisting of (i) a convertible promissory note in the principal amount of Thirty Thousand Dollars ($30,000) which shall be convertible into 54,087 shares of the Company's common stock, par value $0.001 per share, and (ii) a warrant to acquire 54,087 shares of Common Stock at an exercise price of $0.555 per share. The Notes bear an interest rate of four percent per annum until the Buyer elects to exercise the right to convert, and matured on March 28, 2009. The Notes have reached the Maturity Date. We have not repaid the principal amounts of the Notes as of the date of this annual report.

In March 2007 the Company and the Investors entered into a Modification Agreement amending the November Financing Documents to allow for certain issuances of the Company's securities, including additional purchases of the Company's equity securities pursuant to the Investment Agreement; shares issuances required under the Equity Transfer Agreements; and issuances of options pursuant to an approved Qualified Employment Stock Option Plan. All of the investors in the November Financing had the right to participate in the purchase of additional units under the Investment Agreement and all of such investors either participated in the Investment Agreement or have waived their right to participate in such. In addition, those investors that did not participate in the Investment Agreement also waived their right to object to the changes to the Warrants, Registration Rights Agreement and Make Good Agreement which were set forth in the Modification Agreement.

On or prior to forty five (45) days from the Closing Date of the Investment Agreement, we were required to deliver to the Buyers our financial statements for the years ending December 31, 2005 and December 31, 2006, audited by Kempisty & Company Certified Public Accountants, P.C., prepared in accordance with GAAP, during each year involved and fairly presenting in all material respects our financial position as of the dates thereof and the results of our operations and cash flows for each such year then ended. Such financial statements for the years ending December 31, 2005 and December 31, 2006 were filed with our Form 10KSB for the year ending December 31, 2006 filed with the Securities and Exchange Commission on May 4, 2007. In addition, on or prior to seventy five (75) days from the Closing Date, we are also required to deliver to the Buyers audited financial statements for SiBiono for the required time periods for the Form 8-K filing required by the Securities and Exchange Commission. Such financial statements were filed with our Amendment No. 1 to Form 8K filed June 15, 2007.

Shenzhen SiBiono GeneTech Co., Ltd.

On April 5, 2007, Hubei Tongji Benda Ebei Pharmaceutical Co., Ltd., a Sino-Foreign Equity Joint Venture company incorporated under the laws of the PRC (“Benda Ebei”), of which Ever Leader Holdings Limited, a company incorporated under the laws of Hong Kong SAR ("Ever Leader") and a wholly owned subsidiary of Benda Pharmaceutical, Inc. (the “Company”), owns 95% of the outstanding common stock, has entered into Equity Transfer Agreements with certain shareholders of Shenzhen SiBiono Gene Technology Co., Ltd. (“SiBiono”), a corporation established and validly existing under the law of the PRC, to purchase a total of approximately 57.57% of the shares of SiBiono's common stock for total consideration of RMB60,000,000 due and payable on or before April 30, 2007.

In connection with the Equity Transfer Agreements, we entered into a Financial Consultancy Agreement with Super Pioneer International Limited (“Super Pioneer”) for financial consultancy services rendered by Super Pioneer. Pursuant to the Financial Consultancy Agreement, we agreed to issue 2,100,000 shares of our common stock to Super Pioneer within three months from the date of the agreement. Super Pioneer agreed to lock up the shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.6 per share and we are not listed in the capital market of NASDAQ or AMEX, Super Pioneer shall have the option to require us to redeem 1,960,000 shares of the stock owned by Super Pioneer at a price of $3.6 per share. Such option shall expire within one month from the last date of the three month period.

On June 11, 2007, Benda Ebei entered into Equity Transfer Agreements with Yaojin Wang and Huimin Zhang, shareholders of SiBiono, for the purchase of an additional 2.56% of the shares of SiBiono's common stock for total consideration of RMB2,560,000 due and payable on or before June 30, 2007. Accordingly, Benda Ebei holds a total of 60.13% of the shares of SiBiono's common stock.

In connection with the Equity Transfer Agreements, we entered into Technical Consultancy Agreements with Yaojin Wang and Huimin Zhang for technical consultancy services rendered by Yaojin Wang and Huimin Zhang. Pursuant to the Technical Consultancy Agreements, we agreed to issue 33,585 shares of our common stock to Yaojin Wang and 55,975 shares of our common stock to Huimin Zhang within three months from the date of the agreement. Yaojin Wang and Huimin Zhang agreed to lock up their shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.6 per share and we are not listed in the capital market of NASDAQ or AMEX, Yaojin Wang and Huimin Zhang shall have the option to require us to redeem the shares of the stock owned by Yaojin Wang and Huimin Zhang at a price of $3.6 per share. Such option shall expire within one month from the last date of the three month period. The redemption requests were made to the Company in January 2008 and the company has already obtained oral consent from Super Pioneer, Wang and Zhang that the payment would be deferred to the year of 2010.

Business

Our operations are headquartered in Wuhan, Hubei Province, China. We are a mid-sized Chinese pharmaceutical company that identifies, discovers, develops and manufactures both conventional medications, Traditional Chinese Medicines (“TCMs”) for the treatment of some of the largest common ailments and diseases (e.g., common cold, diabetes, cancer), gene therapy product for the treatment of cancer and Herbal TCM Oral Liquid for the treatment of anti-respiratory tract infections.

We currently have five core operating companies:

Yidu Benda develops, manufactures and sells bulk chemicals (or pharmaceutical intermediated), which are the raw materials used to make “Active Pharmaceutical Ingredients” (“APIs”).

Jiangling Benda develops, manufactures and sells APIs, which are one of the two components of any capsules, tablets and fluids that are pharmaceutically active. An API is the substance in a drug that produces the desired medicinal effect. The “excipient” is the inert material that holds the API (such as gelatin or water).

Benda Ebei develops, manufactures and sells (a) conventional finished medicines, which are non-patented, branded, proprietary small volume injection solutions (vials) used for a variety of treatments including hepatitis; and (b) Traditional Chinese Medicines (“TCMs”), which are herb-based and natural medicines used in TCM therapies (via our newly formed subsidiary Beijing Shusai). Some of the medicines we produce are of our own origination and protected from competition by certificates issued by China’s State Food and Drug Administration (“SFDA”). There are no differences between the regulatory processes for conventional medicines and Traditional Chinese Medicines. Traditional Chinese Medicines are ready-make medicines, which are produced according certain curing principles and prescriptions and can be used immediately, such as pills, medicinal granules and capsules.

BJ Shusai develops, manufactures and sell herbal TCM oral liquid for the treatment of anti-respiration tract infections. However due to the fact that the SFDA experienced an overhaul in its policies and regulatory systems in an effort to fight against corruption in Chinese pharmaceutical industry, thus BJ 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.

SiBiono develops, manufactures and sells gene therapy products. As a pioneer in gene therapy in China, SiBiono's mission is to develop innovative gene therapy products for the improvement of human health and life quality. The Company has developed two core technology platforms: Viral Vector Gene Delivery System and Non-Viral Vector Gene Delivery System focusing on development of gene therapy product for cancer and cardiovascular diseases. SiBiono’s flagship product, Gendicine is the commercialized gene therapy for the treatment of cancer.

The Chinese government agency, SFDA, provides approval for drugs released into the market in China. Unlike the Food and Drug Administration (“FDA”) in the United States, however, the SFDA provides intellectual property and competitive protection to certain classes of approved drugs.

Each core Benda operating company has its own manufacturing facility located near Wuhan, in Hubei Province and Shenzhen, in Guangdong Province. Good Manufacturing Practices (“GMP”) certification was first issued to Benda Ebei on November 11, 2003 and renew on December 3, 2009 for the production of injection vials. On November 26, 2007, Benda Ebei received a GMP certificate for the production of tablets. Benda Ebei was designated a High and New Technology Enterprise by the Science and Technology Bureau of Hubei Province on July 6, 2005 for a period of two years. This designation represents formal recognition by the provincial government that a company has developed or acquired new technology of significance, and triggers a number of government support and incentive policies, including availability of land for expansion, research grants and discounts on bank loan interest. The designation expired on July 6, 2007; however, we have passed the re-examination and the new designation was received on August 2007. Although we have not received any support from the government to date, such a designation may be useful in obtaining incentives in the future.

Our Yidu Benda facility produces bulk chemical intermediates for raw material medicine and does not require GMP certification. Yidu Benda was temporarily closed mid January to upgrade its waste water treatment system to comply with new environmental standards enforced by PRC local government. Yidu Benda has completed its upgrading of the waste 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.

Our Jiangling Benda facility was closed for renovation in July 2004 to comply with GMP standards. The Jiangling Benda plant reopened on August 10, 2007 and has been producing Ribose, the only product that does not require GMP approval. Jiangling Benda also plans to produce three other types of active pharmaceutical ingredients and they are Ribavirin, Asarin and Levofloxacin which need to have GMP Certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate 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.

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.

Good Manufacturing Practices (“GMP”) is an internationally-recognized standard for pharmaceutical plant design and construction. GMP has been defined as “that part of quality assurance which ensures that products are consistently produced and controlled to the quality standards appropriate for their intended use and as required by the marketing authorization” (World Health Organization). GMP covers all aspects of the manufacturing process: defined manufacturing process; validated critical manufacturing steps; suitable premises, storage, transport; qualified and trained production and quality control personnel; adequate laboratory facilities; approved written procedures and instructions; records to show all steps of defined procedures taken; full traceability of a product through batch processing records and distribution records; and systems for recall and investigation of complaints. The validity of the GMP approval lasts for five years upon the issuing date and when the expiration date is approaching, the manufacturing company needs to make an application for the renewal.

We distribute our high value, branded medicines, through agents who sell them to hospitals that administer them to patients. We sell generics to medical wholesalers for resale to hospitals. We sell our Over the Counter (“OTC”) medicines to wholesalers specializing in selling to retail chain drug stores. Our APIs are typically sold to large drug manufacturers under long-term supply contracts. Our bulk chemicals are purchased by other Chinese drug companies.

History and Corporate Organization

Ever Leader was incorporated in Hong Kong on October 29, 2005 for the purpose of functioning as an off-shore holding company to obtain ownership interests in various entities (collectively “Benda”) that were previously owned, either directly or indirectly, by Mr. Yiqing Wan (“Wan”) and his wife, Ms. Wei Xu (“Xu”).

The following paragraphs summarize the original ownership structure of various entities owned by Wan and Xu and the subsequent reorganization and transfer of ownership interests in these entities, either directly or indirectly, to Ever Leader.

Ownership Structure Prior to Reorganization

Hubei Benda Science and Technology Development Co., Ltd. (“Benda Science”) was incorporated in the Province of Hubei, PRC in October of 2002, primarily functioning as a holding company with ownership interests in various entities operated by Wan and Xu. Wan and Xu are the sole owners of Benda Science, with ownership interests of 10% and 90%, respectively.

Benda Ebei was incorporated in the Province of Hubei, PRC in April of 2001. Benda Ebei has registered capital of $2,419,404 which is fully paid up. Prior to the reorganization of Benda as further described in the paragraphs below, Benda Science, Wan, and Xu were the sole owners of Benda Ebei, with ownership interests of 60%, 20%, and 20%, respectively. Benda Ebei develops, manufactures, and sells small volume injection solutions (vials) and other conventional medicines.

Jiangling Benda was incorporated in the Province of Hubei, PRC in October of 2001. Jiangling Benda has registered capital of $967,738 which is fully paid. Prior to the reorganization of Benda, Benda Science and Wan were the sole owners of Jiangling Benda, with ownership interests of 90% and 10%, respectively. Jiangling Benda develops, manufactures and sells active pharmaceutical ingredients (“APIs”). Jiangling Benda’s primary production facility was closed for upgrades and renovations in July 2004 in order to secure a GMP certification from the Chinese SFDA. The Jiangling Benda plant reopened on August 10, 2007 and has been producing Ribose, the only product that does not require GMP approval. Jiangling Benda also plans to produce three other types of active pharmaceutical ingredients and they are Ribavirin, Asarin and Levofloxacin which need to have GMP Certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate which authorizes the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still undergoing the GMP certificate approving process. The management cannot estimate the exact timing for obtaining those certificates.

Yidu Benda was incorporated in the Province of Hubei, PRC in March of 2002. Yidu Benda has registered capital of $4,233,854 which is fully paid. Prior to the reorganization of Benda, Benda Science and Wan were the sole owners of Yidu Benda, with ownership interests of 90% and 10%, respectively. Yidu Benda develops, manufactures and sells bulk chemicals (or pharmaceutical intermediates) for use in the production of APIs. The organization and ownership structure of Benda prior to reorganization is as follows:

Reorganization and Revised Ownership Structure

As previously stated in the paragraphs above, Ever Leader was incorporated in Hong Kong on October 29, 2005 for the purpose of functioning as an off-shore holding company to obtain ownership interests in various Benda entities that were previously owned, either directly or indirectly, by Wan and Xu. Ms. Mo Mo Hon (“Hon”), a Hong Kong SAR resident, was the sole registered shareholder of Ever Leader, holding the single issued and outstanding share of Ever Leader in trust for Xu.

Pursuant to three separate Equity Transfer Agreements entered into in November of 2005 among Ever Leader, Benda Science, Xu, and Wan, Ever Leader obtained a 95% ownership interest in Benda Ebei in exchange for a commitment to pay $2,298,434 in aggregate consideration to Benda Science, Wan, and Xu. The $2,298,434 acquisition price represented 95% of the $2,419,404 of registered capital of Benda Ebei, but was not representative of the fair value of the assets acquired or liabilities assumed. Specifically, as transfers of ownership interests in PRC entities to offshore holding companies for zero or nominal consideration is prohibited by the Chinese Government (regardless of whether these PRC entities and offshore holding companies are directly or indirectly owned and controlled by the same individual or individuals), an amount equal to 95% of the value of the registered capital of Benda Ebei was established for purposes of the transfer of the 95% ownership interest in Benda Ebei (directly and indirectly 100% owned and controlled by Wan and Xu) to Ever Leader (beneficially 100% owned and controlled by Xu). As a result of each of these entities being 100% directly and indirectly controlled by Wan and Xu, this transaction has been accounted for as a combination of entities under common control (see additional discussion of accounting treatment in the paragraphs that follow), with Ever Leader’s commitment to pay $2,298,434 in aggregate consideration to Benda Science, Wan and Xu being reflected as a current liability at both December 31,2005 and 2004, with corresponding reductions to paid-in capital.

Pursuant to an Equity Transfer Agreement entered into on December 3, 2005 among Benda Ebei, Benda Science, and Wan, Benda Science transferred and assigned its 90% ownership interest in Jiangling Benda to Benda Ebei and Wan transferred and assigned a 5% ownership interest in Jiangling Benda to Benda Ebei (for zero consideration as Benda Ebei and Jiangling Benda were both directly and indirectly 100% owned and controlled by Wan and Xu).

Pursuant to a second Equity Transfer Agreement entered into on December 4, 2005 among Benda Ebei, Benda Science, and Wan, Benda Science transferred and assigned its 90% ownership interest in Yidu Benda to Benda Ebei and Wan transferred and assigned a 5% ownership interest in Yidu Benda to Benda Ebei (for zero consideration as Benda Ebei and Yidu Benda were both directly and indirectly 100% owned and controlled by Wan and Xu).

The organization and ownership structure of the Company subsequent to the consummation of the reorganization as summarized in the paragraphs above is as follows:

In July of 2006, Benda Ebei invested approximately $112,500 for a 75% ownership interest in Beijing Shusai, with the remaining 25% owned by an unrelated PRC individual. Beijing Shusai, a PRC limited liability company, was incorporated on June 15, 2006 and commenced primary operations in July 2006. Benda Ebei is setting up self-operated and franchised Pharyngitis Clinics in leading hospitals throughout major cities in China. It is currently operating two clinics for the Pharyngitis Killer therapy in Beijing, PRC.

On September 5, 2006, Ever Leader increased its number of authorized shares of common stock from 10,000 to 1,000,000 and effected a 100 to 1 stock split, resulting in Hon (the original sole registered shareholder of Ever Leader holding one share in trust for Xu) receiving 99 additional shares in the Company.

On September 5, 2006, Ever Leader transferred and assigned 711,202 shares of common stock to Xia Pharmaceutical, Inc. (“XIA”), an offshore holding company incorporated in the British Virgin Islands (“BVI”) that is 100% owned and controlled by Wan and Xu.

On September 5, 2006, Ever Leader issued 288,698 shares of common stock to 19 entities (some of whom are considered related parties) at par value. Additionally, Hon transferred and assigned her ownership interest in her 100 shares of Ever Leader to one of these entities.

The organization and ownership structure of the Company subsequent to the consummation of the reorganization as summarized in the paragraphs above is as follows:

The organizational chart after the acquisition of SiBiono would be stated as follows:

PRINCIPAL PRODUCTS

In 2009, our revenues were principally derived from sales of products listed in Figure 1. We have SFDA approval for all medicines and active pharmaceutical ingredients that we market. Sales of herbal TCM’s and bulk chemicals do not require SFDA approval. Our medicines have undergone pharmacological experiments in order to research the medicines’ effect and mechanism on organisms. On the other side, the experiments also research the organisms’ effect on the medicine. It includes pharmacodynamics and pharmacokinetics. Pharmacological experiments and clinical trials have similarities. Clinical trials are part of pharmacological experiments. However, pharmacological experiments mainly use animals as research subjects, while clinical trials generally utilize patients as research subjects. Pharmacological experiments are carried out by regulations of non-clinical medicine research and quality control issued by SFDA.

Main Products

Manufacturer	Product	Type	Function
Benda Ebei	Jixuening injection vial	Generic	Haemostatic (stops bleeding)

Benda Ebei	Xujing injection vial	Generic	Haemostatic

Benda Ebei	Nokeqing injection vial	Generic	Used to treat hepatitis

Benda Ebei	Yidingshu injection vial	Generic	Vitamin to treat lack of Riboflavin

Benda Ebei	Shusai-A injection vial	Generic	Anti-inflammatory analgesic

Benda Ebei	Suzheng-B injection vial	Generic	Vitamin; complementary medicine used to treat hepatitis

Benda Ebei	Ribavirin injection vial利巴韦林	Generic	Anti-virus, to treat acute upper respiratory tract infection

Benda Ebei	Gentamycin Sulfate Injection vial	Generic	Broad spectrum antibiotic

Benda Ebei	Vitamin B6 injection vial	Generic	Vitamin; complementary medicine used to treat hepatitis

Benda Ebei	Inosine injection vial	Generic	Nutrition, complementary medicine used to treat hepatitis

Benda Ebei	Vitamin C injection vial	Generic	To treat deficiency of vitamin C

Jiangling Benda	Ribavirin API (1)	API	Ribavirin drug manufacture.

Jiangling Benda	Asarin API (1)	API	Asarin manufacture to treat acute upper respiratory system infection

Jiangling Benda	Levofloxacin Mesylate API (1)	API	Broad spectrum antibiotic drug manufacture

Jiangling Benda	Ribose	API	Used to manufacture antibiotic drug

Yidu Benda	Triazol carboxylic acid methyl ester (“TCA”)	Bulk chemical	Ribavirin manufacture, anti-virus

SiBiono	Gendicine	Gene Therapy	Treatment of cancer

(1)

Jiangling Benda facility was closed for renovation in July 2004 to comply with GMP standards. The Jiangling Benda plant reopened on August 10, 2007 and has been producing Ribose, the only product that does not require GMP approval. Jiangling Benda also plans to produce three other types of active pharmaceutical ingredients and they are Ribavirin, Asarin and Levofloxacin which need to have GMP Certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate which authorizes the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still undergoing the GMP certificate approving process. The management cannot estimate the exact timing for obtaining those certificates.

SFDA Compared to the FDA

The SFDA approval process is similar to the FDA approval process. They both require three phases of clinical trials.

Phase I: Test the safety of drugs. 20-80 cases are required by FDA, while 20-30 cases are required by SFDA.

Phase II: Test the efficacy of drugs. Several hundred cases are required by FDA, while 100 cases are required by SFDA.

Phase III: Expand the sample group and further test the safety and effectiveness of drugs. Several hundreds, even thousands are required by FDA, while 300 hundred cases are required by SFDA.

Before a drug can be sold in China, the drug needs to undergo the above three phases, namely pre-clinical trial, clinical trial and finally, GMP approval. The approval of a drug by SFDA does not guarantee the approval by FDA. However, drugs approved by SFDA can be exempted from certain steps in US clinical trials before applying for FDA.

Benda Ebei Products

Of our branded medicines, the Shusai-A Nefopam Hydrochloride solution, sold in injection vials, is particularly noteworthy. According to a pharmacological experiment, Nefopam Hydrochloride has an analgesic effect 10.4 times greater than that of aspirin. Furthermore, it is not addictive and causes no known side effects.

Pharmacological experiments research the medicines’ effect and mechanism on organisms. On the other side, the experiments also research the organisms’ effect on the medicine. It includes pharmacodynamics and pharmacokinetics. Pharmacological experiments and clinical trials have similarities. Clinical trials are part of pharmacological experiments. However, pharmacological experiments mainly use animals as research subjects, while clinical trials generally utilize patients as research subjects. Pharmacological experiments are carried out by regulations of non-clinical medicine research and quality control issued by SFDA.

The chemical name of this product is Nefopam hydrochloride. It mainly contains: 5-Methyl-1-Phenyl-3,4,5,6-Tetrahydrocannabinol-1H-2,5-benzoxazocine, fenazoxine hydrochloride. It is a new type of Non-narcotic analgesics which has the function of low-grade Antipyretic and muscle relaxants. Its chemical structure belongs to O-methyl benzene ring of diphenhydramine, so it does not have the attribute of Non-steroidal anti-inflammatory drugs, nor Opioid receptor agonist. It is effective for middle-grade and heavy-grade pain. Intramuscular injecting 20mg of Nefopam hydrochloride equals to intramuscular injecting 12mg morphine. It has light effectiveness on respiration inhibition. It has no inhibition on circulatory system. It has no tolerance or dependence. It can be rapidly oral absorbed, Tmax 1-3 hours, and it has obvious effect while first pass. T1/2 4-8 hours, the binding rate of plasma protein is 71%-76%. It is metabolized by liver to lose its pharmacological activities. Most of it will be excreted through kidney. The prototype drug will be less than 5% and only a little will be excreted along with excretion. It is used for pain-killing after operation, cancer pain, and acute pain. It is also used for visceral smooth muscle cramps such as acute gastritis, in-biliary ascariasis, ureterolithiasis.

The clinical trials were conducted in 1993, instructed by Doctor Guozhong, Peng. Ebei plant paid for all clinical trial expenses. It passed the clinical trials in 6 clinical institutes including the provincial hospital of Hebei, the second and the forth hospital attached Hebei School of Medicine, Bethune international peace hospital and etc. The efficacy rate is around 80% for all 374 cases examined. There is no follow up results.

Generics are common, low-cost, medicines used by doctors in hospitals nationwide. Our generics have been marketed for more than 10 years and are generally used by low-income patients in rural and country districts. The profit margins for our generics, which constitute about 3 per cent of Benda Ebei’s current sales volume, are lower than those of our branded products. However, our generic products are an effective means for promoting our corporate name, image and brands nationwide.

Jiangling Benda Products

Jiangling Benda produces and 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.

Ribavirin has been used to produce antivirus medicine to treat SARS and SARS-like illnesses. Ribavirin is also used to treat severe virus pneumonia in infants and young children and a viral liver infection known as hepatitis C. It can be used in patients who have hepatitis C or human immunodeficiency virus (“HIV”) infection. Alliance Pharm, Inc. is advising us on modifications to our production processes in our effort to achieve U.S. FDA certification. Currently, there is only one other pharmaceutical company in PRC that has received U.S. FDA certification to produce Ribavirin API. On April 9, 2008, Jiangling Benda received the approved GMP Certificate from the SFDA which authorizing the production of Ribavrin.

Asarin is used to treat infections of the upper respiratory system. Our Asarin API is synthesized chemically rather than being extracted from natural raw materials, making it a cost effective and price competitive product. Benda’s Asarin received SFDA approval as a new API on December 27, 2005. We plan to extend our reach further down the value chain and manufacture consumer-ready Asarin medicines, in injection, vial and pill form, from our Asarin API. We have already filed for SFDA approval for these three types of finished Asarin products.

·	Levofloxacin Mesylate is a synthetic broad spectrum antibacterial agent for oral and intravenous administration. Benda’s Levofloxacin received SFDA approval as new drug ingredient on March 5, 2006.

·	Ribose is a kind of active pharmaceutical ingredient and which is used to manufacture antibiotic drug and which does not the approval from SFDA.

Yidu Benda Product

Yidu plans to produce one type of bulk chemicals:

·	Triazol carboxylic acid methyl ester (“TCA”). This is our main bulk chemical product.

Due to a government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the middle of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007. On September 25, and October 1, 2007, Yidu Benda had passed the environmental assessment and safety assessment by the Yichang Environmental Protection Bureau and Yichang Safety Supervision Bureau These two bureaus have issued “Environmental Influence Report” and “Safety Assessment Report” in November and December of 2007, respectively. Yichang Environmental Protection Bureau issued an approval document, (Document Number: Yichang Environmental Audit [2007] No. 111) and permitted the trial production of Yidu Benda on December 28, 2007, at which time Yidu Benda resumed full production. The related government agencies through trial production physically inspect the products produced by the newly installed production facilities. The main purpose for doing so is to ensure that the quality of the products is such that there will be no harm to the environment. In addition, Yidu Benda had also passed the examinations conducted by Yichang Public Security Bureau, Yichang Lightning Protection Institute and Yichang Special Equipment Inspection and Test Institute, in terms of the fire apparatus and facilities, lightning protection and static proof facilities etc. 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.

SiBiono Product

SiBiono is a gene therapy company dedicated to the development, manufacturing and commercialization of gene therapy products. As a pioneer in gene therapy in China, SiBiono's mission is to develop innovative gene therapy products for the improvement of human health and life quality. The Company has developed two core technology platforms: Viral Vector Gene Delivery System and Non-Viral Vector Gene Delivery System focusing on development of gene therapy product for cancer and cardiovascular diseases.

MARKETING AND DISTRIBUTION METHODS OF PRODUCTS AND SERVICES

Prescription Medicines

Two types of distribution channels exist in the Chinese medicine industry.

For high value branded medicines: Pharmaceutical Manufacturers à Agents à Sub Agents à Medicine Representatives à Hospitals or Pharmacies à Patients

For low value generics: Pharmaceutical Manufacturers à Wholesalers à Secondary Wholesalers à Hospitals or Pharmacies à Patients

The major difference between an agent and a wholesaler is that the agent has exclusive product sales rights from each manufacturer in each region, which is generally a province. Sometimes manufacturers have several wholesalers in a region.

The table below illustrates price markups along the distribution channel for a typical Benda Ebei branded drug, Shusai-A.

Shusai-A Price Markup Pattern

	Purchase Price per piece in RMB			Price Markup
Patients		40.00			54	%
Retail/Hospitals		26.00			622	%
Medicine Reps		[3.60	]		29	%
Sub-agents		2.80			56	%
Agents		1.80
Benda Ebei		n/a

The highest price markup along the distribution channel is on sales by medicine reps to hospitals because such markups finance kick-backs paid by the reps to doctors. This unfortunate, but common, practice is condemned by PRC’s patients and medical industry regulators, but no effective method has been found to stamp it out. In reality, there are “kick-backs” phenomena which are paid by the reps to doctors, not by our company to doctors. However, in the normal course of business, sales commission would be incurred between our company and clients, such as agents or wholesalers etc., in order to have a sense of incentive to them. This sales commission scheme is fully disclosed in the sales contracts and is also allowed by the relevant PRC regulations.

Benda Ebei sells its products to agents or wholesalers. This method minimizes the need for a direct sales force and distances Benda Ebei from questionable kick-backs and potential legal consequences.

Active Pharmaceutical Ingredients (“APIs”)

Our APIs are purchased by other Chinese drug companies on an order-by-order basis. The domestic industry is tight-knit and API marketing still relies on word-of-mouth, reputation, and personal contacts. Although we have temporarily closed the Jiangling plant to complete renovation and obtain GMP certification, we have maintained relationships with all our former clients and expect to bring on other drug companies as new customers.

Jiangling Plant is primarily engaged in producing Ribose, a bulk chemical which does not require GMP approval and Active Pharmaceutical Ingredients (API) which need GMP approval.

Jiangling Benda was re-opened in August 2007. The products that are planned to be produced in Jiangling Benda are as follows:

a) Ribavirin API (Anti-virus)

b) Asarin API (Antibiotic)

c) Levofloxacin (Antibiotic)

d) Ribose

These four products are classified as API whereas the production of Ribavirin, Asarin and Levofloxacin need to obtain GMP approval, however the production of Ribose does not need the GMP approval. Currently, Jiangling Benda only produces Ribose and which is a kind of API.

Bulk chemicals

We market our bulk chemicals by cultivating strong, long-term relationships with loyal customers. We usually supply customers pursuant to annual renewable contracts. Customers usually start by buying small quantities and gradually increasing order sizes. We also enjoy long-standing relationships with a number of important exporters. These sales contracts are signed annually.

Beijing Shusai Pharyngitis Research Co., Ltd.

Beijing Shusai Pharyngitis Research Co., Ltd, a recently established subsidiary of Benda Ebei, handles our Pharyngitis Killer therapy operation, promotion, and distribution. Key functional departments are as follows:

·	Training. Trains doctors, doctor assistants, and medical workers.

·	Advisory. Advises each clinic on how best to apply the Pharyngitis Killer treatment.

·	Business Development. Extend the footprint of Pharyngitis clinics and implement patient outreach programs.

·	Marketing. Formulate and execute marketing plans.

·	Finance. Provide internal financial services to support business operations.

·	Logistics. Ensure no bottlenecks or shortages in product supply to the clinics.

Special Marketing Initiatives

(1)	Qiweiben Capsule Initiative. Benda Ebei intends to develop a series of products based on the Qiweiben Capsule and designed to treat diabetes. They will be sold through diabetes recovery centers and regional distributors.

(2)	Jixuening Initiative. We plan to develop a group of haemostatic medicines based on our core Jixuening brand. Benda Ebei’s Jixuening has been listed in the Catalog of Basic Medicines Covered by Social Medical Security.

(3)

Analgesic Initiative. The treatment of pain attracts more attention from PRC’s medical community and hospitals around the country that are setting up pain clinics. Our Shusai-A and Lappaconitine Hydrobromide products are uniquely powerful pain killers and are not addictive. We plan to leverage their popularity to promote our other pain killers and thereby build a series of pain killer medicines.

(4)	Asarin Initiative. We intend to form a group of medicines, based on Asarin, which will be designed to cure upper respiratory tract infection.

STATUS OF PUBLICLY ANNOUNCED NEW PRODUCTS/SERVICES

We expect that the following products in our development pipeline will generate growth in our revenues in the next few years. We expect to begin mass production for products once we receive SFDA’s approval.

The registration of a medicine must first be undertaken at the provincial level. First, you need to make an application in the provincial Food and Drug administration, then you must pass the on-the-spot examination of the provincial registration office and the initial inspection of information experts. After that, you can apply for the experts’ technological evaluation of National Medicine Analysis and Judgment center. Only after you received the technological evaluation, your registration can be transferred to SFDA to have administrative ratification. After the ratification, you will be issued new license and ratification number. In most situations, after the application and record of provincial Food and Drug administration, the company’s products will not be examined again by National Medicine Analysis and Judgment center, which is similar to the first step of technological check.

Due to the restructuring of SFDA, the process of approval new drug has been on hold since the beginning of 2007. We do not know how long it will take to resume the approval process.

The Company can only obtain the license for the new medicine and the production license after the completion of the clinical experiments. The procedures of obtaining new drug certificate with the SFDA are as follows:

1. Submit the application to the Province SFDA;

2. Then the Province SFDA will perform the physical inspection;

3. If we pass the physical inspection, the related application would be transferred to the State SFDA;

4. After ratification, the new drug license and ratification number would be issued.

Development Status of Key Products in Our Pipeline

Name of Product	Type	Main Function	Status
Pharyngitis Killer	Herbal TCM Oral Liquid and Treatment	Anti-respiratory tract infections	Market launch underway; SFDA Certificate not necessary

Qiweiben Capsule	Branded TCM	Diabetes treatment	New Medicine Application is accepted by SFDA; awaiting for SFDA approval and production permit。

Yan Long Anti-cancer Oral Liquid	Branded TCM	Treatment of cancers of the digestive tract	Awaiting for SFDA approval (1)

500mg:5ml Tranexamic Acid Injection vial	Generic	Haemostatic	SFDA production approval H20044601 received; Put in production line.

200mg:2ml Ribavirin Injection vial	Generic	Antibiotic	SFDA production approval H42021048 received; Put in production line.

1000mg:2.5mlVitamin C Injection vial	Generic	Vitamin	Achieved State acceptance and hearing Y0405945; SFDA production approval H20067577 received; Put in production line.

0.1g:2ml Lomefloxacin Aspartate Injection vial	Generic	Antibiotic	SFDA production approval H20056701 received; Put in production line.

0.2g:5ml Lomefloxacin Aspartate Injection vial	Generic	Antibiotic	SFDA production approval H20056702 received; Put in production line.

Lappaconitine Hydrobromide Injection vial	Branded Medicine	Analgesic	SFDA production approval H20055966 received; Put in production line.

Asarin Injection vial	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filed with SFDA in May 2006

Asarin pill	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filed with SFDA in August 2006; Need further bio-clinical trial.

Asarin granular medicine	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filing with SFDA in September 2006

Asarin oral liquid	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filing with SFDA in September 2006; Need further bio-clinical trial.

Lysine Hydrochloride Injection vial	Generic	Amino acid	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

Arginine Monohydrochloride Injection vial	Generic	Amino acid	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

100mg:5ml Levofloxacin Hydrochloride Injection vial	Generic	Antibiotic	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

500mg:5ml Levofloxacin Hydrochloride Injection vial	Generic	Antibiotic	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

a-Asarin raw medicines	API	Upper respiratory infection	SFDA production approval H20059540 received; prepare for production.

Levofloxacin mesylate API	API	Antivirus	Filing completed at provincial bureau level; SFDA approval received; prepare for production.

GCLE	Bulk chemical	Production of Antibiotics	As it is a chemical product, it does not need SFDA approval.

(1) Yanlong oral solution has finished its earlier stage of research, and the Company is in the process of applying for SFDA’s permission of clinical trials. The new drug certificate will only be issued after the clinical trials.

New Branded Medicines

Our upcoming branded medicines include Qiweiben capsule and Yanlong anti-cancer oral liquid, which are proprietary traditional Chinese medicines, and Pharyngitis Killer Therapy, which is a combination of herb-based traditional Chinese medicine and treatments. We expect these products to have a significant positive impact on our future operational results.

Our New Branded Traditional Chinese Medicines

Features	Pharyngitis Killer	Qiweiben Capsule	Yan Long Anti-cancer Oral Liquid
Targeted IP/ Formula Protection Period (1)	Not Applicable (2)	7+7 years (7)	7+7 years (7)
Our Ownership	75% (3)	100%	100% with reservation (4)
Completion Date Of Clinical Tests	Not Applicable	Pening (6)	Pending (6)
New Medicine Certification Date	Not Applicable	Pening (6)	Pending (6)
Expected installation of GMP quality production line (5)	Not Applicable	Pending (6)	Pending (6)
Expected SFDA Production Certification	Not Applicable	Pending (6)	Pending (6)
Expected Commencement of Production	Launched June 2006	Pending (6)	Pending (6)

(1) The first protection period will commence when the proprietary TCM protection application is approved. The second protection period can be applied for when the first protection period is expired.

(2) TCM therapies do not require SFDA approval. We chose not to apply for patent protection for this product’s formula due to our concerns about disclosures required in the patent application process.

(3) Benda owns 75% of Beijing Shusai Pharyngitis Research Co., Ltd., a company that owns all product and market exploitation rights to Pharyngitis Killer Therapy.

(4) The inventor of Yanlong Anti-cancer oral liquid, Mr. Yan Li, has reserved the right to sell the product to one hospital in Hong Kong, one hospital in Taiwan and one hospital in Shenzhen province.

(5) GMP certification is expected once the facility installation for the products below referenced products and examination by the related local government agency is completed.

In order to produce Qiwweiben, the following table shows the production facilities are purchased and installed, and they are all located in Benda Ebei and waiting for the government agency for inspection:

No.	Equipment	Model No.	Quantity
1	Muller	300A	2
2	powder shifter	ZS-350	2
3	powder shifter	XS-650	1
4	3D mixer blender	HD-1000	1
5	Ultrasonic spray drier	FL-120	1
6	Wet mixer granulator	GHL-250	1
7	Slot shape Mixer	CHL-150	2
8	granule drier	TC-Z-Ⅱ	1
9	Capsule filling machine	NJP-1200	1
10	Capsule polishing machine	YPJ-Ⅱ	1
11	fast packing machine	DPH-250D	1

In order to produce Yanlong Anti-cancer Oral Liquid, the following table shows the production facilities are purchased and installed, and they are all located in Benda Ebei and waiting for the government agency for inspection:

No.	Equipment	Model No.	Category
1	Solution Preparation Reservoir	PLG-1.0
2	Fluid Storage Reservoir	ZYG-1.0
3	High Level Reservoir	N/A, general machinery	Liquefy
4	Micro-filters	N/A, general machinery	System
5	Filters for Sugar Syrup	N/A, general machinery
6	Sugar Dissolving Reservoir	HTG-0.5
7	Bottle Filling Machine	QCX60
8	Sterilization System	AQS1.2	Bottling
9	Labeling Machine	TWJA	System
10	Light Examine Workstations	N/A

(6) Due to recent restructuring within SFDA, the approval process for new medicines has been ceased since November 2006, except for the first class new medicines which are drugs that have never been sold or appeared in the market in China. The management expects that such situation would still last for an indefinite period.

(7) According to the relevant Chinese patent drug policies of SFDA, all national protective Chinese patent drugs can apply for a seven-year protective period. During the period, other pharmaceutical enterprises cannot produce imitation products. After the first seven years, the company can apply for another seven years’ protective period.

Pharyngitis Killer Therapy (Anti-Respiratory Tract Infections)

Product Description: This is an entirely natural Chinese medicine and treatment containing no hormones or antibiotics, which cures a wide range of upper respiratory tract infections, ranging from the common cough to more advanced respiratory illnesses, such as acute and chronic pharyngitis, tracheitis and bronchitis which has already been proven by clinical trails which are conducted by the company together with the co-operated hospitals.

The clinical trials were conducted by the company together with co-operated hospitals which was based on the sample size 50 chronic respiratory patients who either had the symptom pharyngoxerosis throat itch, chest distress and feeling suffocated or oppressed, throat swelling and sore or vocal cord weary and hoarseness. The medical products used as a comparison were Pharyngitis Killer Therapy (in form of herb drink) alone and chronic comprehensive therapy.

We believe the oral liquid taken alone has a success rate of up to 80% in treating chronic pharyngitis; however, if accompanied by further treatment, success rates of up to 98% can be achieved.

This medicine, in the form of herbal drink, was developed and kept secret over many generations by the Wang family of Beijing. The formula and treatment was initially invented in 682 A.D. by Wang Zhaojing, a famous doctor in Chinese medical history. We believe the oral liquid taken alone has a success rate of up to 80% in treating chronic pharyngitis; however, if accompanied by further treatment, success rates of up to 98% can be achieved.

However, the above data was only conducted by the company together with co-operated hospitals which was based on the sample size 50 chronic respiratory patients. In order words, such clinical trials were not performed by the formal requirement of SFDA.

Our Pharyngitis Killer therapy:

·	Swiftly smoothes away throat itching and coughing

·	Controls the development of disease in the mucus of the mouth

·	Rebuilds the immune function of the throat area

·	Provides a natural therapy, which is without side effects and free of antibiotics

Market Outlook: With the recent urbanization and industrialization of PRC, pollution has become a big problem. Air pollution in particular causes several diseases of the pharynx. Researchers believe that approximately 10% of the people who live in cities suffer from pharynx disease, while in some rural areas, the ratio is a lower, though still significant, 5.5%. Until now treatments for upper respiratory tract infections have relied on antibiotics to control acute pharyngitis temporarily. However, no medicine in the market has thus far been effective at treating chronic pharyngitis. Pharyngitis Killer therapy overcomes the deficiencies of other treatments and eradicates the disease.

Purchase: The operating company for the Pharyngitis Killer therapy is Beijing Shusai. The total registered capital is 1.2 million RMB. As part of the joint venture, Mr. Wang contributed the Pharyngitis Killer formula and treatment as intangible assets, valued at 300,000 RMB, in return for 25% of Benda Shusai’s equity. Benda Ebei invested 900,000 RMB in cash for 75% equity.

IP protection/ technology confidentiality: Pharyngitis Killer is a traditional Chinese medicine and as such does not require SFDA approval. Benda Ebei has chosen not to file for patent protection on the formula in order to avoid disclosing the product formula. It believes that the formula and treatment are effectively protected by: (a) the separation of auxiliary ingredients with a proprietary catalyst powder called Yao Yin; (b) a proprietary production method for the oral liquid; and (3) by proprietary treatment techniques. We plan to apply for patent protection for both the processing method used to make the oral liquid and the treatment method applied on patients.

Promotion: We plan to market Pharyngitis Killer as a stand alone oral liquid medicine that can be combined with surgery-like treatment to achieve results. In August 2006, the PRC State Administration of Traditional Chinese Medicine (“SATCM”) issued an official promotional document to provincial SATCM’s, in which Pharyngitis Killer therapy is categorized as a recommended TCM and treatment. This official promotional document was issued on August 18, 2006 based on an expert panel review of Pharyngitis Killer conducted in August 2006.

Marketing and Distribution: We are setting up self-operated and franchised Pharyngitis Clinics. Benda Ebei currently has two clinics in full operation in Beijing. Benda Ebei has prepared advertising and marketing campaigns to support the rapid expansion of the franchise, which will begin after the closing of this offering. Our self-operated clinics will be located inside hospitals. A proportion of the gross revenues will be paid to the host hospitals in lieu of rent and as compensation for any marketing efforts made on our behalf. Franchised Pharyngitis Killer clinics will be operated by franchisees, which will buy the medicine from us and pay us a franchising fee. We plan to open franchising clinics only at the beginning of the roll-out period in order to accelerate the revenue growth and minimize start-up costs. At a later stage, we plan to open self operated clinics only because we expect that they will be comparatively more profitable and easier to manage.

Status of Planned Pharyngitis Clinics

Due to the restructuring of SFDA, the related policies of SFDA have changed such that the local hospitals are not allowed to co-operate with third parties. These changes have caused us to discontinue our plans of setting of Pharyngitis Clinics. The management of the company is seeking and considering other alternatives to launch this particular drug, however up to now there is no definite plan yet.

Qiweiben Capsule (alleviates symptoms of diabetes)

Product Description: Benda Ebei has the exclusive right to produce a new, effective, herbal medicine against diabetes, which was developed in cooperation with Shandong Haiyang Biotech Co., Ltd. (“Haiyang”). Qiweiben capsule is a medicine used to reduce symptoms of patients suffering from type II diabetes and improve their sexual ability. It contains 7 active pharmaceutical ingredients (“APIs”) extracted from animals and plants; its major API is an extract from virgin male silk moths. This medicine has the following key benefits:

(1)	Reduces blood glucose.

(2)	Cures erectile dysfunction and reduces sexual dysfunction caused by diabetes. The Qiweiben capsule is unique amongst diabetic medicines in this regard.

(3)	As it is a complementary medicine based on natural ingredients, the patient reduces intake of chemical medicines.

Market Outlook: Diabetes has become a common and frequently occurring disease that threatens the health of an increasing portion of the population. According to the 5 th International Diabetes Union conference held in Beijing in 2002, there are 130 million type II diabetes patients around the world, over 40 million of which are in PRC. In the 21 st century, type II diabetes is expected to be epidemic in developing countries such as PRC and India. Such a large patient group provides a significant market opportunity for Qiweiben Capsule. Artificial insulin is currently the most widely used medicine for the treatment of diabetes. Patients using artificial insulin can become addicted to it and also suffer the discomfort of needle injections. These disadvantages can be reduced by using our Qiweiben capsule as a complement to artificial insulin. Pilot studies conducted by Haiyang in 2001 have shown that the Qiweiben capsule significantly reduces one or more symptoms of diabetes in 88% of cases.

Rights Purchase: Qiweiben is the brand name of this medicine. The registered drug name is Qiwei Xiaoke capsule. The SFDA production permit (SFDA Z200110150) was held by Shandong Leaf Pharmaceutical Co., Ltd. On March 14, 2004, Benda Ebei agreed to pay Haiyang RMB 5 million ($625,000) for the technology required for the extraction of virgin male silk moth essence, the SFDA production permit (SFDA Z200110150) and the New Medicine Certificate (SFDA Z20010134). The purchase agreement provided for the immediate transfer of the production permit and the deferred payment of the RMB 5 million ($625,000) within three years after Benda Ebei begins to sell the product.

IP protection/ technology confidentiality: Benda Ebei will apply for TCM protection for Qiweiben and expects a reply from the SFDA no later than 6 months thereafter. According to new regulations, protected TCM status is granted for 7 years from the registration date, during which period no other party may produce it. Thereafter, a further 7 year protection may be granted to the right holder depending on factors such as the effectiveness, production standards, quality and safety of the product. Benda Ebei also has pending patents for the protection of technological and manufacturing processes used to produce this medicine.

Production: We have been building Qiweiben production facilities. In order to produce qiwweiben, the following table shows the production facilities or equipment which have been purchased and installed. The equipment are all located in Benda Ebei and waiting for the government agency for inspection:

No.	Equipment	Model No.	Quantity
1	Muller	300A	2
2	powder shifter	ZS-350	2
3	powder shifter	XS-650	1
4	3D mixer blender	HD-1000	1
5	Ultrasonic spray drier	FL-120	1
6	Wet mixer granulator	GHL-250	1
7	Slot shape Mixer	CHL-150	2
8	granule drier	TC-Z-Ⅱ	1
9	Capsule filling machine	NJP-1200	1
10	Capsule polishing machine	YPJ-Ⅱ	1
11	fast packing machine	DPH-250D	1

We intend to start manufacturing and marketing the product immediately after receiving GMP certification. However, due to recent restructuring within SFDA, the approval process for new medicines has been ceased since November 2006, except for the first class new medicines. The management expects that such situation would still last for an indefinite period.

Clinical Experiments:

Qi Wei Xiao Ke capsule is a Chinese traditional medicine capsule whose main raw material is male Sangcan moth of no copulation. Biochemistry engineering technique is used to extract its useful components, which are produced to traditional Chinese medicine capsule preparation by adding six additional kinds of traditional Chinese medicinal materials.

Experiments with animals have shown that it can lower the blood glucose of streptozotocin diabetes big mouse and ALX diabetes little mouse and can increase the big mouse’s glucose tolerance content of ALX and prolong the submerged weight swimming time of ALX diabetes little mouse.

The male Sangcan moth is rich in brain hormone, ecdysone, male hormone, etc. and contains many amino acid, vitamins and microelement that are needed by the human body. The biological extracts of the male Sangcan moth which are added with milk veteh, the extracts of root of yellow kudzuvine and sealwort, and the extracts of medlar, and then mixed with trichosanthes and rhubarb micro mist, are adequate for traditional medicine’s curing for deficiency of both yin and yang, II diabetes of Qi deficiency and blood silt. It is tested for 420 clinical researches in Beijing Guang An Men Hospital-a subordinate hospital of China Academy of Chinese Medical Sciences and Shandong traditional Chinese medicine hospital, Liaoning traditional Chinese medicine hospital, and Jiangsu traditional Chinese medicine hospital which are four clinical experiment base of new drug. The total effective rate is 88.67% regardless of whether the disease history is long or short, and it has no poisonous side effect to human body.

The medicine was conferred patent of invention by National Patent Bureau in 1996 (patent No. Z96105259·7). Qi Wei Xiao Ke capsule received the new drug license (SFDA No.: Z20010134) and production approval license (SFDA No.: Z200110150) issued by SFDA in October, 2001.

Up to date, we have already submitted the related documents and awaiting for the approval of SFDA.

Yan Long Anti-cancer Oral Liquid

Product Description: The Yan Long Anti-Cancer Oral Liquid (“Yan Long”) is a conventional Chinese patent drug effective against cancers of the digestive tract such as anal, bile duct, colon, esophageal, gallbladder, liver, pancreatic, rectal, and gastric cancers. It is especially effective in helping patients withstand chemotherapy treatment. Yan Long has successfully completed first and second phase clinical trials and Benda Ebei plans to begin the third phase.

Yanlong Anti-cancer Oral Liquid is a kind of pure mixture contains Chinese traditional medicine such as: Baiying, Morel, Salvia, Gentiana, Angelica, etc.

Starting in 1989, Yanlong anti-cancer oral liquid was given to 30 patients with primary liver cancer for the clinical trails. The number of the survivals for the year of 1990, 1991, 1992 and 1993 were 23, 17, 11 and 8 respectively. By March 2004, among the eight surviving patients, two do not have any signs of recurrence, three take care of themselves but are still physically weak, three regressed and returned to the hospital for treatment. I n this clinical research, the survival rate of the patients observed for over 14 years reached 26.67%.

Inventor: The development of Yan Long has been the life work of Dr. Yan Li, one of the nation’s most well-recognized experts in cancer studies. Dr. Li has been an oncology specialist for over 40 years and has held various prestigious positions in the cancer research field in PRC. He was born in 1931. In 1956, he went to study in Beijing College of TCM and graduated in 1962. After that, he worked in the Beijing TCM Hospital Oncology Department for 12 years. In 1970, he was promoted to physician in charge. In 1974, he transferred to the institute of oncology of Beijing Medical University. In 1984, he was appointed as vice president of Beijing Sino-Japan Friendship Hospital. He developed an anti-cancer oral liquid based on his decades of research and experience and named it Yan Long Anti-Cancer Oral Liquid.

Rights Purchase: Benda Ebei and Dr. Yan Li (“Li”) signed an agreement regarding the production, marketing, and sales of Yan Long. Benda Ebei signed agreement to buy all rights to Yan Long from Mr. Li for RMB 5 million ($625,000). Once sales of Yan Long commence a monthly payment of RMB 150,000 ($18,750) per month for the first six months and RMB 300,000 ($37,500) thereafter will be paid. Benda Ebei will cease payment when the accumulated monthly payments reach the RMB 5 million ($625,000) agreed purchase price. Li and Benda Ebei are obliged to keep the Yan Long formula secret. Li retains the right to produce and sell Yan Long in his own clinic. Benda Ebei management believes that this will not significantly impact Benda Ebei’s revenue from Yan Long.

IP protection/ technology confidentiality: Benda Ebei has applied for patent protection for Yan Long and expects to receive a 10 year patent when the registration process is completed

Production: The production facilities and equipment for Yan Long were installed and implemented in July 2007. We intend to start manufacturing and marketing the product immediately after receiving GMP certification. Due to recent restructuring within SFDA, the approval process for new medicines has been ceased since November 2006, except for the first class new medicines. The management expects that such situation would still last for an indefinite period. The process of third phase clinic trail of Yang Long, application for IP protection and the application of certificate are pending.

New Bulk Chemicals

We are in the process of developing and bringing to market 7-Phenylacetamido-3-chloromethyl cephalosporanic acid P-Metoxy Benzyl Ester (“GCLE”), which is a medicine intermediate, chemical name which is used for cephalotin antibiotics. Japan Otsuka Chemical Industry Company originally developed the process to produce GCLE and held the worldwide patent on the GCLE production process. The PRC patent protection period expired in 2005. Since then Benda’s research center and the Wuhan Institute of Chemical Technology have jointly mastered this process of GCLE production. We have completed small-scale and mid-scale trial productions, and expect to be able to produce 200 tons of GCLE in 2007 and 500 tons in 2008. Domestic demand for this product is expected to increase by 28% in 2006 to 1,200 metric tons 3. This demand is currently met by imports.

This new product will be produced in our Yidu plant. Due to a government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the middle of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007.

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.

3	Source: China National Medical Information Center Southern Sub center

INDUSTRY AND COMPETITIVE FACTORS

There is certain industry and competitive factors which we believe will be critical to achieving our growth:

Rapidly growing Chinese pharmaceutical market. In 2005, China was the 9th largest and fastest growing pharmaceutical market in the world. The Chinese currently spend about $12 per capita on pharmaceuticals compared to $340 per capital in the U.S. As the Chinese population ages and becomes wealthier, the already large Chinese pharmaceutical market is poised for continued explosive growth. According to IMS Health, Inc., a research firm, the Chinese pharmaceutical market grew by over 28% and 20% in 2004 and 2005, respectively. According to Boston Consulting Group, China’s pharmaceutical market will become the 5 th largest in the world by 2010. Further, a recent report by McKinsey & Co. reported that Chinese healthcare spending will grow from $21 billion in 2000 to approximately $323 billion by 2025, or at a compounded growth rate of 11.6%. (Farrell D., Gersch U., Stephenson E., (2006) The Value of China’s Emerging Middle Class, McKinsey Quarterly)

Benda is uniquely positioned to capture market share. Our growth potential will be largely driven by the gene therapy product which is known as Gendicine and used for the treatment of cancer. 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 first ever commercialized gene therapy product approved in the world by a government agency. Gendicine is recognized by the world's first class journals as a major milestone in the field of gene research and biotechnology and is expect to make important contribution to mankind's endeavor for improving human health.

Low cost producer. Our continuing success in optimizing our manufacturing processes and minimizing our production costs provides us with a competitive advantage. For example, we have recently developed innovative processes that achieve Ribavirin (an API in common anti-viral injections) yield rates 4.5 per cent higher than the competition, while at the same time reducing Ribavirin manufacturing costs by 9 per cent.

Government sponsored industry consolidation presents opportunities for acquisitions. According to Business China magazine, China’s thousands of domestic companies account for 70 percent of the pharmaceutical market. Anticipating the effects of WTO entry and in an effort to compete with foreign firms, the Chinese government has decided to nurture its own large pharmaceutical companies, by encouraging the consolidation of its government-owned companies. To this end, the Chinese State Economic and Trade Commission (SETC) announced plans to consolidate the industry and support the development of 10 to 15 largest pharmaceutical firms. According to government statistics China currently has about 3,500 drug companies, down from over 5,000 in 2004. The number is expected to drop further. As the industry undergoes further consolidation, Benda will have the opportunity to grow by acquisition.

Benda’s GMP compliant manufacturing processes provide us with a strong competitive advantage in the Chinese healthcare market. The government has formulated an Action Plan for the Modernization of Chinese Medicine to boost the quality of Chinese medicine and enhance China's ability to compete in world markets. As such, all domestic producers of APIs were required to be GMP compliant by the end of 2004. Since the end of June 2004, the SFDA has been closing down manufacturers that do not meet the new GMP standards. In contrast to many of its competitors, Benda has made significant investments in refitting our manufacturing systems to comply with GMP standards. Our Benda Ebei plant received GMP certificate from SFDA on November 11, 2003 and renew on December 3, 2008 for the production of injection vials; while on November 26, 2007, Benda Ebei received a GMP for the production of tablets. Our Jiangling Benda plants received GMP certificate on April 9, 2008 which authorizing the production of Ribavrin. Our SiBiono received GMP certificate on October 16, 2003. Our Yidu Benda facilities, which produce bulk chemicals, are not subject to GMP certification requirement.

RAW MATERIALS AND PRINCIPAL SUPPLIERS

Benda Ebei Suppliers

Benda Ebei plant manufactures injection vials from APIs. Benda Ebei’s largest supplier of APIs was Hubei Fourth Ring Pharmaceutical Co., Ltd. In 2008, Benda Ebei’s largest supplier of APIs was Nan Yang Re Gong Co. Ltd and Benda Ebei purchased approximatel $2.9 million worth of Tranexamic Acid from this supplier, equivalent to 28 per cent of Benda Ebei’s raw materials purchases by value。In 2009, Benda Ebei’s largest supplier of APIs was Hubei Sihuan Pharmaceutical Co.,Ltd and Benda Ebei purchased approximately $3.4 million, worth of Tranexamic Acid equivalent to 38 per cent of Benda Ebei’s raw materials purchases by value.

Jiangling Benda Suppliers

Our Jiangling Benda plant manufactures APIs from bulk chemicals. Jiangling Benda’s largest supplier of bulk chemicals is Wuhan Zhongnan Supplying Co., Ltd. In 2004, Jiangling Benda purchased $400,000 worth of Acetic Anhydride from this supplier, equivalent to 26.2 per cent of Jiangling Benda’s raw materials purchases by value. The Jiangling Benda plant has made no further raw materials purchases since its closure for renovation.

Jiangling Benda re-opened on August 10, 2007 and started producing Ribose. In year of 2008, the largest supplier was Hubei Zhijiang Shanyau Chemical Co. Ltd., and approximately $74 K worth of raw materials was purchased from this suppliers, equivalent to 13.16% of total the raw materials purchases by value. In year of 2009, the largest supplier was Xinxiang Weide Chemical Co. Ltd., and approximately $556,000 worth of raw materials was purchased from this suppliers, equivalent to 29% of total the raw materials purchases by value

Yidu Benda Suppliers

Our Yidu Benda plant manufactures bulk chemicals from other bulk chemicals.

Due to an government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the middle of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007.

Packaging Material Suppliers

Our packaging materials are purchased from two main suppliers. In 2007, we purchased approximately $0.9 MM worth of plastic packaging material from Anlu ZhongYa Plastics Package Factory, equivalent to 11 per cent of our packaging supplies by value. In 2008, we purchased approximately $0.62 MM worth of plastic packaging material from Anlu ZhongYa Plastics Package Factory and Anlu Zhong’Ao Printing Factory, equivalent to 20 per cent of our packaging supplies by value.

The standardized purchasing contract, which is designed by the PRC government agency, is being adopted. The major terms (or components) of the purchasing contracts are stated are as follows:

1.	payment schedule which is based on the negotiation;

2.	the goods are inspected and received according to the PRC regulations for materials of producing drug;

3.	breach contract, then parties have the right to sue in the PRC local civil courts;

As there were many transaction contracts during the years, since the company formed purchasing contract with the suppliers for lots of material purchased, therefore we just listed three of those and shown as a sample for reference.

However, our company does not depend on any sole source suppliers, since the raw materials market is opened in the sense that we could have plenty of choices of the suppliers (each category of materials purchased may have three to five suppliers in the market). We only choose those suppliers who could offer better terms to us and having a long term co-operation relationship.

OUR INTELLECTUAL PROPERTY

We regard our service marks, trademarks, trade secrets, patents and similar intellectual property as critical factors to our success. We rely on patent, trademark and trade secret law, as well as confidentiality and license agreements with certain of our employees, customers and others to protect our proprietary rights.

Pursuant to the PRC TCM Protection Regulation, certain ready-made TCM products which have received SFDA approval have automatic protected intellectual property rights for a seven-year period from the date of grant of such approval. An application can subsequently be made to extend such protection for up to three consecutive seven-year periods. Once this protection period has expired, a company may apply for patent protection.

To a large extent, we rely on such protection regulation to protect our intellectual property rights with respect to such products. In addition, as of December 31, 2005, we filed four patents for manufacturing technologies, primarily relating to our medicine products and manufacturing techniques and the applications are still in the approval process

Our Patents

Two types of medicine-related patents exist in PRC: the medicine production technique patent and medicine invention formula patent. In PRC, illegal infringements of production technique patents are widespread. A tiny modification to a filed medicine production technique might be construed as a new one and argued as not violating the patent laws. Therefore, Benda Ebei has historically tried to avoid applying for this kind of patent in order to protect its technological secrets.

Invention formula patents are as easily imitated as production technique patents. However, since only one SFDA production certificate can be issued on new branded medicine based on the major pharmaceutical ingredients used, a minor modification to the formula would not warrant a new SFDA production certificate. This means that, even if another manufacturer gets to know a patented formula, it won’t be able to produce it, at least in PRC, without the proper SFDA production certificate.

SiBiono patents

Our company has already applied for 6 patents and they are shown in the following table:

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

(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.

The validity of the patent is 20 years since the application date.

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, as SiBiono is the rightful owner of the patents.

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 in the above table.

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. This case has been brought to the court twice, and we are still waiting for the judgment.

Our Trademarks

Benda currently owns four trademarks: Jixuening, Benda, Suzheng-B, and Shusai-A. Benda has filed trademark applications, the approvals of which are pending, for other 13 medicine names or general trademarks and the applications are still in the approval process.

WORK SAFETY ISSUES

On November 10, 2005, there was a small explosion in the Yidu plant resulting in the deaths of two of our workers. This tragic accident resulted from the violation of our operating procedures by one of the workers killed in the explosion. We paid RMB 260,000 ($32,000) to each of the victims’ families in settlement of any compensation issues. On November 11, 2005, there was another explosion in the same factory resulting from a chemical reaction triggered by the prior explosion. Fortunately management had anticipated this incident and the plant had already been temporally sealed so nobody was killed.

Following the events of November 10 and 11, 2005 we have put in place very strict work safety procedures and revised the design of the relevant production process in order to avoid similar incidents in the future. We believe Benda is not liable for any further material liabilities arising from these explosions.

RESEARCH AND DEVELOPMENT ACTIVITIES DURING THE PRIOR TWO FISCAL YEARS

We spent $349,361 and $1,461,951 on direct research and development (“R&D”) efforts in 2009 and 2008 respectively. Rather than spend considerable sums internally on R&D in a market where we cannot easily protect our results of development, we prefer to leverage our management team’s extensive industrial network and knowledge in finding new drugs and treatments that may be potentially very successful but which have not yet been brought to market. We carefully evaluate each of these drugs before making a purchase decision. We believe each of our new products will enjoy considerable success in the market.

We also leverage our network of leading research institutions and universities to optimize the effectiveness of our investment in production R&D. We allocate and fund research projects to these institutions. Our in-house scientists coordinate and supervise the outsourced R&D processes. We have the rights to all results of the R&D efforts including IP rights. In order to protect our interests we usually divide each project into several sections and assign each section to a different research institution. Each research ally therefore only works on a limited part of each project. Some universities and institutes that work with us are:

Life Science College of Wuhan University.

Biochemical College of Sanxia University

Jilin Medical University

Shanghai Institute of Pharmacy of Chinese Academy of Sciences.

Wuhan University of Chemical Technology.

The science and technology cooperation agreement between College of Chemistry and Life Science of China Three Gorges University and Yidu Benda:

Party A: China Three Gorges University (Party A for short in the following)

Party B: Yidu Benda Chemical Co.Ltd. (Party B for short in the following)

To increase the science and technology progress of Yidu Benda Chemical Engineering, Inc. (“Yidu Benda”), to improve the quality of its products and its production efficiency, and to fully make use of scientific intelligence, technologies and experimental equipments of College of Chemistry and Life Science of China Three Gorges University (“University”), after negotiation, the two parties decided to cooperatively build a “drug raw material research and development group”. The concrete agreements are as follows:

The “drug raw material research and development group” is consist of members of both parties, including one group leader, two assistant group leaders and five science and technology workers. The group leader is assigned by University, while the two assistant leaders are assigned by the two parties, one for each party. The remaining five workers are decided by negotiation according to the demands of project research.

2.	The research and development projects are put forward by Yidu Benda, and are decided after the demonstration of the two parties.

The research funds are supported by Yidu Benda, and University shall supply all the experimental equipment and the related condition according to needs, in which including: University provide certain number of chemistry and chemical engineering apparatus and equipment for common usage and help Yidu Benda to build a basic laboratory and assist Yidu Benda to build a pilot laboratory.

4.	The expense of the research and development projects includes: drug reagent, low priced and easily worn detecting fees, the transportation fees between school and company and allowance of research workers.

5.	University can directly send relative researchers to Yidu Benda to organize and guide project task research according to needs.

6.	The property rights and interests of the project achievements will be appointed by Project Contract.

COMPLIANCE WITH ENVIRONMENTAL LAW

We comply with the Environmental Protection Law of PRC as well as applicable local regulations. In addition to statutory and regulatory compliance, we actively ensure the environmental sustainability of our operations. Penalties would be levied upon us if we fail to adhere to and maintain certain standards. Such failure has not occurred in the past, and we generally do not anticipate that it will occur in the future, but no assurance can be given in this regard.

Our Yidu Benda facility produces bulk chemical intermediates for raw material medicine and does not require GMP certification. Yidu Benda was temporarily closed since mid January to upgrade its waste water treatment system to comply with new environmental standards enforced by PRC local government.

Due to an government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the mid of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007. Up to date, the company had spent approximately $0.2 MM to re-design and improve the existing system. Nowadays, Yidu Benda has completed its upgrading of the waste 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.

SHENZHEN SIBIONO GENE TECHNOLOGY CO., LTD.

On April 5, 2007, Hubei Tongji Benda Ebei Pharmaceutical Co., Ltd., a Sino-Foreign Equity Joint Venture company incorporated under the laws of the PRC (“Benda Ebei”), of which Ever Leader Holdings Limited, a company incorporated under the laws of Hong Kong SAR ("Ever Leader") and a wholly owned subsidiary of Benda Pharmaceutical, Inc. (the “Company”), owns 95% of the outstanding common stock, has entered into Equity Transfer Agreements with certain shareholders of Shenzhen SiBiono Gene Technology Co., Ltd. (“SiBiono”), a corporation established and validly existing under the law of the PRC, to purchase a total of approximately 57.57% of the shares of SiBiono’s common stock for total consideration of RMB60,000,000 due and payable on or before April 30, 2007.

In connection with the Equity Transfer Agreements, we entered into a Financial Consultancy Agreement with Super Pioneer International Limited (“Super Pioneer”) for financial consultancy services rendered by Super Pioneer. Pursuant to the Financial Consultancy Agreement, we agreed to issue 2,100,000 shares of our common stock to Super Pioneer within three months from the date of the agreement. Super Pioneer agreed to lock up the shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.6 per share and we are not listed in the capital market of NASDAQ or AMEX, Super Pioneer shall have the option to require us to redeem 1,960,000 shares of the stock owned by Super Pioneer at a price of $3.6 per share. Such option expired within one month from the last date of the three month period. The redemption requests were made to the Company in January 2008 and the company has already obtained oral consent from Super Pioneer that the payment would be deferred to the year of 2010.

On June 11, 2007, Benda Ebei entered into Equity Transfer Agreements with Yaojin Wang and Huimin Zhang, shareholders of SiBiono, for the purchase of an additional 2.56% of the shares of SiBiono’s common stock for total consideration of RMB2,560,000 due and payable on or before June 30, 2007. Accordingly, Benda Ebei holds a total of 60.13% of the shares of SiBiono’s common stock.

In connection with the Equity Transfer Agreements, we entered into Technical Consultancy Agreements with Yaojin Wang and Huimin Zhang for technical consultancy services rendered by Yaojin Wang and Huimin Zhang. Pursuant to the Technical Consultancy Agreements, we agreed to issue 33,585 shares of our common stock to Yaojin Wang and 55,975 shares of our common stock to Huimin Zhang within three months from the date of the agreement. Yaojin Wang and Huimin Zhang agreed to lock up their shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.6 per share and we are not listed in the capital market of NASDAQ or AMEX, Yaojin Wang and Huimin Zhang shall have the option to require us to redeem the shares of the stock owned by Yaojin Wang and Huimin Zhang at a price of $3.6 per share. Such option expired within one month from the last date of the three month period. The redemption requests were made to the Company in January 2008 and the company has already obtained oral consent from Wang and Zhang that the payment would be deferred to the year of 2010.

Business of SiBiono

Shenzhen SiBiono GeneTech Co., Ltd. (hereinafter referred to as SiBiono) is a gene therapy company dedicated to the development, manufacturing and commercialization of gene therapy products. The Company was founded in early 1998 and is located in Shenzhen Hi-Tech Industrial Park, Shenzhen, China. As a pioneer in gene therapy in China, SiBiono’s mission is to develop innovative gene therapy products for the improvement of human health and life quality. The Company has developed two core technology platforms: Viral Vector Gene Delivery System and Non-Viral Vector Gene Delivery System focusing on development of gene therapy product for cancer and cardiovascular diseases.

On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 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 first ever commercialized gene therapy product approved in the world by a government agency. It is only approved and commercialized in PRC alone; however there is no other gene therapy product like Gendicine has been approved and commercialized in other countries. One of the factor causing this situation may be due to the fact that China’s lack of regulatory obstacles in conducting gene therapy trails.

SiBiono has established the validated GMP manufacturing plant for the production of gene therapy drugs. A complete set of quality-control assays and large-scale production processes were implemented in SiBiono in accordance with international regulations and standards for consistent manufacture of high quality gene therapy products. Based on SiBiono’s QC procedures and standards, the SFDA constituted and issued the national technological guideline - “Points to Consider for Human Gene Therapy and Product Quality Control” in May 2004. This document was also published in the magazine of Biopharm International for reference and peer review.

SiBiono has undertaken a number of national and provincial research and development projects, including biotechnology projects of “National 863 Plan”, projects of “National 973 Plan”, key research project of “National Tenth Five-Year-Plan”, projects funded by “National Innovation Fund”, projects of “National Key Scientific Development Plan”, National Hi-tech Industrialization Projects, Key Platform Technology Development Projects in Guangdong Province, as well as Hi-Tech Industrialization Projects of Shenzhen Municipality. By participating in those national projects, the reputation of SiBiono could be raised in China and also it allows us to apply for the funding from the local government agencies to support our gene therapy research activities.

The Company has 60.19 million RMB as its registered capital and currently has about 80 full-time employees.

Milestones of SiBiono

Since its establishment in March of 1998, SiBiono has evolved from a small start-up company to an internationally recognized gene therapy company with its successful launch of the world’s first approved gene therapy product “Gendicine”. The Company has achieved the following major milestones in the past (Table 1):

Table 1. Milestones of SiBiono’s Development

Time		Events
October 2006		SiBiono was awarded with “Global Entrepolis @ Singapore” Innovation Award. The GES Award, honoring the “Technopreneur of the Year” in the Asia-Pacific region, was presented by the President of Singapore, SR Nathan at the Opening Ceremony of Global Entrepolis@Singapore 2006. A record-breaking 224 entries from applicants in 14 countries and territories in the Asia-Pacific region submitted the application for competition.

		Wall Street Journal Asia presented the story of SiBiono in 2 separate issues.

December 2005		Dr. Zhaohui Peng was awarded a Special Recognition Award by ISCGT (International Society for Cell and Gene Therapy of Cancer) in recognition for SiBiono GeneTech, Co., Ltd.'s great contribution to the gene therapy field.

June 2005		Recombinant Human Ad-p53 Injection (Gendicine) was granted the “State Key-New product Certificate” issued jointly by the Ministry of Science and Technology, the Ministry of Commerce, the General Administration of Quality Supervision, Inspection and Quarantine and the State Environmental Protection Administration of the People’s Republic of China.

April 2004		Gendicine was launched into market

March 2004		SiBiono’s Gendicine manufacturing facility is granted with “Certificate of GMP for Pharmaceutical Product” by SFDA.

January 20, 2004		SiBiono was granted “Manufacture Certificate” for Gendicine by the SFDA

October 16, 2003		Gendicine was granted “New Drug License” by the SFDA, and became the first gene therapy product ever approved by a government agency in the world.

September 2003		Mr. Zeng Qinghong, Vice President of P.R.China, visited SiBiono GeneTech and gave the Chinese Brand name (今又生) for Gendicine.

September 2003		Completion of the clinical trials, defense and assessment of “recombinant human p53 adenoviral injection” product

July 2003		Corporate restructuring was finished, the registration capital increased to be 48.19 million RMB

November 2002		SiBiono was granted the Pharmaceutical Manufacture Permission by the Guangdong Drug Administration.

September 1998		SiBiono obtained SFDA’s permission to initiate Gendicine clinical trials.

March 1998		Shenzhen SiBiono GeneTech Co., Ltd. was established.

Dr. Zhaohui Peng is the founder and Chairman of SiBiono. He graduated from a medical university in China, served as director of a research institute at the South Medical University in Guangzhou and as a visiting professor at both the University of Chiba in Japan and the University of California. He also conducted research at two US biotech companies. Dr. Peng has devoted more than fifteen years to gene therapy research, development and commercialization. He led the research, development, industrialization and commercialization of Gendicine. He is also the main inventor of all patents in SiBiono.

Attribute to his great contribution to the gene therapy field by developing and launching the world's first gene medicine product - Gendicine®, Dr. Peng was honored with the “Gene Therapy Achievement Award” at the 2005 ISCGT Annual Conference in December 2005, the person of cover story on Forbes (Chinese Edition) entitled with the “Technology Pioneer in China” in October 2006, the “Certificate of Recognition” for outstanding achievement and innovative contribution to bioscience research and development by California State Assembly in November 2006, and the nominee of “CCTV 2006 People of the Year in China’s Economy” in November 2006.

On September 9, 2007, Benda achieved a great success in the national forum on "Gene Therapy for Tumors" sponsored by the Chinese Academy of Medical Sciences and the China Pharmaceutical Biotechnology Association. The forum is China’s large annual medical biotechnology conference run from September 7 - 10 in Qing Dao, Shandong Province. In conjunction with the national conference, SiBiono held a national forum discussing “Gene Therapy for Tumors”. Approximately 600 leading Chinese doctors attended SiBiono’s forum, representing 26 different provinces and over 200 Tier I Chinese hospitals (Tier I hospitals offer the best medical services in China; there are currently 775 Tier I hospitals in China).

The main purpose of the forum was to allow 15 national renowned medical experts to share their experiences in the effective application of Gendicine ® to maximize its treatment efficacy.

As of December 31, 2007, SiBiono shipped 10,652 of the 16,000 vials ordered. From January 1 to February 25, 2008, another 733 vials out of the 16,000 vials order had shipped. From February 26 to July 10, 2008, an additional 2,412 vials shipped. Accordingly, we have shipped and received payment for a total of 13,797 vials of the 16,000 vial order. The 16,000 vial order for Gendicine was ordered by various selling agents with average selling price RMB2,500 per vial.

In January 2008, our quality control department recognized that during the process of purification, one of the components of Gendicine did not fulfill the requirements of the internal quality control; therefore further purification was necessary. Gendicine is a gene therapy product which needs to undergo a series of internal quality control processes. Once the problem was located, our quality control and production department solved the issue immediately.

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 to strictly follow the requirements of GMP to organize trial 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.

Commercial Bank Note

On August 14, 2007, Benda Ebei entered into a three year non-interest bearing commercial bank note issuable agreement with Shanghai Pudong Development Bank. The total commercial note issuable limit is Rmb 60 million; however 50% of the deposit has to be made to the bank in order to secure the issuance of the commercial bank note, thus the net available amount is Rmb 30 million. The repayment period of each commercial note payable is six months. 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 a daily and compound basis.

The credit facility was originally guaranteed by SiBiono and secured by the buildings, machinery and equipment of Benda Ebei. The Sibiono guarantee may have been a violation of the terms of the convertible promissory notes entered into with certain accredited and institutional investors on April 5, 2007. However, 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 December 31, 2009, Benda Ebei and Jiangling Benda deposited an amount of $4,409,334 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 December 31, 2009, the balance of the commercial bank notes payable was $8,160,503. Thus the net commercial bank notes payable was $3,751,169 as of December 31, 2009.

EMPLOYEES

As of December 31, 2009, we had approximately 400 full-time employees, including 48 sales people, 19 technology and R&D staff, and 333 production staff and no part-time employees. Among our current employees are two Ph.D.s and 17 holders of master’s degrees. All executives have received master-degree level executive training and all members of our staff have undertaken GMP training.

We have a sales office in each of three cities that promote our branded medicines. As of December 31, 2009, approximately 18 people in our Central China Sales Office were located in Wuhan, and 16 people were in our Southern China Sales Office located in Shenzhen.

RISK FACTORS

An investment in our common stock involves investment risks and the possibility of the loss of an investor’s entire investment. A prospective investor should evaluate all information about us and the risk factors discussed below in relation to his financial circumstances before investing in us.

Risks Relating to Our Business

WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE.

In order to maximize potential growth in our current and potential markets, we believe that we must expand our manufacturing and marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

In order to achieve the above mentioned targets, the general strategies of our company are to maintain and search for hard-working employees who have innovative initiatives; on the other hands, our company will also keep a close eye on expanding opportunities, for example, acquisition of state-owned enterprises.

WE CANNOT ASSURE YOU THAT OUR ORGANIC GROWTH STRATEGY WILL BE SUCCESSFUL WHICH MAY RESULT IN A NEGATIVE IMPACT ON OUR GROWTH, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOW.

One of our strategies is to grow organically through increasing the distribution and sales of our products by penetrating existing markets in PRC and entering new geographic markets in PRC as well as other parts of Asia and the United States. However, many obstacles to entering such new markets exist, including, but not limited to, international trade and tariff barriers, shipping and delivery costs, costs associated with marketing efforts abroad and maintaining attractive foreign exchange ratios. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products in any additional markets. Our inability to implement this organic growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.

WE CANNOT ASSURE YOU THAT OUR ACQUISITION GROWTH STRATEGY WILL BE SUCCESSFUL RESULTING IN OUR FAILURE TO MEET GROWTH AND REVENUE EXPECTATIONS.

In addition to our organic growth strategy, we also expect to grow through strategic acquisitions. We intend to pursue opportunities to acquire businesses in PRC that are complementary or related in product lines and business structure to us. We may not be able to locate suitable acquisition candidates at prices that we consider appropriate or to finance acquisitions on terms that are satisfactory to us. If we do identify an appropriate acquisition candidate, we may not be able to negotiate successfully the terms of an acquisition, or, if the acquisition occurs, integrate the acquired business into our existing business. Acquisitions of businesses or other material operations may require debt financing or additional equity financing, resulting in leverage or dilution of ownership. Integration of acquired business operations could disrupt our business by diverting management away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. We also may not be able to maintain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits we anticipated when selecting our acquisition candidates. In addition, we may need to record write-downs from future impairments of intangible assets, which could reduce our future reported earnings. At times, acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition. In addition to the above, acquisitions in PRC, including of state owned businesses, will be required to comply with laws of the People's Republic of China ("PRC"), to the extent applicable. There can be no assurance that any given proposed acquisition will be able to comply with PRC requirements, rules and/or regulations, or that we will successfully obtain governmental approvals which are necessary to consummate such acquisitions, to the extent required. If our acquisition strategy is unsuccessful, we will not grow our operations and revenues at the rate that we anticipate. If our acquisition strategy is not successful, our revenues and profit will be solely dependent upon our organic growth.

WE HAVE PREVIOUSLY HAD AN EXPLOSION AT OUR YIDU PLANT THAT RESULTED IN TWO DEATHS AND ANY SUCH OCURRENCE IN THE FUTURE CAN EXPOSE US TO LIABILITY FOR SUCH AN EVENT

On November 10, 2005, there was a small explosion in the Yidu plant resulting in the deaths of two of our workers. This tragic accident resulted from the violation of our operating procedures by one of the workers killed in the explosion. We paid RMB 260,000 (or $32,500) to each of the victims’ families in settlement of any compensation issues. On November 11, 2005, there was another explosion in the same factory resulting from a chemical reaction triggered by the prior explosion. Fortunately management had anticipated this incident and the plant had already been temporarily sealed so that no further injury occurred.

Following the events of November 10 and 11, 2005, Yidu plant was temporarily closed for approximately one month; during the one month plant shut down, we put in place very strict work safety procedures and revised the design of the relevant production process in order to avoid similar incidents in the future. We believe Benda is not liable for any further material liabilities arising from these explosions. Notwithstanding this fact, there can be a future explosion that may result in death or serious injury. If this occurs and in light of the fact that it previously occurred, may result in exposure to extensive liability to us.

Currently, we do not have any insurance policy for Yidu Benda due to the fact that it has been closed since January 2007 for improvement of our waste water treatment systems. However, once Yidu Benda resumes to its production, we will deploy appropriate insurance policy for the workers.

IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.

If adequate additional financing is not available on reasonable terms, we may not be able to undertake plant expansion, purchase additional machinery and purchase equipment for our operations and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us.

In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If we need additional funding, the market fluctuations affect on our stock price could limit our ability to obtain equity financing.

If we cannot obtain additional funding, we may be required to: (i) limit our investments in research and development; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures.

Such reductions could materially adversely affect our business and our ability to compete.

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

WE MAY BE REQUIRED TO REPURCHASE SHARES OF OUR COMMON STOCK IN CONNECTION WITH THE FINANCIAL CONSULTANCY AGREEMENT AND TECHNICAL CONSULTANCY AGREEMENTS. THE REPURCHASE OF THESE SHARES MAY HAVE A NEGATIVE IMPACT ON OUR PROFITABILITY.

In connection with the Equity Transfer Agreements, we entered into a Financial Consultancy Agreement on April 5, 2007 with Super Pioneer for financial consultancy services rendered by Super Pioneer, and Technical Consultancy Agreements on June 11, 2007 with Yaojin Wang and Huimin Zhang for technical consultancy services rendered. Pursuant to these Agreements, we agreed to issue 2,100,000 shares of our common stock to Super Pioneer, 33,585 shares of our common stock to Yaojin Wang, and 55,975 shares of our common stock to Huimin Zhang within three months from the date of the agreements. The parties to the agreements agreed to lock up the shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.60 per share and we are not listed in the capital market of NASDAQ or AMEX, Super Pioneer shall have the option to require us to redeem 1,960,000 shares of the stock owned by Super Pioneer and Yaojin Wang and Huimin Zhang shall have the option to require us to redeem the shares of the stock owned by Yaojin Wang and Huimin Zhang at a price of $3.60 per share. Such option shall expire within one month from the last date of the three month period. Therefore, as of July 5, 2008, we may be required to redeem 1,960,000 shares of common stock held by Super Pioneer at a price of $3.60 per share for a total of $7,560,000. As of September 11, 2008, we may be required to redeem the 33,585 shares of our common stock held by Yaojin Wang at $3.60 per share for a total of $120,906 and the 55,975 shares held by Huimin Zhang at $3.60 per share for a total of $201,510. According to the signed agreements, the redemption would have been required to be performed in September 2008. The redemption requests were made to the Company in January 2008 and the company has already obtained oral consent from Super Pioneer, Wang and Zhang that the payment would be deferred to the year of 2010.

As of May 17, 2010, the last closing bid price of our common stock was $.04. If we would be required to make payment for the shares of our common stock a price of $3.60 per share, we will not have these funds to devote to our operations and could have a negative impact on our profitability.

JIANGLING BENDA AND YIDU BENDA CURRENTLY ARE ENTITLED TO A BENEFICIAL TAX EXEMPTION FOR A FIVE YEAR PERIOD; HOWEVER, SUCH TAX EXEMPTION MAY BE INTERPRETED TO BE NOT IN COMPLIANCE WITH PRC TAX LAWS IN THE FUTURE CAUSING US TO SET ASIDE CERTAIN CONTINGENCY FUNDS FOR DEALING WITH POTENTIAL RETROSPECTIVE TAX LIABILITIES.

Jiangling Benda and Yidu Benda are entitled to enjoy the “Two exemption Three half” tax holiday based on the local government’s policy to encourage outside investment into the locality. However, the definition of the “Two exemption Three half” policy defined by Yidu City and Jiangling County’s governments is different from the usual understanding of the term. According to PRC tax laws, “Two exemption Three half” policy means foreign investment enterprises including Benda Ebei may enjoy an exemption from corporate income tax for 2 years starting from its first profitable year, followed by 3 years at a rate that is one half of the regular rate for corporate income tax. However, in the documents issued by Yidu City and Jiangling County’s governments, the term means that an outside enterprise can enjoy the “two exemption three half” privilege treatment only with respect to the part allotted to the local government . According to our Chinese legal counsel, under current PRC tax laws, most enterprises are required to pay corporate income tax at a rate of 33% of its income before tax, of which, about 90.91% (30% of the corporate income) is paid over to the Central government, only about 9.09% (3% of the corporate incomes) is reserved for the local government. Accordingly, there is a risk that the local government may only be able to dispose of the “9.09% (3%)” reserved for the local government and Jiangling Benda and Yidu Benda actually would receive much less preferential treatment than a foreign investment enterprise could enjoy.

The beneficial tax exemption of Jiangling Benda and Yidu Benda was started in the year of 2005, and they would subject to corporate income tax rate 18% starting from the year of 2007 and they would subject to corporate income tax at 25%, full income tax rate, according to the new PRC corporate income tax with the effective date January 1, 2008.

If Jiangling Benda and Yidu Benda could not have any beneficial tax exemption, the tax contingency, at full rate 25%, would be as follows:

For the year of 2009: Jiangling Benda: Nil; Yidu Benda: Nil;

For the year of 2008: Jiangling Benda: Nil; Yidu Benda: Nil.

As to the tax treatment promised by local governments to purely domestic enterprises, i.e., Jiangling Benda and Yidu Benda, invested by non-local (but not foreign) investors under the so called preferential policy announced by local governments, our consultation with PRC certified public accountants and lawyers, is that the above policy is not compliant with the PRC laws. Even though such practice exists in many areas across the country, the policy faces the risk of being ruled illegal at any time for non-compliance with relevant laws. In this event, there is a risk that we might be assessed retrospective tax liabilities.

WE MAY HAVE DIFFICULTY DEFENDING OUR INTELLECTUAL PROPERTY RIGHTS FROM INFRINGEMENT RESULTING IN LAWSUITS REQUIRING US TO DEVOTE FINANCIAL AND MANAGEMENT RESOURCES THAT WOULD HAVE A NEGATIVE IMPACT ON OUR OPERATING RESULTS.

We regard our service marks, trademarks, trade secrets, patents and similar intellectual property as critical to our success. We rely on trademark, patent and trade secret law, as well as confidentiality and license agreements with certain of our employees, customers and others to protect our proprietary rights. We have received trademark and patent protection for certain of our products in the People's Republic of China. No assurance can be given that our patents and licenses will not be challenged, invalidated, infringed or circumvented, or that our intellectual property rights will provide competitive advantages to us. There can be no assurance that we will be able to obtain a license from a third-party technology that we may need to conduct our business or that such technology can be licensed at a reasonable cost.

Presently, all of our products are sold to clients in PRC. To date, no trademark or patent filings have been made other than in PRC. To the extent that we market our products in other countries, we may have to take additional action to protect our intellectual property. The measures we take to protect our proprietary rights may be inadequate and we cannot give you any assurance that our competitors will not independently develop formulations and processes that are substantially equivalent or superior to our own or copy our products.

Currently, the State Food and Drug Administration (“SFDA”) does not automatically stay drug registration approval upon initiation of an infringement lawsuit by a third party. At present, we must wait until a copycat manufacturer has received marketing approval from SFDA before we can bring an infringement lawsuit. Furthermore, Chinese courts have been hesitant to issue preliminary injunctions to suspend sales until a final judgment is issued in the lawsuit. Our sales could be lowered were a competitor to infringe our intellectual property rights by marketing one or more versions of SFDA-approved drugs proprietary to us, such as the Qiweiben capsule, until we can curtail such infringement through legal action. Pursuing infringement lawsuits would require us to devote financial and management resources that could impact the results of our operations.

WE DEPEND ON THE SUPPLY OF RAW MATERIALS, AND ANY ADVERSE CHANGES IN SUCH INTENSE COMPETITION FROM EXISTING AND NEW ENTITIES MAY ADVERSELY AFFECT OUR REVENUES AND PROFITABILITY.

We compete with other companies, many of whom are developing or can be expected to develop products similar to ours. Our markets are large with many competitors. The market for pharmaceutical raw materials manufacturing is particularly competitive. In this market, our competitors include a number of contract manufacturers and, from time to time, demand for particular products may be greatly exceeded by production capacity. Many of our competitors are more established than we are, and have significantly greater financial, technical, marketing and other resources than us. Some of our competitors may have greater name recognition and a larger customer base. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. We intend to create greater brand awareness for our brand name so that we can successfully compete with our competitors. We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business.

Our company does not depend on any sole source suppliers, since the raw materials market is opened in the sense that we could have plenty of choices of the suppliers. We only choose those suppliers who could offer better terms to us and having a long term co-operation relationship.

OUR PRODUCTS AND THE PROCESSES COULD EXPOSE US TO SUBSTANTIAL PRODUCT LIABILITY CLAIMS WHICH WILL NEGATIVELY IMPACT OUR PROFITABILITY.

We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in adverse side effects. Side effects or marketing or manufacturing problems pertaining to any of our products could result in product liability claims or adverse publicity. These risks will exist for those products in clinical development and with respect to those products that have received regulatory approval for commercial sale. We do not have insurance to cover any potential product liability claims. To date, we have not experienced any product liability claims. However, that does not mean that we will not have any such claims with respect to our products in the future which will negatively impact our profitability.

WE DEPEND ON OUR KEY MANAGEMENT PERSONNEL AND THE LOSS OF THEIR SERVICES COULD ADVERSELY AFFECT OUR BUSINESS.

We place substantial reliance upon the efforts and abilities of our executive officers, Yiqing Wan, our Chairman and Chief Executive Officer, Wei Xu, our Vice President of Operations, Hui Long, our Vice President of Technology. We have entered into a five year employment contract with Mr. Wan and three year contracts with Ms. Xu. As per his contract, Mr. Wan is to receive salary of $160,000 per year, Ms. Xu is to receive $100,000, with the possibility of a discretionary bonus as determined by the Board of Directors. Each employment contract immediately terminates upon death or disability, and may be terminated by the Company either with or without cause after 30 days notice, or terminated by the officer for good reason with 60 days notice. We are not currently aware of the plans of any key employees to retire or leave the Company. However, the loss of the services of any of our executive officers could have a material adverse effect on our business, operations, revenues or prospects. We do not maintain key man life insurance on the lives of these individuals.

MR. YIQING WAN AND MS. WEI XU ARE HUSBAND AND WIFE. THE SEPARATION OR DIVORCE OF THE COUPLE IN THE FUTURE COULD ADVERSELY AFFECT OUR BUSINESS.

Mr. Yiqing Wan, our Chairman and Chief Executive Officer, and Ms. Wei Xu, Vice President of Operations, are married. They are two of our principal executives and are a vital part of our operations. If they were to become separated or divorced and could not amicably work with each other, one of them may decide to cease his or her employment with us. Alternatively, their work performance may not be satisfactory if they become preoccupied with such negative situation. In both cases, our operations could be negatively affected by our production resulting in a decrease in revenues.

MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER MATTERS REQUIRING SHAREHOLDER APPROVAL WHICH MAY RESULT IN THE DELAY OR PREVENTION OF A CHANGE IN OUR CONTROL.

Mr. Yiqing Wan, our Chairman and Chief Executive Officer, and Ms. Wei Xu, our Vice President of Operations, each have a 50% equity ownership in XIA Pharmaceutical Inc. Through their joint ownership in XIA Pharmaceutical, Inc., Mr. Wan and Ms. Xu currently share voting power equal to approximately 42.50% of our voting securities. When combined with the common stock ownership of our other officers and directors, management has combined voting power in our Company equal to approximately 42.50% of our voting securities. As a result, management through such stock ownership exercises significant control over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership in management may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by shareholders other than management.

INTERNATIONAL OPERATIONS REQUIRE US TO COMPLY WITH A NUMBER OF UNITED STATES AND INTERNATIONAL REGULATIONS WHICH MAY HAVE A NEGATIVE IMPACT ON OUR GROWTH.

We are required to comply with a number of international regulations in countries outside of the United States. In addition, we must comply with the Foreign Corrupt Practices Act, or FCPA, which prohibits U.S. companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. Any failure by us to adopt appropriate compliance procedures and ensure that our employees and agents comply with the FCPA and applicable laws and regulations in foreign jurisdictions could result in substantial penalties and/or restrictions in our ability to conduct business in certain foreign jurisdictions. We believe we are currently in compliance with such regulations. The U.S. Department of The Treasury's Office of Foreign Asset Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries, entities and individuals based on U.S. foreign policy and national security goals. As a result, we are restricted from entering into transactions with certain targeted foreign countries, entities and individuals except as permitted by OFAC which may reduce our future growth.

WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

WE MAY NOT BE ABLE TO MEET THE ACCELERATED FILING AND INTERNAL CONTROL REPORTING REQUIREMENTS IMPOSED BY THE SECURITIES AND EXCHANGE COMMISSION RESULTING IN A POSSIBLE DECLINE IN THE PRICE OF OUR COMMON STOCK AND OUR INABILITY TO OBTAIN FUTURE FINANCING.

As directed by Section 404 of the Sarbanes-Oxley Act, the Securities and Exchange Commission adopted rules requiring each public company to include a report of management on the company's internal controls over financial reporting in its annual reports. In addition, the independent registered public accounting firm auditing a company's financial statements must also attest to and report on management's assessment of the effectiveness of the company's internal controls over financial reporting as well as the operating effectiveness of the company's internal controls. We will not be subject to these requirements for the fiscal year ended December 31, 2009.

While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. In the event that we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.

In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the Securities and Exchange Commission, which could also adversely affect the market price of our common stock and our ability to secure additional financing as needed.

Risks Relating to the People's Republic of China

THE SALES PRICES OF SOME MEDICINES ARE CURRENTLY CONTROLLED BY THE CHINESE GOVERNMENT AND THAT MAY ADVERSELY AFFECT OUR BUSINESS.

Prices paid by end consumers for many of our medicines are regulated by PRC's State Development and Reform Commission. PRC justifies its need to control the drug prices on the basis that, at present, only workers at state or private companies have health insurance. About 900 million rural Chinese people and 35 million urban unemployed Chinese people lack insurance coverage and cannot afford expensive drugs. Our future profitability might suffer if a significant portion of our revenues were to be derived from products whose final selling prices were state-controlled and if those prices were held at levels close to or below our cost of sales.

SALES OF OUR PRODUCTS COULD BE HARMED BY THE WIDESPREAD PRESENCE OF COUNTERFEIT MEDICATION IN PRC NEGATIVELY IMPACTING OUR PROFITABILITY.

Chinese counterfeiting of pharmaceuticals and other products affecting public health has grown in tandem with counterfeiting and piracy of goods such as brand-name clothing, compact discs and computer software. Exact data are impossible to collect, but the FBI believes that more than half of the pharmaceuticals sold in PRC are counterfeit. Examples of the seriousness of the problem include: six months after Viagra was introduced in 2002, state media reported that some 90 percent of little blue pills sold in Shanghai were counterfeit; and 192,000 Chinese patients were reported to have died in 2001 from fake drugs. Counterfeit products shrink markets for legitimate goods. This situation affects Benda and other major domestic and foreign drug manufacturers in PRC, especially for products marketed through the OTC rather than hospital channel. However, we believe the Chinese authorities are becoming increasingly vigilant against counterfeiting because in 2001 the authorities closed 1,300 factories while investigating 480,000 cases of counterfeit drugs. Currently, active pharmaceutical ingredients are governed only by chemical regulations. We believe that a major step towards controlling the problem would be taken should the SFDA be given oversight over PRC’s bulk chemicals producers. However, our ability to increase sales as rapidly as we would like, and our profitability, could be affected if this problem persists or worsens.

THERE COULD BE CHANGES IN GOVERNMENT REGULATIONS TOWARDS THE PHARMACEUTICAL AND HEALTH SUPPLEMENT INDUSTRIES THAT MAY ADVERSELY AFFECT OUR GROWTH AND PROFITABILITY.

The manufacture and sale of APIs in the PRC is heavily regulated by many state, provincial and local authorities. These regulations have significantly increased the difficulty and costs involved in obtaining and maintaining regulatory approvals for marketing new and existing products. Our future growth and profitability depend to a large extent on our ability to obtain regulatory approvals.

The SFDA of PRC recently implemented new guidelines for licensing of APIs. All existing manufacturers with licenses were required to apply for GMP certifications by June 30, 2004, and to receive approvals by December 31, 2004. We have received certification for our Benda Ebei injection vial production facilities and expect to receive certifications for the remaining plant that require such certification in 2008. However, should we fail to receive or maintain the GMP certifications under the new guidelines in the future; our businesses would be materially and adversely affected.

Moreover, the laws and regulations regarding acquisitions of the pharmaceutical industry in the PRC may also change and may significantly impact our ability to grow through acquisitions.

CERTAIN POLITICAL AND ECONOMIC CONSIDERATIONS RELATING TO THE PRC COULD ADVERSELY AFFECT OUR COMPANY.

The PRC is transitioning from a planned economy to a market economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms carried out by the PRC government are unprecedented or experimental, and are expected to be refined and improved. Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC's economic and social conditions as well as by changes in the policies of the PRC government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the interest rate or method of taxation, and the imposition of additional restrictions on currency conversion.

THE RECENT NATURE AND UNCERTAIN APPLICATION OF MANY PRC LAWS APPLICABLE TO US CREATE AN UNCERTAIN ENVIRONMENT FOR BUSINESS OPERATIONS AND THEY COULD HAVE A NEGATIVE EFFECT ON US.

The PRC legal system is a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects.

Since all the Company’s operation plants are all located in China, therefore we have to comply with those relevant PRC laws and regulations. The changes of those relevant PRC laws and regulations do affect our operation, for example, due to the changes of the relevant regulations of SFDA in PRC, it may take more time to approve the application of new drug certificate so that the forecasted operation plan for such particular drug product would be delayed and thus the potential earning of revenue and net profit would be affectee. In this aspect, the new drug certificate application progresses of Qiweiben Capsule and Yan Long Anti-cancer Oral Liquid are delayed. Furthermore, due to the changes of the requirements of the Environmental PRC agencies, Yidu Benda’s operation was ceased since January 2007, therefore the company needs to re-design the production facilities so the process of re-opening is also delayed. As these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty.

THE APPROVAL OF THE CHINESE SECURITIES REGULATORY COMMISSION (“CRSC”) MAY BE REQUIRED IN CONNECTION WITH THIS OFFERING UNDER A RECENTLY ADOPTED PRC REGULATION; SINCE THIS OFFERING DID NOT COMMENCE PRIOR TO THE EFFECTIVE DATE OF THE REGULATION, WE MAY BE REQUIRED TO OBTAIN CRSC APPROVAL FOR THIS OFFERING AND WE CAN NOT CURRENTLY PREDICT THE CONSEQUENCES OF ANY FAILURE TO OBTAIN SUCH APPROVAL.

On August 8, 2006, six PRC regulatory agencies, including the Chinese Securities Regulatory Commission, or CSRC, promulgated a regulation that became effective on September 8, 2006. This regulation, among other things, purports to require offshore special purpose vehicles, or SPVs, formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC individuals, such as our company, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. While the application of this new regulation is not yet clear, we believe, based on the advice of our PRC counsel, that CSRC approval is not required if trading of our shares of common stock commenced prior to the effective date of the regulation. Although the CSRC is expected to promulgate formal implementing rules and/or regulations and possibly other clarifications, the procedures, criteria and timing for obtaining any required CSRC approval have not been established and it is unclear when these will be established. Therefore, since this offering did not commence prior to the effective date of the regulation and our shares of common stock did not commence trading prior to the effective date of the regulation, we may be required to obtain CSRC approval for this offering and we cannot currently predict the criteria, timing or procedures for obtaining the CSRC approval or the consequences of any failure to obtain such approval.

RECENT PRC REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT SHAREHOLDERS TO PERSONAL LIABILITY AND LIMIT OUR ABILITY TO INJECT CAPITAL INTO OUR PRC SUBSIDIARIES, LIMIT OUR PRC SUBSIDIARIES’ ABILITY TO DISTRIBUTE PROFITS TO US, OR OTHERWISE ADVERSELY AFFECT US.

The State Administration of Foreign Exchange (“SAFE”) was one of six PRC regulatory agencies promulgating a regulation that became effective on September 8, 2006 requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as an “offshore special purpose company.” PRC residents that are shareholders of offshore special purpose companies established before November 1, 2005 were required to register with the local SAFE branch before March 31, 2006. Our current beneficial owners who are PRC residents have registered with the local SAFE branch as required under the SAFE notice. The failure of these beneficial owners to timely amend their SAFE registrations pursuant to the SAFE notice or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to our company or otherwise adversely affect our business.

Other Risks

CURRENCY CONVERSION AND EXCHANGE RATE VOLATILITY COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.

The PRC government imposes control over the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People's Bank of China publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the previous day's dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC exchange rate according to market conditions.

Pursuant to the Foreign Exchange Control Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs, for use on current account items, including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their after-tax dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in the PRC. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on recurring international payments and transfers under current account items.

Enterprises in the PRC (including FIEs) which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks by providing valid receipts and proofs.

Convertibility of foreign exchange in respect of capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior approval from the SAFE or its relevant branches must be sought.

Furthermore, the Renminbi is not freely convertible into foreign currencies nor can freely remitted abroad. Under the PRC’s Foreign Exchange Control Regulations and the Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, foreign invested enterprises are permitted either to repatriate or distribute its profits or dividends in foreign currencies out of its foreign exchange accounts, or exchange Renminbi for foreign currencies through banks authorized to conduct foreign exchange business. The conversion of Renminbi into foreign exchange by foreign invested enterprises for recurring items, including the distribution of dividends to foreign investors, is permissible. The conversion of Reminbi into foreign currencies for capital items, such as direct investment, loans and security investment, is subject, however, to more stringent controls.

Since 1994, the exchange rate for Renminbi against the United States dollar has remained relatively stable, most of the time in the region of approximately RMB8.28 to $1.00. However, in 2005, the Chinese government announced that it would begin pegging the exchange rate of the Chinese Renminbi against a number of currencies, rather than just the U.S. dollar and, the exchange rate for the Renminbi against the U.S. dollar became RMB8.02 to $1.00. As our operations are primarily in PRC, any significant revaluation or devaluation of the Chinese Renminbi may materially and adversely affect our cash flows, revenues and financial condition. We may not be able to hedge effectively against in any such case. For example, to the extent that we need to convert United States dollars into Chinese Renminbi for our operations, appreciation of this currency against the United States dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert Chinese Renminbi into United States dollars for other business purposes and the United States dollar appreciates against this currency, the United States dollar equivalent of the Chinese Renminbi we convert would be reduced. There can be no assurance that future movements in the exchange rate of Renminbi and other currencies will not have an adverse effect on our financial condition. Benda’s operating companies are FIEs to which the Foreign Exchange Control Regulations are applicable. There can be no assurance that we will be able to obtain sufficient foreign exchange to pay dividends or satisfy other foreign exchange requirements in the future.

IT MAY BE DIFFICULT TO AFFECT SERVICE OF PROCESS AND ENFORCEMENT OF LEGAL JUDGMENTS UPON OUR COMPANY AND OUR OFFICERS AND DIRECTORS BECAUSE THEY RESIDE OUTSIDE THE UNITED STATES.

As our operations are presently based in PRC and a majority of our directors and all of our officers reside in PRC, service of process on our company and such directors and officers may be difficult to effect within the United States. Also, our main assets are located in PRC and any judgment obtained in the United States against us may not be enforceable outside the United States.

ANY FUTURE OUTBREAK OF AVIAN INFLUENZA, OR THE ASIAN BIRD FLU, OR ANY OTHER EPIDEMIC IN PRC COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS OPERATIONS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Since mid-December 2003, a number of Asian countries have reported outbreaks of highly pathogenic avian influenza in chickens and ducks. Since all of our operations are in PRC, an outbreak of the Asian Bird Flu in PRC in the future may disrupt our business operations and have a material adverse effect on our financial condition and results of operations. For example, a new outbreak of Asian Bird Flu, or any other epidemic, may reduce the level of economic activity in affected areas, which may lead to a reduction in our revenue if our clients cancel existing contracts or defer future expenditures. In addition, health or other government regulations may require temporary closure of our offices, or the offices of our customers or partners, which will severely disrupt our business operations and have a material adverse effect on our financial condition and results of operations.

OUR BUSINESS MAY BE AFFECTED BY UNEXPECTED CHANGES IN REGULATORY REQUIREMENTS IN THE JURISDICTIONS IN WHICH WE OPERATE.

We are subject to many general regulations governing business entities and their behavior in PRC and in other jurisdictions in which we have, or plan to have, operations and market our products. In particular, we are subject to laws and regulations covering food, dietary supplements and APIs. Such regulations typically deal with licensing, approvals and permits. Any change in product licensing may make our products more or less available on the market. Such changes may have a positive or negative impact on the sale of our products and may directly impact the associated costs in compliance and our operational and financial viability. Such regulatory environment also covers any existing or potential trade barriers in the form of import tariff and taxes that may make it difficult for us to import our products to certain countries and regions, such as Hong Kong, which would limit our international expansion.

WE MAY EXPERIENCE CURRENCY FLUCTUATION AND LONGER EXCHANGE RATE PAYMENT CYCLES WHICH WILL NEGATIVELY AFFECT THE COSTS OF OUR PRODUCTS SOLD AND THE VALUE OF OUR LOCAL CURRENCY PROFITS.

The local currencies in the countries in which we sell our products may fluctuate in value in relation to other currencies. Such fluctuations may affect the costs of our products sold and the value of our local currency profits. While we are not conducting any meaningful operations in countries other than PRC at the present time, we may expand to other countries and may then have an increased risk of exposure of our business to currency fluctuation.

SINCE MOST OF OUR ASSETS ARE LOCATED IN PRC, ANY DIVIDENDS OF PROCEEDS FROM LIQUIDATION IS SUBJECT TO THE APPROVAL OF THE RELEVANT CHINESE GOVERNMENT AGENCIES.

Our assets are predominantly located inside PRC. Under the laws governing foreign invested enterprises in PRC, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to the relevant government agency's approval and supervision as well as the foreign exchange control. This may generate additional risk for our investors in case of dividend payment and liquidation.

Risks Associated with Our Shares of Common Stock

OUR SHARES OF COMMON STOCK ARE VERY THINLY TRADED, AND THE PRICE MAY NOT REFLECT OUR VALUE AND THERE CAN BE NO ASSURANCE THAT THERE WILL BE AN ACTIVE MARKET FOR OUR SHARES OF COMMON STOCK EITHER NOW OR IN THE FUTURE.

Our shares of common stock are very thinly traded, and the price if traded may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for any loans.

Certain of our stockholders have been granted registration rights which entitle them to require us to register their shares of our common stock at the same time that the shares of our common stock are being registered. The inclusion of this additional stock in the registration may negatively affect the resale price that may be obtained for the shares of our common stock when they are registered.

WE ARE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE THE SHARES OF OUR COMMON STOCK MORE DIFFICULT TO SELL.

We are subject to the SEC’s “penny stock” rules as our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer's confirmation.

In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.

THERE CAN BE NO ASSURANCE THAT THE PRICE OF OUR SHARES OF COMMON STOCK WILL MEET OR EXCEED THE EXERCISE PRICE OF THE WARRANTS DURING THE EXERCISE PERIOD OR AT ANY TIME THEREAFTER.

Unless the price of our shares of Common Stock equals or exceeds the exercise price of the Warrants at the time of such exercise, an Investor may not be able to exercise his Warrants profitably. There can be no assurance that the price of our shares of Common Stock will meet or exceed the exercise price of the Warrants during the exercise period or at any time thereafter. Accordingly, should an Investor choose to exercise the Warrants, the value of our shares of Common Stock purchased upon such exercise may be less than the Warrant exercise price the Investor pays. The Warrant may be worthless and expire unexercised if the price of our shares of Common Stock does not exceed the Warrant exercise price. Please see “Description of Securities - Warrants” for additional information as to the terms of the Warrants.

MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER MATTERS REQUIRING SHAREHOLDER APPROVAL AND INVESTORS WILL HAVE CONTROL OVER COMPANY ACTIONS.

As a practical matter, our officers and directors will have control of us and will be able to assert significant influence over the election of directors and other matters presented for a vote of stockholders. Even after the Offering is complete, a majority of our shares of Common Stock will be owned by Mr. Yiqing Wan and Ms. Wei Xu, husband and wife. Through their concentration of voting power, they could delay, deter or prevent a change in our control or other business combinations that might otherwise be beneficial to the other stockholders. In deciding how to vote on such matters, Mr. Yiqing Wan and Ms. Wei Xu may be influenced by interests that conflict with other stockholders’ interests. Investors will not have a voice in management decisions and will exercise very little control. In the event that the requisite approval of stockholders is obtained, dissenting or non-participating stockholders generally would be bound by such vote. Accordingly, Offerees should not subscribe for Units in this Offering unless they are willing to entrust all aspects of operational control to our current management team. Further, Investors in the Offering will rely on our management team to use the proceeds as they determine to be in our best interest. Although management has indicated its current intended uses, those may be changed upon their decision.

In addition, our existing officers, directors, affiliates and other insiders are permitted to purchase Units in the Offering. If they do so, their interest in us after the acquisition may be even greater.

INVESTORS MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE PER SHARE OF OUR COMMON STOCK IF THEY ELECT TO EXERCISE THE WARRANTS.

Investors may experience immediate and substantial dilution in net tangible book value per share of our common stock if they elect to exercise the Warrants. The exercise price of the Warrants may be substantially higher than the net tangible book value per share. Accordingly, if Investors exercise the Warrants, they will likely experience immediate and substantial dilution in the net tangible book value per share and further dilution if we issue shares of our common stock in the future. As a result of this dilution, in the event of our subsequent liquidation, Investors exercising their Warrants may receive significantly less than the full exercise price that they paid for the shares of our Common Stock.

INVESTORS MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE PER SHARE OF OUR COMMON STOCK IN THE EVENT WE ISSUE SHARES OF OUR COMMON STOCK IN THE FUTURE.

There are additional authorized but unissued shares of our Common Stock that may be later issued by our management for any purpose without the consent or vote of the stockholders. Investors purchasing in this Offering may be further diluted in their percentage ownership on an as-converted basis in the event additional shares are issued by us in the future.

OUR ARTICLES OF INCORPORATION AUTHORIZE THE ISSUANCE OF SHARES OF PREFERRED STOCK WHICH, IF ISSUED, THE RIGHTS, PREFERENCES, DESIGNATIONS AND LIMITATIONS OF SUCH PREFERRED STOCK COULD OPERATE TO THE DISADVANTAGE OF THE SHARES OF OUR OUTSTANDING COMMON STOCK.

Our articles of incorporation authorize the issuance of shares of preferred stock, the rights, preferences, designations and limitations of which may be set by the board of directors. While no preferred stock is currently outstanding or subject to be issued, the articles of incorporation have authorized issuance of up to 5,000,000 shares of preferred stock (“Preferred Stock”) in the discretion of the board of directors. Such Preferred Stock may be issued upon filing of amended Articles of Incorporation and the payment of required fees; no further shareholder action is required. If issued, the rights, preferences, designations and limitations of such Preferred Stock would be set by our board of directors and could operate to the disadvantage of the shares of our outstanding Common Stock. Such terms could include, among others, preferences as to dividends and distributions on liquidation.

ITEM 2. DESCRIPTION OF PROPERTIES.

Production Facilities and Equipment

Locations

Our head office is located in Wuhan, the capital city of Hubei Province. Wuhan is the biggest hub city in Central China. Divided by the Yangtze River, Wuhan has come to be known as the Three Towns of Wuhan, with Hankou and Hanyang on the west bank, and Wuchang on the east. Hubei borders with Henan to the north, Anhui to the east, Jiangxi to the southeast, Hunan to the south, Chongqing to the west, and Shanxi to the northwest.

Addresses of Benda Offices and Plants

Address	Function	Size
Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd., Taibei Mingju, 4th Floor, 6 Taibei Road, Wuhan, Hubei Province, PRC	Headquarters/ administration office	800 sq feet (Leased)

Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd. Shanlihe,Yingshan District, Guangshui City, Hubei Province, PRC	GMP certified injection vial production plant	121,110 sq feet

Jiangling Benda Pharmaceuticals Co., Ltd., 84 South Street, Tanqiao Town, Jiangling County, Hubei Province, PRC	API production plant under renovation/ awaiting GMP certification	182,750 sq feet

Yidu Chemical Industry Co., Ltd., Chayuansi Village, Yidu City, Hubei Province, PRC	Bulk chemicals production plant	172,000 sq feet

Shenzhen SiBiono Gene Technology Co., Ltd. No.19, Science & Technology Middle Road, Shenzhen Hi-Tech Industrial Park(Middle), Shenzhen, PRC	Gene therapy production plant	140,000 sq feet

Beijing Shusai Pharyngitis Research Co., Ltd., 6-3-601, Yangguang Xinganxian, Yiyuan, Anhuibeili, Chaoyang District, Beijing, PRC	Operating, promoting, and distributing Pharyngitis Killer	2,000 sq feet (leased) office space in Beijing

Finished Medicines - The Benda Ebei Plant

The Benda Ebei plant produces and packages Benda’s finished medicines. The plant employs about 200 personnel and has six world-class production lines and 11 stand-alone machinery for injection vials, with an annual aggregate production capacity of approximately 900 million units. In PRC, based on management estimate, there are about 197 factories with similar manufacturing facilities for injection vials. Benda Ebei’s capacity is sixth in PRC and first in Hubei province. In 2008 and 2007, Benda Ebei produced approximately 420 million and 418 million units of injection vials respectively, equivalent to 46% capacity. The production processes and equipment at Benda Ebei meets international quality and control standards and have been GMP certified by the SFDA since November 2003 and renew on December 3, 2008 for the production of injection vials; while on November 26, 2008, Benda Ebei received a GMP for the production of tables.

Benda Ebei’s plant will produce lozenges, capsules, granules, oral liquid and pills. Benda Ebei has invested approximately $5 million on its oral medicine production facilities. To date, we have already completed the equipment and facilities installation We expect the production of oral liquid medicines in second quarter of 2008. The Yanlong Anti-cancer Oral Liquid, Qiweiben Capsule will be produced in this section of the plant. (Please refer to the section of New Branded Medicines for the status of progress of these two new drugs.)

Active Pharmaceutical Ingredients - The Jiangling Benda Plant

We manufacture APIs at our Jiangling Benda plant. We closed the plant in July 2004 in order to renovate the buildings, equipment and processes and secure GMP certification by the SFDA. Upon completion, the new plant will be comprised of three large facilities on a total land area of 68 acres. The total expense of these renovations will be approximately $3 million. All the equipment has been ordered.

Bulk chemicals - The Yidu Benda Plant

Yidu Benda was temporarily closed since mid January 2007 to upgrade its waste water treatment system to comply with new environmental standards enforced by PRC local government.

Yidu Benda has completed its upgrading of the waste 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

Gene therapy – SiBiono Plant

On October 16, 2003, SiBiono successfully obtained a New Drug License from 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.

ITEM 3. LEGAL PROCEEDINGS.

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 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.

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

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

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.

2.	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.

Countries /

Application

Publication

Approved Patent

Name of Patent

Name of

Patent

Item

Patent name

Date

Number (1)

Number (2)

Number (3)

Inventor (6)

Applicant (6)

Assignees

A new method for manufacturing recombinant adenovirus

China

98123346.5

CN1228474A

ZL98123346.5

Peng

SiBiono

Date

1998/12/14

1999/9/15

2002/7/3

A recombinant constructed by a virus vector and a

human tumor suppressor gene and its use

China

02115228.4

CN1401778A

ZL02115228.4

Peng / Zhang

Date

2002/5/8

2003/3/12

2004/11/24

PCT

(4)

WO2004/078987A1

Not Approved

Peng / Zhang

N/A

Date

2004/3/8

2004/9/16

N/A

Recombinant gene medicine of adenovirus vector and

and gene p54 for treating proloferative diseases

China

03125129.3

CN1471977A

ZL03125129.3

Peng / Zhang

Date

2003/5/10

2004/2/4

2007/7/25

PCT

(4)

WO2004/104204A1

Not Approved

Peng / Zhang

N/A

Date

2004/5/9

2004/12/2

N/A

The application of recombinant adenoviral p53

as cancer vaccine (tentative title)

China

200510002779.1

CN1679641A

ZL200510002779.1

Peng / Zhang

Date

2005/1/26

2005/10/12

2007/8/29

PCT

(4)

WO2006/079244A1

Not Approved

Peng / Zhang

N/A

Date

2005/1/26

2006/8/3

N/A

(5)

11/075035

2005/0281785A1

Not Approved

Peng / Zhang

Unidentified Yet

N/A

Date

2005/3/7

2005/12/22

N/A

Human Embryonic Kidney (HEK) sub-clone cell line

China

03126889.7

CN1513985A

Not Approved

Peng / Zhang

N/A

Date

2003/6/13

2004/7/21

N/A

PCT

(4)

WO2004/111239

Not Approved

Peng / Zhang

N/A

Date

2004/5/9

2004/12/23

N/A

The complex of polypeptide liposome and human VGEF

gene, and its use and human VGEF gene, and its use

China

02134321.7

CN1389269A

Not Approved

Peng / Zhang / Zhu

N/A

Date

2002/7/4

2003/1/8

N/A

Note:

(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.

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. The Company was 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 the Company has been delinquent on the payment of an aggregate sum of $5,520,000 and accrued interest and costs arising from the Note that the Company issued to 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, the Company 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, the Company received a Notice of Default from three additional investors in the April 2007 private placement offering holding Notes totaling $90,000.

4.	On December 30, 2009, the Company was served with a Summons and Complaint filed by Pope Investments, LLC (“Pope”) in the Court of Chancery of the State of Delaware (the “Court”) against the Company and our officers and directors. Pope filed the Summons and Complaint as a judgment creditor and as a shareholder of the Company. Pope alleges that the assets and profits of our subsidiary company have been wrongfully diverted by our officers and directors and requests the appointment of a receiver to liquidate and wind down the business affairs of the Company. In connection with the filing of the Summons and Complaint, Pope has also filed a motion for a Preliminary Injunction Motion seeking to enjoin the Company and our officers and directors from taking any further actions to divert the corporate assets and profits of our subsidiary company and for expedited discovery proceedings. Pope further requests the imposition of a constructive trust, an accounting, damages for an alleged breach of fiduciary duty by the Company’s officers and directors, and attorney fees.

	A hearing on the application of Pope Investments, LLC ("Pope") seeking the appointment of a receiver was held on March 29, 2010. The parties filed post-trial briefs on April 7, 2010. As of this date (May 12, 2010), the Court has not yet ruled on Pope's application. Since the hearing, the remaining defendants, including the Benda directors and officers named as defendants, have filed a motion to dismiss Pope's complaint against them. No date has yet been set for Pope's response to the motion or the parties' arguments to the Court on the motion.

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

ITEM 4. (REMOVED AND RESERVED)

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock was traded on the national, over-the-counter market under the symbol ASTI after our initial public offering in January 1988. However, we were notified by NASD that, due to low trading volume, it would not report transactions in our common stock after October 13, 1989.

On September 16, 2005, our common stock commenced quotation on the Over-the-Counter Bulletin Board (“OTCBB”). Our common stock, having $.001 par value per share ("Common Stock"), is traded on the otcbb under the symbol "BPMA". As of May 13, 2010, there were approximately 807 holders of record of our common stock.

The following table sets forth, for the periods indicated, the reported high and low closing bid quotations for our common stock as reported on the OTCBB. The bid prices reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions.

Quarter Ended	High Bid		Low Bid
December 31, 2009	$	.09	$	.03
September 30, 2009	$	.04	$	.01
June 30, 2009	$	.05	$	.01
March 31, 2009	$	.09	$	.02
December 31, 2008	$	.19	$	.04
September 30, 2008	$	.26	$	.13
June 30, 2008	$	.34	$	.25
March 31, 2008	$	.77	$	.30
December 31, 2007	$	2.69	$	.65
September 30, 2007	$	2.60	$	1.90
June 30, 2007	$	3.00	$	1.15
March 31, 2007	$	1.65	$	.85
December 29, 2006	$	1.05	$	.76
September 30, 2006	$	.55	$	.40
June 30, 2006	$	.55	$	.40
March 31, 2006	$	.75	$	.40

Transfer Agent and Registrar

Computershare Trust Company, Inc. is currently the transfer agent and registrar for our Common Stock. Its address is 350 Indiana Street, Suite 800, Golden, Colorado 80401. Its phone number is (303) 262-0600.

Dividend Policy

Any future determination as to the declaration and payment of dividends on shares of our Common Stock will be made at the discretion of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions to declare or pay dividends on our shares of Common Stock. In addition, we currently have no plans to pay such dividends. However, even if we wish to pay dividends, because our cash flow is dependent on dividend distributions from our affiliated entities in PRC, we may be restricted from distributing dividends to our holders of shares of our common stock in the future if at the time we are unable to obtain sufficient dividend distributions from Ebei, Jiangling, Yudi or Shusai. Our board of directors currently intends to retain all earnings for use in the business for the foreseeable future. See “Risk Factors.”

Recent Sales of Unregistered Securities

On August 25, 2008, 3,810,976 shares were issued to the April 2007 PIPE investors as make good shares pursuant to the Make Good and Escrow Agreement. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On July 10, 2008, 540,870 shares were issued to Jayhawk Private Equity Fund upon conversion of certain promissory notes. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On May 1, 2008, 523,438 shares were issued to PIPE investors as penalty for registration delay expenses. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On January 3, 2008, 110,000 shares were issued to the independent directors in lieu of their remuneration. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Statements

The following discussion may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are intended to be covered by the safe harbors created by such provisions. These statements include the plans and objectives of management for future growth of the Company, including plans and objectives related to the consummation of acquisitions and future private and public issuances of the Company's equity and debt securities. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

The words “we,” “us” and “our” refer to the Company. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify “forward-looking statements.” Actual results could differ materially from those projected in the forward looking statements as a result of a number of risks and uncertainties, including but not limited to: (a) limited amount of resources devoted to achieving our business plan; (b) our failure to implement our business plan within the time period we originally planned to accomplish; (c) because we are seeking to merge with an operating business which has not yet been identified, you will be unable to determine whether we will ever become profitable; and (d) other risks that are discussed in this Form 10-K or included in our previous filings with the Securities and Exchange Commission.

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. 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. 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

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 December 31, 2009 and 2008, the Group provided a $5,502,311 and $3,788,102, 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.

Inventories, which are primarily comprised of raw materials, packaging materials, and finished goods, are stated at the lower of weighted average 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.

For the year ended December 31, 2009 and 2008, the Group provided a reserve against its obsolete, slow-moving or non-salable inventory amounting to $9,262 and $244,915, respectively.

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

Year ended December 31, 2009 Compared to Year ended December 31, 2008

The following table provides key components of our operational results for the year ended December 31, 2009 and 2008 for Benda Pharmaceutical, Inc.

	YEAR ENDED DECEMBER 31,
				(Restated)
	2009			2008

Revenue	$	21,990,915		$	25,041,986
Cost of goods sold		(13,720,676	)		(15,740,107	)
Gross profit		8,270,239			9,301,879

Selling expenses		2,378,852			2,708,968

General and administrative expenses
Bad debts		1,424,072			2,730,434
Depreciation and amortization expense		1,273,051			837,440
Goodwill impairment		-			4,141,109
Inventory wirtten down to net realizable value		-			392,535
Other general and administrative expenses		3,224,561			4,189,341
Research and development expenses		349,361			1,461,951
Total operating expenses		8,649,897			16,461,778
Operating loss		(379,658	)		(7,159,899	)

Other income (expenses)
Rental income		241,005			-
Government subsidies / grants (Note 13)		454,491			-
Interest income		129,513			133,251
Interest expense		(2,298,411	)		(5,359,788	)
Other expenses		(14,833	)		(1,311,140	)

Loss before income taxes		(1,867,893	)		(13,697,576	)
Income taxes (Note 18)		818,289			776,295

Net Loss		(2,686,182	)		(14,473,871	)

Less: Net loss attributable to the noncontrolling interests		(748,712	)		(2,993,073	)
Net loss attributable to Benda Pharmaceutical, Inc.	$	(1,937,470	)	$	(11,480,798	)

Other Comprehensive Loss
Foreign currency translation (loss) gain		(120,157	)		3,460,265
Comprehensive Loss		(2,806,339	)		(11,013,606	)
Comprehensive loss attributable to the noncontrolling interest		(764,484	)		(2,344,747	)
Comprehensive loss attributable to Benda Pharmaceutical, Inc.	$	(2,041,855	)	$	(8,668,859	)

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 $3.05 million (or 12.18%) to $21.99 million for the year ended December 31, 2009 from $25.04 million for the year ended December 31, 2008. Decrease in revenue is principally attributed by the following factors:

1.	One of the Benda’s subsidiaries, Benda Ebei’s net revenue decreased $4.24 million (or 19.25%) to $17.78 million for the year ended December 31, 2009 from $22.02 million for the year ended December 31, 2008. It was mainly due to the keen competition in generic medicine and overall economic downturn.

2.	One of the Benda’s subsidiaries, Jiangling Benda which resumed its production in October 2007 and achieved $1.61 million and $0.69 million for the year ended December 31, 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 waste water treatment system to comply with new environmental standards enforced by PRC local government.

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.

5.	One of the Benda’s subsidiaries, SiBiono, acquired and effective since April 1, 2007, net revenue increased $0.26 million (or 11%) to $2.59 million for the year ended December 31, 2009 from $2.33 million for the year ended December 31, 2008.

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 $2.02 million (or 12.83%) to $13.72 million for the year ended December 31, 2009 from $15.74 million for the year ended December 31, 2008 primarily due to the decreased in the sales volume in Benda Ebei.

Gross Profit

Gross profit decreased $1.03 million (or 11.09%) to $8.27 million for the year ended December 31, 2009 from $9.30 million for the year ended December 31, 2008, which was mainly because of the decrease in the products market price due to the overall economic downturn.

Selling Expenses:

Selling expenses slightly decreased $0.33 million (or 12.19%) to $2.38 million for the year ended December 31, 2009 from $2.71 million for the year ended December 31, 2008, primarily due to the management performed cost control in the reporting period.

General and Administrative Expenses:

General and administrative decreased $7.48 million (or 54.40%) to $6.27 million for the year ended December 31, 2009 from $13.75 million for the year ended December 31, 2008, primarily due to no goodwill impairment, less bad debt expense, inventory impairment and R&D expense incurred in 2009.

Operating Loss:

The Company resulted an operating loss $0.38 million for the year ended December 31, 2009, while the operating loss from comparative period for 2008 was $7.16 million.

Interest Expenses:

Interest expense was $2.30 million and $5.36 million for the year ended December 31, 2009 and 2008 respectively. The main component of it was the financing cost associated with the issuance of convertible promissory note.

Other Income / (Expenses)

The net other income (expense) was 0.01 million and 1.31 million for the year ended December 31, 2009 and 2008 respectively. The expense incurred in 2008 was due to $1.1 million Registration Delay Penalty and $0.27 million expense by the issuance of 523,438 shares of common stock for the make good agreement. There was no such expense incurred for the year ended December 31, 2009.

Income Taxes:

Benda is subject to Delaware, United State of America tax, but no provision for income taxes were made for the year ended December 31, 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 year ended December 31, 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 income taxes, whereas the full income tax rate is 33%. The remaining tax holidays was 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 Shusai 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 $872,643 and $1,109,249 income tax for the year ended December 31, 2009 and 2008 respectively.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $0.29 million for the year ended December 31, 2009, while for the year ended December 31, 2008 was $0.83 million.

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

For the year ended December 31, 2008, an amount about $13.68 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, goodwill impairment, and depreciation.

However, for the year ended December 31, 2009, about $4.87 million of non-cash operating activities was reconciled back to the net income and summarized as follows:

$0.92 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; and

Other factors: $1.42 million incurred on bad debt provision; $2.19 million incurred on depreciation; and $0.71 million incurred on amortization of intangible assets.

b)	Trade receivables

The net amount of trade receivable increased by $3.08 million for the year ended December 31, 2009. The management also noticed that the net balance of the trade receivable, as of December 31, 2009, was a significant asset to the company. However, management believes that the above situation is temporarily due to the following reasons:

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 year ended December 31, 2009 and 2008, the amounts provided by (used in) investing activities were $0.13 million and ($4.57) million respectively. It was mainly because higher capital expenditure in 2008 and release of restricted cash in 2009.

Financing cash outflow was $0.22 million for the reporting period year ended December 31, 2009, while the financing cash inflow was $3.6 million for the reporting period year ended December 31, 2008. The major component of it was a net amount $4.3 million borrowed from the commercial banks during the year ended December 31, 2008.

ITEM 8. FINANCIAL STATEMENTS

The following financial statements required by this item are filed herewith following the signature page to this report:

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 1, 2010, Benda Pharmaceutical, Inc. (the “Company”) was notified Kempisty & Company Certified Public Accountants, P.C., the Company’s independent registered public accounting firm (“K&Co”), intended to cease auditing services for public companies and that certain employees of Kempisty would be providing services for MaloneBailey, LLP (“MB”). On March 1, 2010, K&Co resigned as the independent registered public accounting firm of the Company and, with the approval of the Audit Committee of the Company’s Board of Directors, MB was engaged as the Company’s independent registered public accounting firm.

K&Co performed audit of the Company’s consolidated financial statements for the fiscal year ended December 31, 2008. K&Co’s report did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except for an explanatory paragraph related to the Company’s ability to continue as a going concern.

During the fiscal years ended December 31, 2009 and December 31, 2008 and the subsequent interim period up through the March 1, 2010, there were no (i) disagreements between the Company and K&Co on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to its satisfaction, would have caused K&Co to make reference to the subject matter of such disagreements in connection with its report, or (ii) “reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K.

On March 1, 2010, the Company furnished K&Co with a copy of this report prior to filing with the Securities and Exchange Commission (“SEC”) and requested that K&Co furnish it with a letter addressed to the SEC stating whether or not it agreed with the statements made by the Company in this report insofar as they relate to K&Co’s audit services and engagement as the Company’s independent registered public accounting firm. K& Co has furnished a letter addressed to the SEC dated March 1, 2010, a copy of which is attached hereto as Exhibit 16.

As noted above, on March 1, 2010, the Company engaged the services of MB as the independent registered public accounting firm of the Company. During the fiscal years ended December 31, 2009 and 2008 and from December 31, 2009 through the engagement of MB as the Company’s independent registered public accounting firm, neither the Company nor anyone on its behalf consulted MB with respect to any accounting or auditing issues involving the Company. In particular, there was no discussion with the Company regarding the application of accounting principles to a specified transaction, the type of audit opinion that might be rendered on the financial statements, or any matter that was either the subject of a disagreement, as described in Item 304 of Regulation S-K, with K&Co, or a “reportable event” as described in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with United State’s generally accepted accounting principles (US GAAP), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the Chief Executive Officer concluded that our disclosure controls and procedures were not effective.

Management Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of our Chief Executive Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2009 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of December 31, 2009, we determined that control deficiencies existed that constituted material weaknesses, as described below.

1.There is a risk of management override given that our officers have a high degree of involvement in our day to day operations.

2.Significant errors were found in our prior years accounting treatments that require restatements of our prior years filed financial statements.

3.There is personal loan to executives which is a violation of Section 402 of the Sarbanes-Oxley Act of 2002

Management is currently evaluating remediation plans for the above control deficiencies. Accordingly, we concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2009 based on criteria established in Internal Control—Integrated Framework issued by COSO.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

Changes in Internal Controls

During the quarter ended December 31, 2009 there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, positions and ages of our executive officers and directors. All of our directors serve until the next annual meeting of stockholders or until their successors are elected and qualify. Officers are elected by the board of directors and their terms of office are, except to the extent governed by employment contract, at the discretion of the board of directors.

Name	Age	Position	Date of Appointment
Yiqing Wan	46	Chief Executive Officer, Chief Financial Officer and Chairman	November 10, 2006

Wei Xu	45	Vice President of Operations	November 15, 2006

Jun Tang	42	Director	April 25, 2008

Hui Long	47	Vice President of Technology	November 15, 2006

Jingbo Wu	46	Vice President	November 15, 2006

Dr. Q.Y. Ma	51	Chairman of Compensation Committee and Director	March 20, 2007

Business Experience Descriptions:

Mr. Yiqing Wan, Chairman, and Chief Executive Officer and Chief Financial Officer

Mr. Wan was appointed as Chairman and Chief Executive Officer on November 10, 2006. Mr Wan was appointed as the Chief Financial Officer in September 2009 upon Eric Yu’s resignation from the position. Mr. Wan founded Benda Ebei in April 2001and has served as its president and general manager overseeing the day to day operations of the Company since such time. Before founding Benda Ebei, Mr. Wan was Chairman of Zhanjiang Jinhui Pharmaceutical Corp. (from 1995 to 1998), Chairman of Shandong Jinhai Real Estate Development Co. (from 1992 to 1995), Manager of Hainan Pharmaceutical Co. Ltd Guangzhou Division (from 1990 to 1992), and Director of Yichang No.4 Drug Plant (from 1982 to 1990). Mr. Wan has held a range of operational and executive positions in a number of pharmaceutical enterprises for more than two decades and has developed significant management experience in production planning and implementation and in product marketing. Mr. Wan earned B.S. degree in Biological Engineering from Sanxia University in 1982.

Ms. Wei Xu, Vice President of Operations

Ms. Xu was appointed as Vice President of Operations on November 15, 2006. In April, 2007, she was appointed as the General Manger of Shenzhen SiBiono Gene Tech Co., Ltd., a subsidiary of the company. From 2002 to present, she serves as Chairperson of a related company, Hubei Benda Science and Technology Co., Ltd. Prior to such time, she was the Chairman at Hubei Tongji Benda Pharmaceutical Co., Ltd. (from 1999 to 2004), General Manager at the Zhanjiang Jinhui Pharmaceutical Co., Ltd (from 1995 to 1998) and Manager at the Hainan Pharmaceutical Co., Ltd., Guangzhou Division (from 1991 to 1995).

Jun Tang, Director

Jun Tang is now serving as president and Chief Executive Officer in Xin Hua Du Industrial Group Co., a group company incorporated in the PRC covering retail, real estate, mining, high-tech and tourism industries with a subsidiary already listed both in Hong Kong Stock Exchange and in PRC A-shares market and a subsidiary to be listed in PRC A-shares market in the year of 2008.

Prior to joining Xin Hua Du Industrial Group Co. this April of 2008, Mr. Tang served as the president and director of Shanda Interactive Entrainment Limited, a company listed in NASDAQ, and now remain as a member of Shanda's board of directors and serve as an advisor to the CEO of Shanda.

Prior to joining Shanda in 2004, Mr. Tang served as the president of Microsoft China Co., Ltd. from March 2002 to January 2004 and the general manager of Microsoft Asia product support and service and Microsoft Global Technical Engineering Center from January 1998 to March 2002. He received the Microsoft Chairman Bill Gates Award in 1998 and the Microsoft Top Honor Award in 2002 from Microsoft Corporation, and remains the honorary president of Microsoft China Co. Ltd. Prior to joining Microsoft, Dr. Tang founded Intertex Company, a software and entertainment company, in Los Angeles, California in 1993.

Mr. Tang received his doctorate degree, master’s degree and bachelor’s degree in the U.S., Japan and China, respectively. Mr. Tang was honoured as PRC Top 10 Economic Person, PRC Top 10 IT Person, PRC Top 10 Valuable CEO etc.

Mr. Hui Long, Vice President of Technology

Mr. Long was appointed as Vice President of Technology on November 15, 2006. Mr. Long has held senior technical and production management positions with pharmaceutical enterprises for approximately 20 years. From 2001 to present, he is the General Manager of Jiangling Benda Pharmaceutical Co., Ltd. Prior to such time, he was he deputy general manager of Zhanjiang Jinhui Pharmaceuticals Co. Ltd (from 1995 to 2000), the Chief of Technical Division of Sanxia Pharmaceutical Co., Ltd (from 1993 to 1995) and t. Mr. Long earned a B.S. in Biological Engineering from Sanxia University in 1982 and an M.S. in Biological Engineering from Sanxia University in 1988.

Mr. Jingbo Wu, Vice President

Mr. Wu was appointed as Vice President on November 15, 2006. Since 2002, Mr. Wu has been the general manager of North Hubei Tongji Benda Pharmaceutical Company Ltd., overseeing the company’s daily activities and GMP authentication. Prior to this position, he was the deputy general manager of Ebei Pharmaceutical Corp. (from 2000 to 2001) and the deputy general manager of Zhejiang Jinhui Pharmaceutical Co. Ltd. (from 1999 to 2000). Mr. Wu received his certification of graduation in Business Administration from Wuhan University in 1995.

Dr. Q.Y. Ma, Director

Dr. Ma was appointed as a Director on March 20, 2007. Dr. Ma has over 20 years of R&D and managerial experience in US. Dr. Ma has been the managing director of Time Innovation Ventures, a venture capital firm focused on funding technology start-ups and joint ventures in China, since 2000. He has also been a director of ComTech, a Chinese semiconductor company, since 2004. He served as an Associate Professor of electrical engineering at the University of Hong Kong from 1998 to 2005. Dr. Ma also served as an Associate Professor at the Department of Electrical Engineering at Columbia University and in the Department of Radiology at Harvard Medical School from 1994 to 2005. He has served as a consultant to IBM, General Electric, TRW Inc. and DuPont. Dr. Ma is a co-founder of and advisor to Semiconductor Manufacturing International Corp., and the Chairman of TiMed. He has served as an adviser to the Ministry of Information Industry, Beijing Government, and as senior advisor to Zhangjiang Hi-Tech Park in Shanghai. He has published over 160 papers and obtained 7 patents. Dr. Ma received his PhD from Columbia University, and attended the Executive Program of Stanford University's School of Business.

Employment Agreements

On November 15, 2006, we executed employment agreements with each of our executive officers, specifically, Yiqing Wan, our Chief Executive Officer; Wei Xu, our Vice President of Operations; Hui Long, our Vice President of Technology; Daping Gu, our Vice President of Marketing; and Jingbo Wu, our Vice President. The employment agreements are for terms of three years, except for Yiqing Wan, whose term is for five years. The employment agreements provide for annual salaries and annual bonuses in amounts as set forth in the table herein entitled “Executive Compensation Summary.”

Audit Committee and Audit Committee Financial Expert

The Audit Committee assists the Board of Directors in its oversight of the quality and integrity of the accounting, auditing and reporting practices of the Company. The Audit Committee has the authority and responsibility to hire one or more independent auditors to audit the Company’s books, records and financial statements and to review the Company’s systems of accounting (including its systems of internal control), to discuss with such independent auditors the results of such audit and review, to conduct periodic independent reviews of the systems of accounting (including systems of internal control), and to make reports periodically to the Board of Directors with respect to its findings. The Board of Directors has determined that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the Committee. The committee is also responsible for making recommendations to the Board of Directors or otherwise acting with respect to corporate governance matters, including board size and membership qualifications, new director orientation, committee structure and membership, communications with shareholders, and board and committee self-evaluations. The Audit Committee operates under a written charter adopted by our Board of Directors.

The members of the Audit Committee are independent of the Company (as defined under Rule 4200(a)(15) of the NASDAQ Marketplace Rules). We currently do not have a member of the Audit Committee that is a “financial expert” as defined under Item 407 of Regulation S-B.

Code of Ethics

A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer;

Compliance with applicable governmental laws, rules and regulations;

The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

Accountability for adherence to the code.

Due to the limited scope of our current operations, we have not adopted a corporate code of ethics that applies to its principal executive officer, principal accounting officer, or persons performing similar functions.

Indemnification

Under Delaware law and pursuant to our articles of incorporation and bylaws, we may indemnify our officers and directors for various expenses and damages resulting from their acting in these capacities. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our officers or directors pursuant to those provisions, our counsel has informed us that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.

Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that directors, executive officers and persons who own more than 10% of the outstanding common stock of certain reporting companies file initial reports of ownership and reports of changes in ownership in such common stock with the Securities and Exchange Commission ("SEC"). Officers, directors and stockholders who own more than 10% of the outstanding common stock of certain reporting companies are required by the SEC to furnish such companies with copies of all Section 16(a) reports they file. We are required to comply with Section 16(a). Accordingly, stock ownership information contained in this report is based on what is known to us.

ITEM 11. EXECUTIVE COMPENSATION

The following table shows the compensation paid over the past three fiscal years with respect to: (i) the Company’s President as of the end of the 2009, 2008 and 2007 fiscal year; (ii) the two other most highly compensated executive officers (in terms of salary and bonus) serving at the end of the 2009, 2008 and 2007 fiscal year whose annual salary and bonus exceeded $100,000; and (iii) up to two additional individuals who would be in category (ii) but for the fact that the individual was not serving as an executive officer of the Company at the end of the last completed fiscal year (the “named executive officers”):

SUMMARY COMPENSATION TABLE

Name and principal position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Yiqing Wan, CEO and President	2009		160,000														160,000
	2008	$	160,000													$	160,000
	2007	$	160,000		—		—		—		—		—		—	$	160,000
Wei Xu, Vice President	2009		100,000														100,000
	2008	$	100,000													$	100,000
	2007	$	100,000		—		—		—		—		—		—	$	100,000
Hui Long, Vice President	2009		17,580														17,580
	2008	$	6,170													$	6,170
	2007	$	6,170		—		—		—		—		—		—	$	6,170
Daping Gu, Vice President	2009		17,580														17,580
	2008	$	6,000													$	6,000
	2007	$	6,000		—		—		—		—		—		—	$	6,000
Jingbo Wu, Vice President	2009		17,580														17,580
	2008	$	6,000													$	6,000
	2007	$	6,000		—		—		—		—		—		—	$	6,000
Eric Yu, CFO*	2009		12,631														12,631
	2008	$	100,000													$	100,000
	2007	$	89,000		—		—		—		—		—		—	$	89,000

*Eric Yu resigned from his position of Director and CFO in September 2009.

No stock options were granted or exercised by any executive officer during the fiscal year ended December 31, 2009.

For the year ended December 31, 2009, we paid $90,000 as the director remuneration to our independent directors.

We have entered into a five year employment contract with Mr. Wan and three year contracts with Ms. Xu and Mr. Long. Pursuant to the Employment Agreements entered into with the executive officers, starting from January 1, 2007, the compensation of CEO, CFO and Vice President, Wei Xu would be as follows:

CEO, CFO, Yiqing Wan’s yearly salary would be $160,000;

Vice President, Wei Xu’s salary would be $100,000.

The other Vice Presidents’ yearly salary would remain the same as the fiscal year of 2006.

There would be no specific salary increment and bonus scheme for the above mentioned key managements for the next three years; it all depends on the profitability of the company and subject to the Board of Directors’ approval.

Each employment contract immediately terminates upon death or disability, and may be terminated by the Company either with or without cause after 30 days notice, or terminated by the officer for good reason with 60 days notice. We are not currently aware of the plans of any key employees to retire or leave the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth information as of December 31, 2009 with respect to the beneficial ownership of the outstanding shares of the Company’s capital stock by (i) each person known by the Company who will beneficially own five percent (5%) or more of the outstanding shares; (ii) the officers and directors of the Company; and (iii) all the aforementioned officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants or convertible securities exercisable or convertible within 60 days of May 13, 2010 are deemed outstanding for computing the percentage of the person or entity holding such options, warrants or convertible securities but are not deemed outstanding for computing the percentage of any other person.

Name of Beneficial Owner	Amount of Beneficial Ownership			Percent of Beneficial Ownership (4)
XIA Pharmaceutical Inc. (1)		44,687,136	(2)	42.50	%
Hui Long (1)		0		0.00	%
Yiqing Wan (1)		44,687,136	(2)	42.50	%
Wei Xu (1)		44,687,136	(2)	42.50	%
Dr. Q.Y. Ma (1)		0		0.00	%
Daping Gu (1)		0		0.00	%
Ruilu Song (1)		0		0.00	%
Jingbo Wu (1)		0		0.00	%
Pope Investments, LLC (3) 5100 Poplar Ave., Suite 805 Memphis, TN 38137		54,108,458		39.52	%
All Executive Officers and Directors as a group (7 persons)		44,687,136		42.50	%

(1)	Address is c/o Room 13, Floor 25, Sunny New World Tower, No. 231 Xin Hua Road, Jianghan District, Wuhan, Hubei, PRC.

(2)	Yiqing Wan and Wei Xu each have a 50% equity ownership in XIA Pharmaceutical Inc. They are both our executive officers and Yiqing Wan is a director. In addition, they are husband and wife.

(3)

William P. Wells is the manager of Pope Investments, LLC (“Pope”) and exercises sole voting and investment control over such shares. In addition to the 22,337,998 shares of common stock, Pope also holds warrants for the right to purchase a total of 21,818,452 additional shares, and a Convertible Promissory Note convertible into 9,952,008 additional shares.

(4)

Applicable percentage of ownership is based on 105,155,355 shares of common stock outstanding as of May 13, 2010 together with securities exercisable or convertible into shares of common stock within sixty (60) days of May 13, 2010 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of May 13, 20109 are deemed to be beneficially owned by the person holding such options for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Described below are certain transactions or series of transactions since inception between Benda and our subsidiaries and our executive officers, directors and the beneficial owners of 5% or more of our common stock, on an as converted basis, and certain persons affiliated with or related to these persons, including family members, in which they had or will have a direct or indirect material interest in an amount that exceeds $120,000 other than compensation arrangements that are otherwise required to be described under "Executive Compensation."

Kevin R. Keating

Keating Securities, LLC (the “Placement Agent”) acted as placement agent in connection with the Financing. For their services, the Placement Agent received a commission equal to 7.5% of the gross proceeds or approximately $900,000 from the offering and a non-accountable expense allowance equal to 1.5% of the gross proceeds or approximately $180,000. In addition, the Placement Agent received, for nominal consideration, five-year warrants to purchase 2,596,176 shares of our common stock, or 10% of the number of shares of Common Stock sold in the offering, at an exercise price of $0.555 (“Placement Agent Warrants”). We also paid for the out-of-pocket expenses incurred by the Placement Agent and all purchasers in the amount of approximately $100,000. As additional compensation for the Placement Agent's services, we will also pay the Placement Agent the Warrant Solicitation Fee with respect to the exercise, in whole or in part, of any Warrant equal to 3.0% of the total exercise price of the Common Stock issued in such exercise of such Warrant. Such cash Warrant Solicitation Fees shall be paid to the Placement Agent, in immediately available funds, within three (3) business days following receipt, directly or indirectly, by us, of any cash or other proceeds from the exercise of such Warrant.

At or prior to the Closing, pursuant to the terms of the Exchange Agreement, we will enter into a certain financial advisory agreement with Keating Securities, LLC ("Keating Securities"), a registered broker-dealer, under which Keating Securities will be compensated by us for its advisory services rendered to us in connection with the Exchange Agreement. The transaction advisory fee will be $395,000. This fee shall be paid upon the Closing of the Exchange Agreement.

Kevin R. Keating, our former President and sole officer and director who resigned on November 15, 2006, is the father of Timothy J. Keating, the principal member of Keating Investments, LLC. Keating Investments, LLC is the managing member of KI Equity, which is our majority stockholder. Keating Investments, LLC is also the managing member and 100% owner of Keating Securities, LLC, a registered broker-dealer. Kevin R. Keating is not affiliated with and has no equity interest in Keating Investments, LLC, KI Equity, or Keating Securities, LLC and disclaims any beneficial interest in the shares of our common stock owned by KI Equity. Similarly, Keating Investments, LLC, KI Equity and Keating Securities, LLC disclaim any beneficial interest in the shares of our common stock currently owned by Kevin R. Keating.

Effective January 1, 2006, we entered into a contract with Vero Management, L.L.C. ("Vero") for managerial and administrative services. Vero has not been engaged to provide, and Vero does not render, legal, accounting, auditing, investment banking or capital formation services. Kevin R. Keating, our former officer and director, is the manager of Vero. The term of the contract is for one year, but the contract may be terminated at any time. In consideration of the services provided, Vero is paid $2,500 for each month in which services are rendered.

Mark R. Littell and Norwood

On December 14, 2005, KI Equity entered into a Purchase Agreement with Norwood Venture Corp. (“Norwood”) for 2,281,302 shares of our common stock, representing 77.2% of the common shares then outstanding. Mark R. Little, our former Chairman, Chief Executive Officer, President and Chief Financial Officer who resigned on December 30, 2005, is the President and controlling shareholder of Norwood. In connection with the Purchase Agreement, Mark R. Littell and Norwood entered into an agreement releasing Applied from any and all claims they have against us.

During 2006, Norwood paid an accrued legal expense on behalf of Applied in the amount of $1,568, which was recorded as additional paid-in capital.

In connection with the Purchase Agreement, we paid Norwood approximately $18,936 for consulting services rendered by it to Applied Spectrum.

Related Party Transactions a nd Long Term Loan Receivable

Due from related parties at December 31, 2009 and 2008 were comprised as follows:

			December 31,		December 31,
		Relationship	2009		2008
Current
Qin Yu		Vice president
	Due to SiBiono		$	2,024	$	4,314
Xiaoji Zhang		Minority shareholder
	Due to SiBiono			5,423		5,439
Hua Xu		General Manager's Sister
	Due to SiBiono			22,726		-
Rong He		Manager
	Due to SiBiono			688		1,247

			$	30,861	$	11,000

Non current
Yiqing Wan		CEO & Director
	Due to Ever Leader		$	646,586	$	650,790
	Due to Benda Ebei			520,712		439,719
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due to Yidu Benda			1,602,950		1,607,173
	Due to Ever Leader			230,216		231,713
Feng Wang		Minority shareholder
	Due to Beijing Shusai			32,262		32,348
			$	3,032,726	$	2,961,743

The balance owned by the CEO & Director, and the Company under his control, totaled $3,000,464 and $2,929,395 as of December 31, 2009 and 2008, respectively. This is a violation of Section 402 of the Sarbanes-Oxley Act of 2002 which prohibits on personal loans to executives.

Due to related parties at December 31, 2009 and 2008 were comprised as follows:

			December 31,		December 31,
		Relationship	2009		2008
Current
Wei Xu		VP, CEO's Spouse & Director
	Due to SiBiono		$	234,569	$	188,065
	Due from Ever Leader			1,356,172		968,000
	Due from Benda			36,184		-
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due from Benda Ebei			28,528		-
	Due from Jiangliang Benda			793,864		-
	Due from Beijing Shusai			14,111		-
SiBiono Zhongjia Gene Tech (SZ) Co., Ltd.		Associate company
	Due from SiBiono			103,948		-
Yiqing, Wan		CEO & Director
	Due from SiBiono			224,071		237,780
Hua Xu		General Manager's Sister
	Due from SiBiono			-		25,523
Hua Shen		Vice president
	Due from SiBiono			-		33,253
Dongyi Tien		Manager
	Due from SiBiono			-		364
Pong Tsaiohuei		Minority shareholder
	Due from SiBiono			-		4,818
			$	2,791,447	$	1,457,803

Non current
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due from Benda Ebei		$	-	$	28,602
	Due from Jiangliang Benda			-		811,073
	Due from Beijing Shusai			-		14,262
Wei Xu		VP, CEO's Spouse & Director
	Due from Benda Ebei			23,894		48,922
	Due from Beijing Shusai			65,339		65,691
Yiqing, Wan		CEO & Director
	Due from Yidu Benda			559		560
Hui Xu		Manager
	Due from Benda Ebei			28,410		28,483
			$	118,202	$	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, they are expected to be repaid by the Company in over 12-month period.

Reorganization Related Transactions

Ever Leader was incorporated in Hong Kong on October 29, 2005 for the purpose of functioning as an off-shore holding company to obtain ownership interests in various Benda entities that were previously owned, either directly or indirectly, by Wan and Xu. Ms. Mo Mo Hon (“Hon”), a Hong Kong SAR resident, is the sole registered shareholder of Ever Leader, holding the single issued and outstanding share of Ever Leader in trust for Xu.

The organization and ownership structure of the Company subsequent to the consummation of the reorganization as summarized in the paragraphs above is as follows:

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(1)AUDIT FEES

The aggregate fees paid for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company's annual financial statements and review of financial statements included in the Company's Form 10-K (17 CFR 249.308a) or 10-Q (17 CFR 249.308b) or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was $220,000 to MB and $125,000 to K&Co for the fiscal year ended December 31, 2009 and $420,734 to K&Co for the fiscal year ended December 31, 2008.

(2)AUDIT-RELATED FEES

There were no fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the Company's financial statements.

(3)TAX FEES

There were no fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

(4) ALL OTHER FEES

There were no other fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above.

RE-APPROVAL POLICIES AND PROCEDURES

Before the accountant is engaged by the issuer to render audit or non-audit services, the engagement is approved by the Company's the board of directors acting as the audit committee.

ITEM 15. EXHIBITS, LIST AND REPORTS ON FORM 8-K.

(a)Exhibits.

EXHIBIT INDEX

The following exhibits are incorporated by reference or included as part of this report:

Exhibit Number		Description
2.1		Articles of Merger between Applied Spectrum Technologies, Inc., a Minnesota corporation, and Applied Spectrum Technologies, Inc., a Delaware corporation, together with the Agreement and Plan of Merger (1)

2.2		Exchange Agreement by and among Applied Spectrum Technologies, Inc. (“Applied Spectrum”); KI Equity Partners, III, LLC (“KI Equity”); Ever Leader Holdings Limited (“Ever Leader”); and each of the equity owners of Ever Leader Shareholders, dated September 7, 2006 *(2)

2.3		Voting Agreement by and among the Ever Leader Shareholders and KI Equity, dated November 15, 2006 (4)

2.4		Escrow Agreement by and among Applied Spectrum, Ever Leader, Keating Securities, LLC and Steele Street State Bank, the escrow agent, dated November 15, 2006 (4)

2.5		Make Good Agreement by and among Keating Securities, LLC, Applied Spectrum, Ever Leader, Mr. Yiqing Wan and Ms. Wei Xu, and Moveup Investments Limited, dated November 15, 2006 (4)

2.6		Make Good Escrow Agreement by and among Keating Securities, LLC, Applied Spectrum, Ever Leader, Mr. Yiqing Wan and Ms. Wei Xu, and Moveup Investments Limited, dated November 15, 2006 (4)

3.1		Certificate of Incorporation of Applied Spectrum Technologies, Inc., a Delaware corporation. (1)

3.2		Bylaws of Applied Spectrum Technologies, Inc., a Delaware corporation. (1)

4.1		Lock-Up Agreement amongst Applied Spectrum, Keating Securities, LLC, Yiqing Wan, Wei Xu and Moveup Investments Limited (4)

4.2		Specimen Stock Certificate for Shares of Common Stock of the Company (3)

10.1		Placement Agent Agreement dated October 17, 2006 between Applied Spectrum and Keating Securities, LLC (4)

10.2		Securities Purchase Agreement by and among Applied Spectrum, Ever Leader and the Investor listed on the attached Schedule of Buyers (4)

10.3		Registration Rights Agreement (4)

10.4		Form of Common Stock Purchase Warrant (4)

10.5		Form of Placement Agent Stock Purchase Warrant (4)

10.6		Employment Agreement with Yiqing Wan (4)

10.7		Employment Agreement with Wei Xu (4)

10.8		Employment Agreement with Hui Long (4)

10.9		Employment Agreement with Daping Gu (4)

10.10		Employment Agreement with Ruilu Song (4)

10.11		Employment Agreement with Jingbo Wu (4)

10.12		Form Investment Agreement between the Company and Buyers (5)

10.13		Equity Transfer Agreement with Shenzhen Yuanzheng Investment Development Co., Ltd (5)

10.14		Financial Consultancy Agreement (5)

10.15		Equity Transfer Agreement with Shenzhen Yuanxing Gene City Development Co., Ltd. (5)

10.16		Modification and Amendment Agreement dated April 5, 2007 (5)

10.17		Technical Consultancy Agreement with Huimin Zhang (6)

10.18		Equity Transfer Agreement with Huimin Zhang (6)

10.19		Technical Consultancy Agreement with Yaojin Wang (6)

10.20		Equity Transfer Agreement with Yaojin Wang (6)

10.21		Interview by Eric Yu for WallSt.net dated July 26, 2007 (7)

10.22		Rights Purchase Agreement with Dr. Yan Li (7)

10.23		The Science and Technology Cooperation Agreement between College of Chemistry and Life Science of China Three Gorges University and Yidu Benda (7)

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

32.1		Certification of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

32.2		Certification of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

(1)	Incorporated by reference to the Company's Current Report on Form 8-K dated November 17, 2005 and filed on November 22, 2005 (SEC File No. 000-16397).

(2)	Incorporated by reference to the Company's Current Report on Form 8-K dated September 7, 2006 and filed on September 7, 2006 (SEC File No. 000-16397).

(3)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (SEC File No. 33-17959).

(4)	Incorporated by reference to the Company's Current Report on Form 8-K dated November 15, 2006 and filed on November 17, 2006 (SEC File No. 000-16397).

(5)	Incorporated by reference to the Company’s Current Report on Form 8-K dated April 5, 2007 and filed on April 6, 2007 (SEC File No. 000-16397).

(6)	Incorporated by reference to the Company’s Current Report on Amendment No. 1 to Form 8-K dated April 5, 2007 and filed on June 15, 2007 (SEC File No. 000-16397).

(7)	Incorporated by reference to the Company’s Amendment No. 2 to Registration Statement on Form SB-2 (SEC File No. 33-17959).

(b)	Reports on Form 8-K.

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, thereunto duly authorized.

	BENDA PHARMACEUTICAL, INC.

Date: May 18, 2010	By:	/s/ Yiqing Wan
		Yiqing Wan Chief Executive Officer, Chief Financial Officer, President, and Director

In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on August 1, 2008.

Name	Title	Date

/s/ Yiqing Wan	Chief Executive Officer and	May 18, 2010
Yiqing Wan	President / Director

/s/ Jun Tang	Director	May 18, 2010
Jun Tang

/s/ Dr. Q.Y. Ma	Director	May 18, 2010
Dr. Q.Y. Ma

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Benda Pharmaceutical, Inc.

Wuhan, Hubei Province, PRC

We have audited the accompanying consolidated balance sheet of Benda Pharmaceutical, Inc. (the “Company”) as of December 31, 2009 and the related statements of operations, changes in shareholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. at December 31, 2009 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses for the year ended December 31, 2009 and had a working capital deficiency at December 31, 2009. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/MALONEBAILEY, LLP

www.malonebailey.com

Houston, Texas

May 17, 2010

Page 1 of 39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Benda Pharmaceutical, Inc.

Wuhan, Hubei Province, PRC

We have audited the condensed Parent Only balance sheet of Benda Pharmaceutical, Inc. (the “Company”) as of December 31, 2009 and the related condensed Parent Only statements of income and cash flows for the year then ended included in Footnote 24 to the Consolidated Financial Statements of Benda Pharmaceutical, Inc. These Parent Only condensed financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the condensed Parent Only financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. at December 31, 2009 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

/s/MALONEBAILEY, LLP

www.malone-bailey.com

Houston, Texas

May 17, 2010

Page 2 of 39

KEMPISTY & COMPANY

CERTIFIED PUBLIC ACCOUNTANTS, P.C.

15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Benda Pharmaceutical, Inc.

We have audited the accompanying consolidated balance sheets of Benda Pharmaceutical, Inc. and subsidiaries (the "Company") as of December 31, 2008 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. and subsidiaries at December 31, 2008 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

As discussed in Note 25 to the consolidated financial statements, the accompanying consolidated balance sheet as of December 31, 2008 and the related statements of operations, cash flows and stockholders' deficit for the year then ended have been restated.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses for the year ended December 31, 2008 and had a working capital deficiency at December 31, 2008. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Kempisty & Company

Certified Public Accountants PC

New York, New York

May 17, 2010

Page 3 of 39

KEMPISTY & COMPANY

CERTIFIED PUBLIC ACCOUNTANTS, P.C.

15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Benda Pharmaceutical, Inc.

We have audited the condensed Parent Only balance sheet of Benda Pharmaceutical, Inc. as of December 31, 2008 and the related condensed Parent Only statements of operations and cash flows for the year then ended included in Footnote 24 to the Consolidated Financial Statements of Benda Pharmaceutical, Inc. These Parent Only condensed financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the condensed Parent Only financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. at December 31, 2008 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses for the year ended December 31, 2008 and had a working capital deficiency at December 31, 2008. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Kempisty & Company

Certified Public Accountants PC

New York, New York

May 17, 2010

Page 4 of 39

Benda Pharmaceutical, Inc.

Consolidated Balance Sheets

				(Restated)
	December 31			December 31
	2009			2008
Assets
Current Assets
Cash and cash equivalents	$	191,095		$	584,266
Trade receivables, net (Note 5)		12,405,018			9,328,914
Advance for inventory purchase		2,110,857			230,888
Notes receivable		81,426			154,691
Inventories (Note 6)		2,038,987			2,344,561
Due from related parties, short term (Note 14)		30,861			11,000
Prepaid expenses and other current assets		1,720,237			508,854
Total current assets		18,578,481			13,163,174

Due from related parties, long term (Note 14)		3,032,726			2,961,743
Property and equipment, net (Note 7)		28,658,131			28,907,035
Intangible assets, net (Note 8)		6,629,501			7,369,482
Debt issuance costs (Note 19)		-			55,485
Restricted cash (Note 10)		4,409,334			5,162,184
Other assets (Note 11)		2,285,581			2,291,602
Total Assets	$	63,593,754		$	59,910,705

Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable		902,079			605,317
Customer deposit		1,507,147			1,056
Other payable		4,569,503			2,232,874
Accrued liabilities		6,175,538			3,940,480
Convertible notes (Note 19)		7,260,000			6,395,951
Short-term debt (Note 12)		11,576,121			12,281,729
Accrued VAT and other taxes		795,013			954,509
Acquisition price payable (Note 1)		1,422,743			1,426,491
Wages payable		1,187,075			1,020,474
Due to related parties, short term (Note 14)		2,791,447			1,457,803
Redeemable common stock, 2,049,560 shares at $3.6 per share (Note 15)		7,376,366			7,376,366
Total current liabilities		45,563,032			37,693,050

Government grant payable (Note 13)		1,789,439			2,234,210
Due to related parties, long-term (Note 14)		118,202			997,593
Deferred income tax liability		778,026			834,458
Total liabilities		48,248,699			41,759,311

Shareholders' 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		105,155			105,155
Additional paid in capital		22,108,427			22,108,427
Statutory surplus reserve fund (Note 16)		2,642,775			2,642,775
Accumulated deficit		(17,481,559	)		(15,544,089	)
Accumulative other comprehensive income		6,268,111			6,372,496
Shares issuable for services		503,860			503,860
Total Benda Pharmaceutical, Inc.'s Shareholders' Equity		14,146,769			16,188,624
Noncontrolling Interest		1,198,286			1,962,770
Total Shareholders' Equity		15,345,055			18,151,394
Total Liabilities & Shareholders' Equity	$	63,593,754		$	59,910,705

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

Page 5 of 39

Benda Pharmaceutical, Inc.

Consolidated Statements of Operations

	YEAR ENDED DECEMBER 31,
				(Restated)
	2009			2008

Revenue	$	21,990,915		$	25,041,986
Cost of goods sold		(13,720,676	)		(15,740,107	)
Gross profit		8,270,239			9,301,879

Selling expenses		2,378,852			2,708,968

General and administrative expenses
Bad debts		1,424,072			2,730,434
Depreciation and amortization expense		1,273,051			837,440
Goodwill impairment		-			4,141,109
Inventory wirtten down to net realizable value		-			392,535
Other general and administrative expenses		3,224,561			4,189,341
Research and development expenses		349,361			1,461,951
Total operating expenses		8,649,897			16,461,778
Operating loss		(379,658	)		(7,159,899	)

Other income (expenses)
Rental income		241,005			-
Government subsidies / grants (Note 13)		454,491			-
Interest income		129,513			133,251
Interest expense		(2,298,411	)		(5,359,788	)
Other expenses (Note 17)		(14,833	)		(1,311,140	)
Loss before income taxes		(1,867,893	)		(13,697,576	)
Income taxes (Note 18)		818,289			776,295

Net Loss		(2,686,182	)		(14,473,871	)

Less: Net loss attributable to the noncontrolling interests		(748,712	)		(2,993,073	)
Net loss attributable to Benda Pharmaceutical, Inc.	$	(1,937,470	)	$	(11,480,798	)

Other Comprehensive Loss
Foreign currency translation (loss) gain		(120,157	)		3,460,265
Comprehensive Loss		(2,806,339	)		(11,013,606	)
Comprehensive loss attributable to the noncontrolling interest		(764,484	)		(2,344,747	)
Comprehensive loss attributable to Benda Pharmaceutical, Inc.	$	(2,041,855	)	$	(8,668,859	)

Net loss per share - basic and diluted
Net loss attributable to Benda Pharmaceutical, Inc.	$	(0.03	)	$	(0.14	)

Weighted average shares outstanding - basic and diluted		105,155,355			101,965,464

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

Page 6 of 39

Benda Pharmaceutical, Inc.

Consolidated Statements of Changes in Shareholders' Equity

								Statutory					Accumulated
					Additional			Surplus					Other			Shares Issuable		Non-			Total
	Common Stock				Paid-in			Reserve		Retained			Comprehensive			for		Controlling			Shareholder's
	Shares		Amount		Capital			Fund		Deficit			Income			Services		Interest			Equity

Balance at December 31, 2007 (Restated)		100,170,071	$	100,170	$	21,547,929		$	2,310,681	$	(3,731,197	)	$	3,560,557		$	503,860	$	4,307,517		$	28,599,517

Shares issued in lieu of director renumeration 02/18/08, 110,000 shares @$0.69 each		110,000		110		75,790			-		-			-			-		-			75,900

Shares issued in lieu of penalty for late filing on SB-2 on March 15, 2008. 03/15/08, 523,438 shares @ $0.440 each (Note 17)		523,438		523		229,789			-		-			-			-		-			230,312

Shares issued for conversion of convertible notes on July 10, 2008. 07/10/2008, 540,870 shares @$0.554662 each (Note 19)		540,870		541		(8,039	)		-		-			-			-		-			(7,498	)

Shares issued for "Make good agreeement" 08/25/2008 3,810,976 shares @$0.07 (Note 17)		3,810,976		3,811		262,958			-		-			-			-		-			266,769

Foreign currency translation adjustment		-		-		-			-		-			2,811,939			-		648,326			3,460,265

Net loss for the year ended 12/31/08		-		-		-			-		(11,480,798	)		-			-		(2,993,073	)		(14,473,871	)

Appropriation to statutory reserve		-		-		-			332,094		(332,094	)		-			-					-

Balance at December 31, 2008 (Restated)		105,155,355	$	105,155	$	22,108,427		$	2,642,775	$	(15,544,089	)	$	6,372,496		$	503,860	$	1,962,770			18,151,394

Foreign currency translation adjustment				-		-			-		-			(104,385	)		-		(15,772	)		(120,157	)

Net loss for the year ended 12/31/09				-		-			-		(1,937,470	)		-			-		(748,712	)		(2,686,182	)

Balance at December 31, 2009		105,155,355	$	105,155	$	22,108,427		$	2,642,775	$	(17,481,559	)	$	6,268,111		$	503,860	$	1,198,286		$	15,345,055

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

Page 7 of 39

Benda Pharmaceutical, Inc.

Consolidated Statements of Cash Flows

	YEAR ENDED DECEMBER 31,
	2009			2008
				(Restated)
Cash Flows From Operating Activities
Net loss	$	(2,686,182	)	$	(14,473,871	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt provision		1,424,072			2,730,434
Inventory written down to net realizable value		-			392,535
Goodwill impairment provision		-			3,635,114
Loss on disposals of fixed assets		43,044			-
Depreciation, including amounts in cost of sales		2,194,394			2,086,178
Amortization of intangible assets		712,369			679,738
Amortization of debt issuance costs		55,485			264,962
Amortization of convertible notes discount		864,049			3,520,876
Capitalized interest relates to construction-in-progress		(364,164	)		-
Income tax benefit		(54,354	)		(198,730	)
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		(4,521,677	)		(1,593,970	)
Advance for inventory purchase		(1,880,576	)		676,222
Inventories		299,415			(784,748	)
Prepaid expenses and other current assets		(1,212,712	)		(609,700	)
Accounts payable		298,354			423,265
Customer deposit		1,506,095			(159,762	)
Others payable		2,342,495			1,949,869
Accrued expense		1,117,190			23,762
Wages payable		168,053			355,688
Accrued taxes		(156,987	)		(324,876	)
Government grant payable		(439,830	)		-
Net cash used in operating activities		(291,467	)		(834,033	)

Cash Flows From Investing Activities
Addition of notes receivable		(1,118,610	)		(155,044	)
Collection of notes receivable		1,191,469			7,208
Restricted cash		739,286			(2,546,930	)
Purchases of property and equipment and construction-in-progress		(589,896	)		(1,708,213	)
Disposal of intangible assets		-			172,548
Advance to related parties		(90,844	)		(342,724	)
Net cash provided by (used in) investing activities		131,405			(4,573,155	)

Cash Flows From Financing Actives
Borrowing (advance) from related party		454,253			(738,222	)
Repayments of borrowings under bank loans, net		(673,338	)		4,295,967
Net cash provided by (used in) financing activities		(219,085	)		3,557,745
Effect of exchange rate changes on cash		(14,024	)		699,589
Net decrease in cash and cash equivalents		(393,171	)		(1,149,854	)

Cash and cash equivalents, beginning of period		584,266			1,734,120

Cash and cash equivalents, end of period	$	191,095		$	584,266

Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	536,106		$	984,621
Cash paid for income taxes	$	1,118,912		$	740,717

Non-Cash Investing Activities
Transfer of construction-in-progress to property and equipment	$	2,412,086		$	-
Purchase of construction-in-progress on credit	$	1,119,428		$	-

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

Page 8 of 39

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 Delaware Law 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.

Ever Leader owns 95% of the issued and outstanding capital of Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd. (“Benda Ebei”), a Sino-Foreign Equity Joint Venture company incorporated under the laws of PRC. Mr. Yiqing Wan owns 5% of the issued and outstanding capital stock of Benda Ebei. Benda Ebei owns: (i) 95% of the issued and outstanding capital stock of Jiangling Benda Pharmaceutical Co. Ltd., (“Jiangling Benda”) a company formed under the laws of PRC; (ii) 95% of the issued and outstanding capital stock of Yidu Benda Chemical Co. Ltd., (“Yidu Benda”) a company incorporated under the laws of PRC; and (iii) 75% of the issued and outstanding capital stock of Beijing Shusai Pharyngitis Research Co. Ltd., (“Beijing Shusai”) a company incorporated under the laws of PRC. Mr. Yiqing Wan owns: (i) 5% of the issued and outstanding capital stock of Jingling Benda; and (ii) 5% of the issued and outstanding capital stock of Yidu Benda. Mr. Feng Wang owns 25% of the issued and outstanding capital stock of Beijing Shusai.

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 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 RMB 60 million due and payable on or before April 30, 2007. On June 11, 2007, Benda Ebei entered into an Equity Transfer Agreement with Huimin Zhang and Yaojin Wang, the individual shareholders of SiBiono, to purchase 1.6% and 0.96% respectively of the shares of SiBiono’s common stock for total consideration of RMB 2.56 million due and payable on or before June 30, 2007. Altogether, the total consideration for 60.13% shares of SiBiono’s common stock was RMB 62.56 million or $8.58 million. As of December 31, 2009, an accumulated amount, approximately RMB 52. 83 million or $7.16 million was paid leaving a balance of RMB 9.73 million or $1.42 million.

Benda, Ever Leader, Benda Ebei, Jiangling Benda, Yidu Benda, Beijing Shusai and SiBiono shall be referred to herein collectively as the “Company”. The Company 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).

Page 9 of 39

As of December 31, 2009, the organization and ownership structure of the Company is as follows:

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying consolidated financial statements, the Company has recurring losses and has a working capital deficiency at December 31, 2009. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.

While the Company is attempting to produce sufficient revenues, the Company’s cash position may not be enough to support the Company’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 Company to continue as a going concern. While the Company 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 Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

2.	Basis of Preparation

The accompanying consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).

These consolidated financial statements include the accounts of Benda, Ever Leader, Benda Ebei, Jiangling Benda, Yidu Benda, Beijing Shusai and Sibiono for the full year. All significant inter-company balances and transactions have been eliminated in the consolidation.

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Certain amounts in the consolidated financial statements for the prior year have been reclassified to conform to the presentation of the current year.

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

Fair Value of Financial Instruments

The Company adopted ASC 820 “Fair Value Measurements,” 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.

• 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 Company evaluates the hierarchy disclosures each period.

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.

Restricted Cash

The restricted cash is recorded as asset when the Company deposits cash in the bank as collateral for note payable, separately from cash and cash equivalents.

Trade receivables

Trade receivables are recognized and carried at original invoiced amount less an allowance for uncollectible accounts, as needed. The allowance for losses on trade receivables reflects management’s best estimate of probable losses determined principally on the basis of historical experience. The allowance for losses is determined primarily on the basis of management’s best estimate of probable losses, including specific allowances for known troubled accounts. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for losses. When facts subsequently become available to indicate that the amount provided as the allowance was incorrect, an adjustment which classified as a change in estimate is made.

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Inventories

Inventories are stated at the lower of cost, as determined on a weighted average basis, or market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. The management writes down the inventories to market value if it is below cost. The management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required.

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		20-30 years
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.

Intangible Assets

The Company’s intangible assets are stated at cost less accumulated amortization and are comprised of land-use rights, drug permits and licenses and patents. Land-use rights are related to land the Company occupies in Hubei and Guangdong Province, PRC and are being amortized on a straight-line basis over a period of 40 to 50 years. Other intangible assets are being amortized on a straight-line basis over a period of 8 to 10 years.

Impairment of Long-Lived Assets

The Company accounts for impairment of plant and equipment and amortizable intangible assets in accordance with ASC 360, “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset Company is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset Company’s) fair value.

Revenue Recognition

The Company generates revenue from the sales of 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. Sales are recognized when the following four revenue criteria are met:

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

Collectability is reasonably assured.

Sales are presented net of Value Added Tax (VAT). No return allowance is made as products returns are insignificant based on historical experience.

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Research and Development

Research and development costs are expensed as incurred and consist primarily of salaries and related expenses of personnel engaged in research and development activities. The Company spent $349,361 and $1,461,951 on direct research and development (“R&D”) efforts for the year ended 2009 and 2008, respectively.

Income Taxes

The Company accounts for income taxes in accordance with the accounting standard which requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company adopted the accounting standard for uncertainty in income taxes which prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction).

Comprehensive Income

The Company reports comprehensive income, its components, and accumulated balances in its financial statements. Accumulated other comprehensive income represents the accumulated balance of foreign currency translation adjustments.

Foreign Currency Translation

The functional currency of the Company is the Renminbi (“RMB”), the PRC’s currency. The Company 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 net income (loss) for the respective periods.

For financial reporting purposes, the financial statements of the Company, which are prepared using the RMB, are translated into the Company’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 December 31, 2009 and 2008 were stated as follows: (for RMB 1.00):

	December 31, 2009		December 31, 2008
Fixed rate	$	0.1463	$	0.1467
Average rate	$	0.1466	$	0.1442

Loss Per Share

Basic earnings per share amounts are calculated based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is based on the weighted average numbers of shares of common stock outstanding for the periods, including dilutive effects of stock options, warrants granted and convertible preferred stock. Dilutive options and warrants that are issued during a period or that expire or are canceled during a period are reflected in the computations for the time they were outstanding during the periods being reported. Since the Company has incurred losses for both periods, the impact of the common stock equivalents would be antidilutive and therefore are not included in the calculation.

Page 13 of 39

Government grants

Grants from the PRC government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants are recognized as other income or gains in the period when received and when government confirms that all attached conditions are met. During the years ended December 31, 2009 and 2008, the Company recognized other income from PRC government of $454,491 and $0 respectively.

Related parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Recently 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 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.

Page 14 of 39

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 the Company, 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 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.

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 adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

5.	Trade Receivables

The Company’s trade receivables consist of the following:

	December 31,			December 31,
	2009			2008
Trade receivables, gross	$	17,607,329		$	13,117,016
Allowance for doubtful accounts		(5,202,311	)		(3,788,102	)
Trade receivables, net	$	12,405,018		$	9,328,914

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6.	Inventories

The Company’s inventories were comprised as follows:

	December 31,			December 31,
	2009			2008
Raw materials	$	489,348		$	753,918
Packing materials		290,601			481,724
Other materials / supplies		83,247			88,412
Finished goods		588,604			720,575
Work-in-process		596,449			544,847
Total inventories at cost		2,048,249			2,589,476

Less: Reserves on inventories		(9,262	)		(244,915	)

Total inventories, net	$	2,038,987		$	2,344,561

7.	Property and Equipment

The Company’s property and equipment at December 31, 2009 and 2008 was compris ed as follows:

	December 31, 2009			December 31, 2008
Buildings	$	14,380,679		$	12,183,053
Machinery and equipment		13,982,775			13,943,173
Office equipment		131,930			128,729
Motor vehicles		348,598			349,516
Cost		28,843,982			26,604,471

Less: Accumulated Depreciation

Buildings	$	(2,401,030	)	$	(1,812,814	)
Machinery and equipment		(5,331,797	)		(3,880,979	)
Office equipment		(73,966	)		(53,840	)
Motor vehicles		(142,688	)		(93,248	)
Accumulated Depreciation		(7,949,481	)		(5,840,881	)

Construction in progress	$	7,763,630		$	8,143,445

Total property and equipment, net	$	28,658,131		$	28,907,035

As mentioned in Note 12, 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 agreement the credit facility is secured by the buildings, machinery and equipment of Benda Ebei and Jiangling Benda. Meanwhile Benda Ebei entered into a short-term loan agreement with Guang Shui Rural Credit Union on October 9, 2009, under which the short-term bank loan is secured by the machinery of Benda Ebei. As of December 31, 2009, the net book value of pledged property and equipment was approximately RMB 121 million (or $17.7 million) in total.

The total depreciation expense was $2,194,394 and $2,086,178 for the years ended December 31, 2009 and 2008, respectively, and is broken down as follows:

Page 16 of 39

	YEAR ENDED DECEMBER 31,
	2009		2008
Cost of sales	$	1,633,712	$	1,224,199
Operating expenses		560,682		861,979
Total	$	2,194,394	$	2,086,178

8.	Intangible Assets

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

	December 31, 2009			December 31, 2008
Land-use rights	$	4,386,064		$	4,415,740
Drugs permits and licenses		1,821,435			1,826,234
Technology formulas		43,890			44,006
Patent		3,776,720			3,786,670
Cost		10,028,109			10,072,650

Less: Accumulated Amortization
Land-use rights	$	(222,946	)	$	(179,511	)
Drugs permits and licenses		(1,784,671	)		(1,606,750	)
Technology formulas		(15,544	)		(11,185	)
Patent		(1,375,447	)		(905,722	)
Accumulated amortization		(3,398,608	)		(2,703,168	)
Total intangible assets, net	$	6,629,501		$	7,369,482

The total amortization expense was $712,369 and $679,738 for the years ended December 31, 2009 and 2008, respectively.

Goodwill

The changes in the carrying amount of goodwill for 2009 and 2008 are summarized below:

	December 31,		December 31,
	2009		2008
Balance, beginning of year	$	-	$	3,720,247
Impairment		-		(3,635,114	)
Translation and other		-		(85,113	)
Balance, end of year		-		-

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) in the fourth quarter of each year, unless an event occurs that would cause us to believe the value is impaired at an interim date.

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The performance of the impairment test involves a two-step process. The first step involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We determine the fair value of our reporting units using the income approach methodology of valuation that includes the discounted cash flow method. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The second step involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill.

We performed the annual impairment test in the fourth quarter of 2008 and determined that the goodwill assigned to operating segment, Sibiono, was fully impaired. The fair value of the reporting unit was estimated using the expected present value of future cash flows.

10.	Restricted Cash

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

	December 31,		December 31,
	2009		2008
Deposits for issuance of commercial notes	$	4,409,334	$	5,162,184

The restricted cash are deposits required by the bank for outstanding notes payable.

11.	Other assets

The Company’s long term other assets were comprised as follows:

	December 31,		December 31,
	2009		2008
Right to purchase the 6.24% equity shares in SiBiono	$	1,825,824	$	1,830,634	(a)
Long term advance of inventory purchase		459,757		460,968
Total	$	2,285,581	$	2,291,602

(a)	Right to purchase the 6.24% equity shares in SiBiono

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 (RMB 6.24 million in cash and shares of our common stock equal to RMB 6.24 million) which was due and payable on or before March 31, 2007.

On November 27, 2007, Shenzhen Arbitration Commission determined that Benda Ebei should pay 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.

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Following this arbitration decision, Benda Ebei recognized the liability as other payable of RMB 12.48 million, plus the penalty and related legal and arbitration expenses, totaling approximately RMB 12.80 million or $1,898,355 and $1,903,357 at December 31, 2009 and 2008 respectively. Accordingly Benda Ebei recognized the right to purchase the 6.24% equity shares in SiBiono and recorded as an asset at RMB 12.48 million or $1,825,824 and $1,830,634 at December 31, 2009 and 2008 respectively.

On May 22, 2008, Benda Ebei applied to Shenzhen People Court to terminate the above mentioned arbitration. The termination is based on the grounds that Xiaozhi Zhang does not own all 6.24% of SiBiono’s common stock. He only owns 3.28% of SiBiono’s stock. The application has been accepted by Shenzhen People Court and is waiting for its determination.

12. Short-term debt

The Company’s short term debt was comprised as follows:

	December 31,		December 31,
	2009		2008
Ebei - one year bank loan due in October 2010, bear interest at 9% per annum, secured by Ebei Benda’s Machinery	$	438,900	$	-
Ebei- bank acceptance notes from SHPudong Development Bank with redemption dates various from one to six months subsequent to year end, secured by buildings, machinery and equipment of Benda Ebei and Jiangling Benda.		8,160,503		9,297,169
Sibiono- three-year bank loan due in April 2008 bearing annual interest at 6.366%. Loan is currently in default.		2,976,718		2,984,560	(a)
	$	11,576,121	$	12,281,729

(a) SiBiono – Bank Loan in default

As of December 31, 2009 and 2008, Sibiono, had an outstanding bank loan for the amount of $2,976,718 and $2,984,560, respectively, which was used primarily to fund construction in progress projects and for general working capital purposes. The loan carries annual interest rate of 6.34% and matured in April 2008. The loan is personally guaranteed by Zhaohui Peng, the former Chairman and a shareholder of SiBiono and is collateralized by Sibiono’s land use right.

The loan is in default since the maturity date. During 2008, SiBiono was sued for default on the bank loan and judgment has been made requiring Sibiono to repay the loan principle amount and related interest. The loan is collateralized by Sibiono’s land use right, the judgment agreed that the lender bank can apply for government permission to sell the land use right owned by Sibiono to repay the debt. Sibiono’s management is actively seeking ways to refinance this loan, currently the lender bank has not exercised its rights on the land use right.

13. Government Grant Payable

As of December 31, 2009 and 2008, long term debt payable is related to various technology funds obtained from various government technology agencies to support the Company’s gene therapy research and development activities during the past years and has been recorded as long term debt payable.

The obligations will be discharged once the examinations by the various government technology agencies are conducted and these agencies confirm that the examinations are carried out and completed.

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During the year ended December 31, 2009, an amount of RMB3,000,000 (or $454,491) of long term debt payable was discharged and recorded as government subsidies.

14. Related Party Transactions

Due from related parties at December 31, 2009 and 2008 were comprised as follows:

			December 31,		December 31,
		Relationship	2009		2008
Current
Qin Yu		Vice president
	Due to SiBiono		$	2,024	$	4,314
Xiaoji Zhang		Minority shareholder
	Due to SiBiono			5,423		5,439
Hua Xu		General Manager's Sister
	Due to SiBiono			22,726		-
Rong He		Manager
	Due to SiBiono			688		1,247

			$	30,861	$	11,000

Non current
Yiqing Wan		CEO & Director
	Due to Ever Leader		$	646,586	$	650,790
	Due to Benda Ebei			520,712		439,719
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due to Yidu Benda			1,602,950		1,607,173
	Due to Ever Leader			230,216		231,713
Feng Wang		Minority shareholder
	Due to Beijing Shusai			32,262		32,348
			$	3,032,726	$	2,961,743

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Due to related parties at December 31, 2009 and 2008 were comprised as follows:

			December 31,		December 31,
		Relationship	2009		2008
Current
Wei Xu		VP, CEO's Spouse & Director
	Due to SiBiono		$	234,569	$	188,065
	Due from Ever Leader			1,356,172		968,000
	Due from Benda			36,184		-
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due from Benda Ebei			28,528		-
	Due from Jiangliang Benda			793,864		-
	Due from Beijing Shusai			14,111		-
SiBiono Zhongjia Gene Tech (SZ) Co., Ltd.		Associate company
	Due from SiBiono			103,948		-
Yiqing, Wan		CEO & Director
	Due from SiBiono			224,071		237,780
Hua Xu		General Manager's Sister
	Due from SiBiono			-		25,523
Hua Shen		Vice president
	Due from SiBiono			-		33,253
Dongyi Tien		Manager
	Due from SiBiono			-		364
Pong Tsaiohuei		Minority shareholder
	Due from SiBiono			-		4,818
			$	2,791,447	$	1,457,803

Non current
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due from Benda Ebei		$	-	$	28,602
	Due from Jiangliang Benda			-		811,073
	Due from Beijing Shusai			-		14,262
Wei Xu		VP, CEO's Spouse & Director
	Due from Benda Ebei			23,894		48,922
	Due from Beijing Shusai			65,339		65,691
Yiqing, Wan		CEO & Director
	Due from Yidu Benda			559		560
Hui Xu		Manager
	Due from Benda Ebei			28,410		28,483
			$	118,202	$	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, is expected to be repaid by the Company in over 12-month period.

15. Redeemable Common Stock Issuable For Services

On April 1, 2007, Benda entered into a Financial Consultancy Agreement with Super Pioneer International Limited (“Super Pioneer”); on June 11, 2007, Benda entered into a Technical Consultancy Agreement with Yaojin Wang (‘Wang”) and Huiming Zhang (“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, the corresponding amount $7,882,416 was recorded as consulting and professional fees.

Page 21 of 39

Super Pioneer, Wang and Zhang 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 did not reach $3.60 per share and Benda’s common stock was not listed on either the NASDAQ or AMEX stock exchanges, Super Pioneer, Wang, and Zhang 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. Such option expired within one month from the last date of the three month period. The redemption requests were made to the Company in January 2008 and the company obtained oral consent from Super Pioneer, Wang and Zhang that the payment would be deferred to the year of 2010.

In accordance with ASC 480-10-25-5, as the Agreements governing the issuance of the 2,189,560 shares of common stock to Super Pioneer, Wang, and Zhang 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, these 2,049,560 shares have been classified as redeemable common stock, as a liability at December 31, 2009.

16. Statutory Reserves

As stipulated by the relevant laws and regulations for enterprises operating in the PRC, the Company is required to make annual appropriations to a statutory surplus reserve fund for each of its PRC subsidiaries. Specifically, the Company 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 Company’s PRC subsidiaries, to a statutory surplus reserve until such reserve reaches 50% of the registered capital of the Company’s PRC subsidiaries. As of December 31, 2009 and 2008, the Company’s statutory reserves total $2,642,775 and the registered capital of the Company’s PRC subsidiaries was $21,719,896.

17. Other Income / (Expenses)

Among the other income / (expenses), there was an amount incurred for the penalty to investors. For the years ended December 31, 2009 and 2008, the amount of penalty to investors consisted of the following events:

	YEAR ENDED DECEMBER 31,
	2009		2008
Registeration delay expense	$	-	$	1,113,405
Make Good Agreement		-		266,768
	$	-	$	1,380,173

In accordance with ASC 815-40 (previously FASB staff position No. EITF00-19-2), the Company recorded $1,113,405 in Registration Delay Expense, for the year ended December 31, 2008. Out of the total penalty, $230,312 was settled by issuance of 523,438 shares of common stock. According to the signed agreement, the penalty would be capped at 10% of the total fund raised and such cap was reached in June 2008, thus there would be no more penalties incurred onwards. Furthermore, the Registration Statement was effective in August 2008.

According to the Investment Agreements (issuance of convertible promissory notes) in March 2007, 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 Company executed in November of 2006 (the “Make Good Agreement”). The Company 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 Company is required to issue to the Investors a pro rata portion of 1,000,000 shares of the Company’s common stock for every one (1) cent by which the Company’s earnings per share, determined on a fully diluted basis, is less than $0.07. On Aug 25, 2008, the Company issued 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 booked as penalty.

Page 22 of 39

18. Income Taxes

United States

Benda is subject to the United States of America tax law, but no provision for income taxes were made for the years ended December 31, 2009 and 2008 as Benda did not have reportable taxable income for the periods.

Hong Kong

Ever Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax law, but no provisions for income taxes were made for the years ended December 31, 2009 and 2008 as Ever Leader did not have reportable taxable income for the periods.

PRC

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 was expired in 2009.

However, starting and effective from January 1, 2008, the full income tax rate was 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%.

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

Page 23 of 39

The income tax expense in the consolidated statements of operations consists of:

	YEAR ENDED DECEMBER 31
	2009			2008
Current income taxes expenses:
PRC Enterprise Income tax expense	$	872,643		$	1,109,249

Income tax benefit		(54,354	)		(332,954	)

Income tax, net	$	818,289		$	776,295

The income tax benefit arises from the incremental difference of the intangible amortization due to difference between intangible assets book value and tax value from the acquisition of Sibiono at March 31, 2007.

A reconciliation between the income tax computed at the U.S statutory rate and the Company’s provision for income tax for the years of 2009 and 2008 are as follows:

	YEAR ENDED DECEMBER 31
	2009			2008

U.S Statutory rate		34.0	%		34.0	%

Foreign income not recognized in the U.S		-34.0	%		-34.0	%

PRC statutory rate		25.0	%		25.0	%

Tax relief and holiday granted to the Subsidiary		0.0	%		-12.5	%

Tax rate change due to valuation allowance to deferred tax assets from NOL		(61.7	)%		(18.2	)%

Effective income tax rate		(36.7	)%		(5.7	)%

According to the Chinese tax law, the Group pays Chinese enterprise income taxes at each individual subsidiary. The income taxes of $872,643 and $1,109,249 for the year ended December 31, 2009 and 2008 respectively were from Ebei Benda which was the only subsidiary with pretax income. The other subsidiaries, Jiangling Benda, Yidu Benda, Beijing Shusai and SiBiono collectively have accumulated NOL of $5.6 million and $3.1 million at December 31, 2009 and 2008 respectively. The components of the deferred income tax assets consisted of allowance for bad debt, inventory reserve and NOL. The Company established a valuation allowance to fully offset the net deferred income tax assets because it is less likely that the Company will be able to generate future taxable income necessary to realize those net deferred income tax assets, considering the Company’s history of significant operating losses.

The tax effects of temporary differences that have given rise to the deferred tax liabilities consist of the following:

	YEAR ENDED DECEMBER 31
	2009		2008
Deferred tax liability - intangible amortization	$	778,026	$	834,458

Page 24 of 39

19. Convertible Promissory Note

In March and April of 2007, the Company entered into Investment Agreements (“Agreements”) with certain accredited and institutional investors (“Investors”) pursuant to which the Investors purchased from the Company a total of 252 Units (“Units”), resulting in aggregate gross proceeds to the Company $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 Company's common stock; and (ii) a Common Stock Warrant (“Warrant”) to acquire 54,087 shares of the Company’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 Company has accounted for the Warrants issued in conjunction with the Notes in accordance with the provisions of ASC 470-20. 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.

Additionally, the difference between the effective conversion price of the Notes into shares of the Company’s common stock, and the fair value of the Company’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). 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 were converted to shares of 540,870. Therefore, as of December 31, 2009 and 2008, the aggregate $7,260,000 principal balance of the notes remained outstanding and for the year ended December 31, 2009 and 2008, the Company recorded $1,089,000 and $695,000 of interest expense related to the Notes.

During the year ended December 31, 2009 and 2008, the Company recorded $864,049 and $3,520,876 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 Company also incurred $529,200 in placement agent commissions related to the issuance of the Notes and Warrants. This amount was recorded by the Company as debt issue costs and is being amortized over expected term of the Notes. For the year ended December 31, 2009, the Company 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 Company executed in November of 2006 (the “Make Good Agreement”). See note 17 for details.

In the accounting for the Convertible Promissory Note, the Company’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.

Page 25 of 39

20. Warrants

The following table summarizes the continuity of the Company’s warrants for the year ended December 31, 2009 and 2008.

	December 31, 2009				December 31, 2008
			Weighted				Weighted
			Average				Average
			Exercise				Exercise
	Warrants		Price		Warrants		Price

Outstanding at beginning of period		43,353,303	$	0.57		40,797,983	$	0.56
Granted		-		-		2,555,320		0.77
Exercised		-		-		-		-
Expired		-		-		-		-
Cancelled		-		-		-		-
Outstanding at end of period		43,353,303	$	0.57		43,353,303	$	0.57
Exercisable at end of period		43,353,303	$	0.57		43,353,303	$	0.57

As of December 31, 2010, the range of warrants prices for shares under warrants, the weighted average remaining contractual life and aggregate intrinsic value are as follows:

					Weighted
	Exercise		Number of		Contractual Life		Aggregate
Expiration Date	Price		Warrants		(in years)		Intrinsic Value
	$		#		#		$
11/15/06	$	0.555		25,961,760		1.87		-
11/15/06	$	0.555		1,747,169		1.87		-
03/28/07	$	0.555		13,089,054		2.24		-
01/02/08	$	0.770		1,597,075		3.01		-
01/02/08	$	0.770		958,245		3.01		-
				43,353,303		2.05		-

21. Commitments and Contingencies

Legal Contingencies

(a)

On December 30, 2009, the Company was served with a Summons and Complaint filed by Pope Investments, LLC (“Pope”) in the Court of Chancery of the state of Delaware (the “Court”) against the Company and its officers and directors. Pope filed the Summons and Complaint as a judgment creditor and as a shareholder of the Company. Pope alleges that the assets and profits of the Company’s subsidiary company have been wrongfully diverted by its officers and directors and requests the appointment of a receiver to liquidate and wind down the business affairs of the Company. In connection with the filing of the Summons and Complaint, Pope has also filed a motion for a Preliminary Injunction Motion seeking to enjoin the Company and its officers and directors from taking any further actions to divert the corporate assets and profits of the subsidiary company and for expedited discovery proceedings. Pope further requests the imposition of a constructive trust, an accounting, and damages for an alleged breach of fiduciary duty by the Company’s officers and directors, and attorney fee. By the time of this report, a judgment has not been made.

(b)

As mentioned in Note 11, 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 RMB12.9 million (or $1.89 million), which was recorded as other payable at December 31, 2009.

Page 26 of 39

(c)

(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 Company was 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 the Company has been delinquent on the payment of an aggregate sum of $5,520,000 and accrued interest and costs arising from the Note that the Company issued to 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, the Company filed an Affidavit in Opposition to Motion for Summary judgment in lieu of Complain 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.

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

For (c) (d) and (e) discussed above, we recorded the convertible note payable principle amount and related accrued interest at December 31, 2009.

Page 27 of 39

Operating Leases

The Company leases office space in Ebei and plant in Shenzhen. In February 2009, Sibiono also entered into a two-year sublease agreement with monthly rental income of $19,106. Approximate future minimum lease payments are as follows:

Year	Amount

2010	$	144,486
2011		35,112
2012		35,112
2013		35,112
2014		8,778
Total		258,600
Less sublease income		267,479
Net		(8,879	)

Concentration of Credit Risk

A significant portion of the Company's cash at December 31, 2009 and 2008 is maintained at various financial institutions in the PRC which do not provide insurance for amounts on deposit.

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

The Company 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 Company’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 years ended December 31, 2009 and 2008:

		YEAR ENDED DECEMBER 31
		2009				2008
	Revenue	$	21,990,915		%	$	25,041,986		%

	Individual customer's revenue
1	Zhuhai Gongbei Pharmaceutical Co, Ltd.		5,286,243	24	%		4,861,888	19	%
2	Shenyang Pharmaceutical Co. Ltd.		2,878,894	13	%		2,620,888	10	%
3	Shenzhen Huihua Pharmaceutical Co. Ltd.		2,544,147	12	%		2,788,933	11	%
4	Hubei Hengchuan Health Products Co.,Ltd.		1,828,339	8	%		2,746,580	11	%
5	Jiangxi Huiren Pharmaceutical Co. Ltd.		1,612,011	7	%		2,073,862	8	%

	Account receivable, gross	$	17,607,329		%	$	13,117,016		%

	Individual customer's account receivable gross balance
1	Zhuhai Gongbei Pharmaceutical Co, Ltd.		2,561,356	15	%		1,742,158	13	%
2	Shenzhen Huihua Pharmaceutical Co. Ltd.		1,851,956	11	%		1,238,820	9	%
3	Hubei Hengchuan Health Products Co.,Ltd.		1,592,476	9	%		1,269,568	10	%
4	Shenyang Pharmaceutical Co. Ltd.		1,519,355	9	%		1,087,027	8	%
5	Jiangxi Huiren Pharmaceutical Co. Ltd.		1,461,258	8	%		990,665	8	%

22.	Segment Information

The Company states the segment information according to the requirement stated in ASC 280-10-50. The Company 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:

Page 28 of 39

Benda Ebei produces conventional medicines which including branded and generic medicines;

Jiangling Benda produces active pharmaceutical ingredients, APIs;

Yidu Benda produces bulk chemicals;

Beijing Shusai produces pharyngitis killer therapy; and

SiBiono produces gene therapy medicines, Gendicine.

Since each subsidiary produces the corresponding products by using the production facilities of each subsidiary, therefore according to the requirement stated ASC 280-10-50, the Company reports the segment information according to the un-identical products that produced in each subsidiary.

Selected financial information for each of these segments for the years ended December 31, 2009 and 2008 were as follows:

Page 29 of 39

	YEAR ENDED DECEMBER 31,
Branded/Generic medicine segment	2009			2008
Revenue from external customers	$	17,783,062		$	22,021,248
Cost of sales		(11,223,358	)		(14,761,544	)
Gross profit		6,559,704			7,259,704
Gross margin		37	%		33	%
Research and development		(225,559	)		(19,540	)
Selling expense		(850,172	)		(1,329,197	)
General and administrative expense		(922,279	)		(2,206,046	)
Segment contribution	$	4,561,694		$	3,704,921
Contribution margin		26	%		17	%

Total assets, segment	$	26,431,912		$	21,582,724

Active pharmaceutical ingredients segment	2009			2008
Revenue from external customers	$	1,614,704		$	689,481
Cost of sales		(2,084,590	)		(778,212	)
Gross profit		(469,886	)		(88,731	)
Gross margin		-29	%		-13	%
Research and development		(1,169	)		(5,776	)
Selling expense		(31,211	)		(5,581	)
General and administrative expense		(522,787	)		(1,721,987	)
Segment contribution	$	(1,025,053	)	$	(1,822,075	)
Contribution margin		-63	%		-264	%

Total assets, segment	$	12,623,094		$	12,624,190

Bulk chemicals segment	2009			2008
Revenue from external customers	$	-		$	-
Cost of sales		-			-
Gross profit		-			-
Gross margin		0	%		0	%
Research and development		-			-
Selling expense		-			-
General and administrative expense		(620,229	)		(605,118	)
Segment contribution	$	(620,229	)	$	(605,118	)
Contribution margin		0	%		0	%

Total assets, segment	$	8,508,245		$	9,099,810

Pharynigitis killer therapy segment	2009			2008
Revenue from external customers	$	-		$	4,565
Cost of sales		-			(251	)
Gross profit		-			4,314
Gross margin		0	%		95	%
Research and development		-			-
Selling expense		(733	)		(4,370	)
General and administrative expense		(25,242	)		(38,049	)
Segment contribution	$	(25,975	)	$	(38,105	)
Contribution margin		0	%		-835	%

Total assets, segment	$	87,628		$	110,359

Gendicine (Ad-p53) segment	2009			2008
Revenue from external customers	$	2,593,149		$	2,326,692
Cost of sales		(412,728	)		(200,100	)
Gross profit		2,180,421			2,126,592
Gross margin		84	%		91	%
Research and development		(122,633	)		(1,436,635	)
Selling expense		(1,496,736	)		(1,369,820	)
General and administrative expense		(2,750,313	)		(5,754,878	)
Segment contribution	$	(2,189,261	)	$	(6,434,741	)
Contribution margin		-84	%		-277	%

Total assets, segment	$	14,689,633		$	15,521,611

	YEAR ENDED DECEMBER 31,
	2009			2008
Total revenue from external customers	$	21,990,915		$	25,041,986
Cost of sales		(13,720,676	)		(15,740,107	)
Gross profit		8,270,239			9,301,879
Gross margin		38	%		37	%
Research and development		(349,361	)		(1,461,951	)
Selling expense		(2,378,852	)		(2,708,968	)
General and administrative expense		(4,840,850	)		(10,326,078	)
Segment contribution	$	701,176		$	(5,195,118	)
Contribution margin		3	%		-21	%

Total assets, segment	$	62,340,512		$	58,938,694

Page 30 of 39

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

	YEAR ENDED DECEMBER 31,
	2009			2008
Total segment contribution	$	701,176		$	(5,195,118	)
Unallocated amounts:
Rental income		241,005			-
Government subsidies / grants (Note 22)		454,491			-
Other income/(expenses)		(421,426	)		(1,311,140	)
Other corporate expenses		(2,843,139	)		(7,191,318	)

Total net loss before noncontrolling interest and income taxes	$	(1,867,893	)	$	(13,697,576	)

The other corporate expenses per the above table for the year ended December 31, 2009 and 2008 composed of the following events:

	YEAR ENDED DECEMBER 31,
	2009		2008

Wages and salaries	$	355,243	$	417,276
Audit and accounting		309,493		330,919
Consulting fee		16,672		747,937
Investor relation, transfer agent and filing fees		19,156		33,563
Director renumeration		90,000		185,468
Legal fee		201,086		137,805
Taxes and levies		70,000		-
Interest expense		1,762,305		4,527,956
Miscellaneous		19,184		810,394
Total	$	2,843,139	$	7,191,318

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 for the years ended December 31, 2009 and 2008:

	December 31,
	2009		2008
Total assets, segment	$	62,340,512	$	58,938,694

Total assets of corporate:
Cash and cash equivalent		12,046		31,070
Prepaid expesnes and deposit		230		2,953
Due from related parties		876,802		882,503
Construction-in-progress capitalized interest		364,164		-
Debit issuance costs		-		55,485

Total assets	$	63,593,754	$	59,910,705

Page 31 of 39

The following table shows how the noncontrolling interest for year ended December 31, 2009 and 2008 was derived:

	Year Ended December 31, 2009
	Benda			Jiangling			Yidu			Beijing			Shenzhen
	Ebei			Benda			Benda			Shusai			SiBiono			Total
Segment operating profit / (loss)	$	4,561,694			(1,025,053	)		(620,229	)		(25,975	)		(2,189,261	)	$	701,176
Interest income/ (expenses)		(223,585	)		(231	)		5			-			(182,782	)		(406,593	)
Other income / (expenses)		(15,331	)		56,888			3,970			-			180,647			226,174
Government subsidy		-			-			-			-			454,491			454,491
Income taxes		(872,643	)		-			-			-			54,354			(818,289	)
Income / (loss) before noncontrolling interest	$	3,450,135			(968,396	)		(616,254	)		(25,975	)		(1,682,551	)	$	156,959

Noncontrolling interest percentage		5.00	%		5.00	%		5.00	%		25.00	%		39.87	%
Noncontrolling interest	$	7,848			(48,420	)		(30,813	)		(6,494	)		(670,833	)	$	(748,712	)

	Year Ended December 31, 2008
	Benda			Jiangling			Yidu			Beijing			Shenzhen
	Ebei			Benda			Benda			Shusai			SiBiono			Total
Segment operating profit / (loss)	$	3,704,921			(1,822,075	)		(605,118	)		(38,105	)		(6,434,741	)	$	(5,195,118	)
Interest income/ (expenses)		(382,124	)		1,466			52			-			(317,975	)		(698,581	)
Other income / (expenses)		(6,808	)		(4,233	)		3,943			6,828			64,890			64,620
Income taxes		(1,109,249	)		-			-			-			332,954			(776,295	)
Income / (loss) before noncontrolling interest	$	2,206,740			(1,824,842	)		(601,123	)		(31,277	)		(6,354,872	)	$	(6,605,374	)

Noncontrolling interest percentage		5.00	%		5.00	%		5.00	%		25.00	%		39.87	%
Noncontrolling interest	$	(330,269	)		(91,242	)		(30,056	)		(7,819	)		(2,533,687	)	$	(2,993,073	)

23.	Subsequent Events

Sibiono and North American Gene Diagnostics and Therapeutics Ltd. (HK) entered into a business agreement to set up Shenzhen Sibiono Zhongjia Gene Technology Ltd. during June 2009. The business license of the new joint entity was obtained in January 2010 and Sibiono made the capital contribution of RMB 800,000 in February 2010. The new entity's legal representative is Mr. Wan, Yiqing. The registered capital is RMB 2 million. Sibiono's share of the registered capital is 40% (RMB 800,000), the other party’s share is 60% (RMB 1.2 million).

In April 2010, Jiangling Benda obtained a one year loan from Hubei Province Rural Credit with principle amount of RMB 2 million ($292,556) and bears interest at 6% per annum. The loan is secured by a third party commercial loan guarantee company for a fee.

24.	Condensed Parent Company Financial Information

Basis of Presentation

The condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of Benda Pharmaceutical, Inc. exceed 25% of the consolidated net assets of Benda Pharmaceutical, Inc. The ability of the Company’s Chinese operating subsidiaries to pay dividends may be restricted due to the foreign exchange control policies and availability of cash balances of the Chinese operating subsidiaries. Because substantially all of the Company’s operations are conducted in China and a substantial majority of its revenues are generated in China, a majority of the Company’s revenue being earned and currency received are denominated in Renminbi (RMB). RMB is subject to the exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC exchange control regulations that restrict its ability to convert RMB into US Dollars.

Page 32 of 39

The condensed parent company financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the only exception being that the parent company accounts for its subsidiaries using the equity method. Refer to the consolidated financial statements and notes presented above for additional information and disclosures with respect to these financial statements.

Benda Pharmaceutical, Inc.

Condensed Parent Company Balance Sheets

				(Restated)
	December 31			December 31
	2009			2008
Assets
Cash and cash equivalents	$	5,625		$	24,379
Prepaid expenses		-			2,720
Debt issuance cost		-			55,485
Investment in subsidiaries, at equity in net assets		33,553,956			33,131,876
Total Assets	$	33,559,581		$	33,214,460

Liabilities & Shareholders' Equity
Accrued liabilities	$	4,046,912		$	2,820,169
Convertible notes		7,260,000			6,395,951
Wages payable		693,350			433,350
Due to related parties, short term (Note 14)		36,184			-
Redeemable common stock, 2,049,560 shares at $3.6 per share (Note 15)		7,376,366			7,376,366
Total liabilities		19,412,812			17,025,836

Shareholders' 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		105,155			105,155
Additional paid in capital		22,108,427			22,108,427
Statutory surplus reserve fund (Note 16)		2,642,775			2,642,775
Accumulated deficit		(17,481,559	)		(15,544,089	)
Accumulative other comprehensive income		6,268,111			6,372,496
Shares issuable for services		503,860			503,860
Total Benda Pharmaceutical, Inc.'s Shareholders' Equity		14,146,769			16,188,624
Total Liabilities & Shareholders' Equity	$	33,559,581		$	33,214,460

Page 33 of 39

Benda Pharmaceutical, Inc.

Condensed Parent Company Statements of Income

	YEAR ENDED DECEMBER 31,
				(Restated)
	2009			2008

General and administrative expenses	$	(455,401	)	$	(2,628,032	)
Interest expense		(2,008,534	)		(4,481,124	)
Total Expenses		(2,463,935	)		(7,109,156	)

Equity in undistributed income of subsidiaries		526,465			(4,371,642	)

Net loss attributable to Benda Pharmaceutical, Inc.	$	(1,937,470	)	$	(11,480,798	)

Benda Pharmaceutical, Inc.

Condensed Parent Company Statements of Cash Flows

	YEAR ENDED DECEMBER 31,
	2009			2008
				(Restated)
Cash Flows From Operating Activities
Net loss	$	(1,937,470	)	$	(11,480,798	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt issuance costs		55,485			264,962
Amortization of convertible notes discount		864,049			3,520,876
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:
Prepaid expenses		2,720			(2,100	)
Equity in undistributed income of subsidiaries		(526,465	)		4,371,642
Accrued expense		1,226,743			1,715,467
Wages payable		260,000			260,000
Net cash used in operating activities		(54,938	)		(776,970	)

Cash Flows From Financing Actives
Borrowing from related party		36,184			-
Net cash provided by financing activities		36,184			-
Effect of exchange rate changes on cash		-			727,894
Net decrease in cash and cash equivalents		(18,754	)		(49,076	)

Cash and cash equivalents, beginning of period		24,379			73,455

Cash and cash equivalents, end of period	$	5,625		$	24,379

Page 34 of 39

25. Restatement of Previously Issued Financial Statements

On May 12, 2010, the Company discovered that its financial statements for the year ended December 31, 2008 and 2007 should not be relied upon due to multiple errors found in the accounting treatment of a business combination transaction completed in March 2007 resulting in adjustment of assets and liabilities to fair market value. The Company also adjusted certain other assets and intangible assets due to errors in the accounting treatment of these assets resulting in additional expenses for the prior period. The Company also adjusted the income tax expense resulting in additional income tax expenses.

To correct the above noted errors, the Company has restated the accompanying Consolidated Balance Sheets as of December 31, 2008 and 2007, its Consolidated Statements of Operations and cash flow for the years ended December 31, 2008 and 2007, and the notes to the consolidated financial statements.

Effects of Restatement

To correct the above noted errors, the Company has restated the accompanying Consolidated Balance Sheets as of December 31, 2008, its Consolidated Statements of Operations and Cash Flows for the year ended December 31, 2008, and the notes to the consolidated financial statements. The impact of the 2007 restatement is not presented here.

The following is a summary items affected by the corrections described above:

Page 35 of 39

Consolidated Balance Sheets

Benda Pharmaceutical, Inc.

Consolidated Balance Sheets

	As of December 31, 2008
	As previously
	reported			Adjustments		As restated
Assets
Current Assets
Cash and cash equivalents	$	569,019		$	15,247	$	584,266		a
Trade receivables, net		9,336,915			-8,001		9,328,914		a
Advance for inventory purchase					230,888		230,888		a
Notes receivable		146,685			8,006		154,691		a
Inventories		2,344,562			-1		2,344,561		a
Due from related parties, short term		11,000			-		11,000
Other receivable		504,349			-504,349				a
Prepaid expenses and other current assets		1,689,758			-1,180,904		508,854		a, b
Total current assets		14,602,288			-1,439,114		13,163,174

Due from related parties, long term		2,961,744			-1		2,961,743		a
Property and equipment, net		29,057,225			-150,190		28,907,035		c
Intangible assets, net		6,003,102			1,366,380		7,369,482		d
Debt issuance costs		55,485			-		55,485
Restricted cash		6,162,849			-1,000,665		5,162,184		e
Refundable purchase price paid		1,200,000			-1,200,000		-		f
Other assets		1,830,634			460,968		2,291,602		a
Total Assets	$	61,873,327			-1,962,622	$	59,910,705

Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable		605,317			-		605,317
Customer deposit		1,056			-		1,056
Other payable		2,622,874			-390,000		2,232,874		g
Accrued liabilities		3,999,153			-58,673		3,940,480		g
Convertible notes		6,395,951			-		6,395,951
Short-term debt		13,569,986			-1,288,257		12,281,729		e
Accrued VAT and other taxes		516,302			438,207		954,509		b
Acquisition price payable		1,426,491			-		1,426,491
Wages payable		630,475			389,999		1,020,474		g
Due to related parties, short term		1,457,803			-		1,457,803
Redeemable common stock, 2,049,560 shares at $3.6 per share					7,376,366		7,376,366		h
Total current liabilities		31,225,408			6,467,642		37,693,050

Government grant payable		2,234,210			-		2,234,210
Due to related parties, long-term		997,593			-		997,593
Deferred income tax liability					834,458		834,458		c
Total liabilities		34,457,211			7,302,100		41,759,311

Redeemable common stock, 2,049,560 shares at $3.6 per share		7,376,366			-7,376,366		-		h
Shareholders' 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		105,155			-		105,155
Additional paid in capital		22,108,427			-		22,108,427
Statutory surplus reserve fund		2,642,775			-		2,642,775
Accumulated deficit		(16,047,561	)		503,472		(15,544,089	)	i
Accumulative other comprehensive income		6,347,547			24,949		6,372,496		i
Shares issuable for services		503,860			-		503,860
Total Benda Pharmaceutical, Inc.'s Shareholders' Equity		15,660,203			528,421		16,188,624
Noncontrolling Interest		4,379,547			-2,416,777		1,962,770		i
Total Shareholders' Equity		20,039,750			-1,888,356		18,151,394
Total Liabilities & Shareholders' Equity		61,873,327			-1,962,622	$	59,910,705

Page 36 of 39

Consolidated Statement of Operations

Benda Pharmaceutical, Inc.

Consolidated Statements of Operations

	As previously						(Restated)
	reported			Adjustments			2008

Revenue	$	25,041,986		$	-		$	25,041,986
Cost of goods sold		(15,740,107	)		-			(15,740,107	)
Gross profit		9,301,879			-			9,301,879
Selling expenses		2,708,968			-			2,708,968
General and administrative expenses
Bad debts		2,730,434			-			2,730,434
Amortization of intangibles		153,303			(153,303	)		-		c, d
Amortization of debt issue costs		264,962			(264,962	)		-		j
Depreciation and amortization expense		861,979			(24,539	)		837,440		c
Director remuneration		185,468			(185,468	)		-		j
Goodwill impairment		7,776,223			(3,635,114	)		4,141,109		c
Inventory wirtten down to net realizable value		392,535			-			392,535
Other general and administrative expenses		3,787,684			401,657			4,189,341		j
Research and development expenses		1,461,951			-			1,461,951
Total operating expenses		20,323,507			(3,861,729	)		16,461,778
Operating income / (loss)		(11,021,628	)		3,861,729			(7,159,899	)
Other income (expenses)
Interest income		-			133,251			133,251		j
Interest expense		(4,961,430	)		(398,358	)		(5,359,788	)	j
Other income (expenses)		(1,311,140	)		-			(1,311,140	)
					-
Loss before income taxes		(17,294,198	)		3,596,622			(13,697,576	)
Income taxes		-			776,295			776,295		b
Net Loss		(17,294,198	)		2,820,327			(14,473,871	)
					-
Less: Net loss attributable to the noncontrolling interests		(1,478,278	)		(1,514,795	)		(2,993,073	)
Net loss attributable to Benda Pharmaceutical, Inc.	$	(15,815,920	)	$	4,335,122		$	(11,480,798	)
Consolidated Statement of Cash Flows

Page 37 of 39

Consolidated Statement of Cash Flows

Benda Pharmaceutical, Inc.

Consolidated Statements of Cash Flows

		For the year ended December 31, 2008
		As previously reported			Adjustments			As restated

Cash Flows From Operating Activities
Net loss	$	(15,815,920	)	$	1,342,049		$	(14,473,871	)	i
Adjustments to reconcile net loss to net cash used in
Bad debt provision		2,730,434			-			2,730,434
Inventory written down to net realizable value		392,535			-			392,535
Goodwill impairment provision		7,776,223			(4,141,109	)		3,635,114		c
Minority interest		(1,478,278	)		1,478,278			-		i
Depreciation, including amounts in cost of sales		2,086,178			-			2,086,178
Amortization of intangible assets		705,259			(25,521	)		679,738		c, d
Amortization of debt issuance costs		264,962			-			264,962
Amortization of convertible notes discount		3,520,876			-			3,520,876
Income tax benefit		-			(198,730	)		(198,730	)	c
Penalty to investors settled by issuance of common stock		497,081			-			497,081
Directors remuneration settled by issuance of common stock		75,900			-			75,900
Changes in operating assets and liabilities:
Trade receivables		(2,213,453	)		619,483			(1,593,970	)	a
Other receivables		195,547			(195,547	)		-		a
Short term loan receivable		(146,685	)		146,685			-		a
Advance for inventory purchase		-			676,222			676,222		a
Inventories		(784,749	)		1			(784,748	)	a
Prepaid expenses and other current assets		359,673			(969,373	)		(609,700	)	a, b
Accounts payable		2,528,101			(2,104,836	)		423,265		g
Customer deposit		-			(159,762	)		(159,762	)	g
Others payable		-			1,949,869			1,949,869		g
Accrued expense		-			23,762			23,762		g
Wages payable		-			355,688			355,688		g
Accrued taxes		(1,503,800	)		1,178,924			(324,876	)	b
Net cash used in operating activities		(810,116	)		(23,917	)		(834,033	)
Cash Flows From Investing Activities
Addition of notes receivable		-			(155,044	)		(155,044	)	a
Collection of notes receivable		-			7,208			7,208		a
Restricted cash		-			(2,546,930	)		(2,546,930	)	e
Purchases of property and equipment and construction-in-progress		(1,708,213	)		-			(1,708,213	)
Disposal of intangible assets		172,548			-			172,548
Advance to related parties		-			(342,724	)		(342,724	)	a
Net cash used in investing activities		(1,535,665	)		(3,037,490	)		(4,573,155	)
Cash Flows From Financing Actives
Borrowing (advance) from related party		(1,080,947	)		342,725			(738,222	)	a
Proceeds and repayments of borrowings under government debts payable, net					-			-
Proceeds and repayments of borrowings under commercial bank notes, net					-
Proceeds and repyaments of borrowings under government debts payable		322,884			(322,884	)		-		a
Repayments of borrowings under bank loans, net		1,852,796			2,443,171			4,295,967		g
Net cash provided by (used in) financing activities		1,094,733			2,463,012			3,557,745
Effect of exchange rate changes on cash		553,827			145,762			699,589		i
Net decrease in cash and cash equivalents		(697,221	)		(452,633	)		(1,149,854	)
Cash and cash equivalents, beginning of period		1,266,240			467,880			1,734,120		a
Cash and cash equivalents, end of period	$	569,019		$	15,247		$	584,266		a

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a – these are minor reclassifications between current asset items

b – We reversed Benda Ebei’s income tax expense during the year ended December 31, 2008 because of a book loss. The reversal of the income tax expense resulted in a decrease in income tax expense, increase in prepaid taxes and decrease of tax payable. However, Benda Ebei did have taxable income for the year ended December 31, 2008, thus the reversal of the income tax expense should be cancelled.

c - When SiBiono was acquired at March 31, 2007, the assets and liabilities of SiBiono were not fair valued at March 31, 2007. The differences in these items are due to the difference between the fair value per valuation and book value at March 31, 2007.

d – Certain R&D expenditures were capitalized as intangible assets in prior years. We expensed these expenditures in the period in which these expenditures occur.

e – Restricted cash reclassification.

f - Certain R&D expenditures were capitalized as other assets in prior years. We expensed these expenditures in the period in which these expenditures occur.

g - these are minor reclassifications between current liability items

h – The redeemable common stock was recorded as “temporary equity” at December 31, 2008. We determined that it should have been classified as liability sine the redemption request was made by the stock holders in January 2008 and payment was deferred.

i – The combination of the above.

j – This is minor reclassifications between G&A expense and interest expense.

Page 39 of 39

Attached files

Benda Pharmaceutical, Inc. Reports

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