**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**




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, 2006  o
            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.)




**Changjiang
      Tower, 23rd Floor**


**No.
      1 Minquan Road**


**Wuhan,
      Hubei Province, PRC**


(Address
      of principal executive offices)





**+86
      (27) 8537-5532**


(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)




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 o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x




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




Issuer's
      revenues for its most recent fiscal year: $15,932,075




As
      of
      April 23, 2007, 96,964,606 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
      April 19, 2007 by the NASD Over-the-Counter Bulletin Board) was approximately
      $104,093,813.50.




DOCUMENTS
      INCORPORATED BY REFERENCE: None




Transitional
      Small Business Disclosure Format (Check One):


Yes
o No
x








**TABLE
      OF CONTENTS**





Item
                Number and Caption
            PagePART
                IItem
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Properties
            42Item
                3.
            Legal
                Proceedings
            44Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            44PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            44Item
                6.
            Management's
                Discussion and Analysis or Plan of Operations
            46Item
                7.
            Financial
                Statements
            52Item
                8.
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            53Item
                8A.
            Controls
                and Procedures
            53PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            54Item
                10.
            Executive
                Compensation
            58Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management
            58Item
                12.
            Certain
                Relationships and Related Transactions
            60Item
                13.
            Exhibits
                and Reports on Form 8-K
            64Item
                14.
            Principal
                Accountant Fees and Services
            66







**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).





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., 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.,
      a
      company formed under the laws of the PRC; (ii) 95% of the issued and outstanding
      capital stock of Yidu Benda Chemical Co., Ltd., a company incorporated under
      the
      laws of the PRC; and (iii) 75% of the issued and outstanding capital stock
      of
      Beijing Shusai Pharyngitis Research Co., Ltd., 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.




1




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 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 acquiring 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.





**Share
      Exchange Transaction**




We
      did
      not become engaged in the pharmaceutical business until November of 2006. Before
      closing our recent 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 Applied Spectrum 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.




In
      connection with the share exchange transaction, we engaged Keating Investments,
      LLC to act as a financial advisor in connection with the Exchange transaction.
      At the closing the Exchange Agreement, Keating Investments, LLC was paid an
      advisory fee of $395,000.




2




**Recent
      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
      Applied Spectrum's 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 Applied Spectrum's 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, Applied Spectrum completed this private placement offering. Applied
      Spectrum received gross proceeds of approximately $12 million in connection
      with
      the Financing from the Investors. Pursuant to Subscription Agreements entered
      into with these Investors, Applied Spectrum 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 Applied Spectrum's 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. Applied Spectrum 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 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
      shall
      bear an interest rate of four percent per annum until the Buyer elects to
      exercise the right to convert, and shall mature on March 28, 2009.





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 are required to deliver to the Investors 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. In addition, on or prior to seventy
      five (75) days from the Closing Date, we are also required to deliver to the
      Investors audited financial statements for SiBiono for the required time periods
      for the Form 8-K filing required by the Securities and Exchange
      Commission.




3




The
      securities underlying the Notes and Warrants issued to the Investors pursuant
      to
      the terms of the Investment Agreement shall be subject to the terms of the
      Make
      Good Agreement entered into in connection with the November Financing (the
“Make
      Good Agreement”). We further represented to the Investors that the targeted net
      income of the Company for fiscal year end 2007 (“FY07 Net Income”) will be
      greater than or equal to $10.0 million (adjusted for any non-cash charges
      associated with this Agreement and the SPA) (the "Performance Threshold").
      In
      the event the Performance Threshold is not attained, then we shall promptly
      issue, or cause to be issued to the Investors or their designee, a pro rata
      portion of One Million (1,000,000) shares of Common Stock for every one (1)
      cent
      by which the Company’s earnings per share, determined on a fully diluted basis
      (“Earnings Per Share”) is less than $0.065. In addition, we are also required to
      issue or cause to be issued to each Investor or its designee Two Thousand
      (2,000) shares of Common Stock per Unit held for every percentage point in
      excess of 10% in which (A) the Old Audited Revenues exceeds the New Audited
      Revenues and (B) the Old Audited Cash Flow from Operations exceeds the New
      Cash
      Flow From Operations. The maximum amount of shares of Common Stock that can
      be
      issued to Investor shall be capped based on a maximum excess of fifteen (15)
      percentage points.




**Business**




Our
      operations are headquartered in Wuhan, Hubei Province, China. We are a
      profitable, mid-sized Chinese 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
      currently have three core operating companies:


**· ****
              ***Yidu
                  Benda***develops,
                  manufactures and sells bulk chemicals (or pharmaceutical intermediates),
                  which are the raw materials used to make “Active Pharmaceutical
                  Ingredients” (“APIs”). About 11.8 per cent of the bulk chemicals that we
                  produce in 2004 were used for our own medicines. The remainder
                  was sold in
                  the market to unrelated parties. We did not sell to related Benda
                  companies in 2005.




·
            ***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). About 3.7 per cent of the APIs that we produce in 2004 were
                used
                to produce some of our finished medicines. The remainder was sold
                in the
                market to unrelated parties. Jiangling Benda did not sell to related
                Benda
                companies in 2005.




**· ****
            ***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”)1.******







1 The
      Chinese government agency, SFDA, is analogous to the Food and Drug
      Administration (“FDA”) in the United States. Unlike the FDA, however, the SFDA
      provides intellectual property and competitive protection to certain classes
      of
      approved drugs.




4




Each
      core
      Benda operating company has its own manufacturing facility located near Wuhan,
      in Hubei Province. Good Manufacturing Practices 2 (“GMP”) certification was issued to Benda Ebei on November 11, 2003 for the
      production of injection vials. 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. Our Yidu Benda facility
      produces bulk chemicals. Our Jiangling Benda facility was closed for renovation
      in July 2004 in order to secure GMP certification, but expects to reopen and
      resume production in August 2007.




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. This facility is expected to reopen and resume production
      in August of 2007.




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:







2 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.




5










*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.




6




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).


7


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.




8




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:




9


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









**PRINCIPAL
      PRODUCTS**




In
      2006,
      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.




10




Main
      Products




**Manufacturer**
            
            **Product**
            
            **Type**
            
            **Function**Benda
                Ebei
            
            Jixuening
                injection vial
            
            Branded
            
            Haemostatic
                (stops bleeding)Benda
                Ebei
            
            Xujing
                injection vial
            
            Branded
            
            HaemostaticBenda
                Ebei
            
            Nokeqing
                injection vial
            
            Branded
            
            Used
                to treat hepatitisBenda
                Ebei
            
            Yidingshu
                injection vial
            
            Branded
            
            Vitamin
                to treat lack of RiboflavinBenda
                Ebei
            
            Shusai-A
                injection vial
            
            Branded
            
            Anti-inflammatory
                analgesicBenda
                Ebei
            
            Suzheng-B
                injection vial
            
            Branded
            
            Vitamin;
                complementary medicine used to treat hepatitisBenda
                Ebei
            
            Ribavirin
                injection vial
            
            Generic
            
            Anti-virus,
                to treat acute upper respiratory tract infectionBenda
                Ebei
            
            Gentamycin
                Sulfate Injection vial
            
            Generic
            
            Broad
                spectrum antibioticBenda
                Ebei
            
            Vitamin
                B6 injection vial
            
            Generic
            
            Vitamin;
                complementary medicine used to treat hepatitisBenda
                Ebei
            
            Inosine
                injection vial
            
            Generic
            
            Nutrition,
                complementary medicine used to treat hepatitisBenda
                Ebei
            
            Vitamin
                C injection vial
            
            Generic
            
            To
                treat deficiency of vitamin CJiangling
                Benda
            
            Ribavirin
                API (1)
            
            API
            
            Ribavirin
                drug manufacture.Jiangling
                Benda
            
            Asarin
                API (1)
            
            API
            
            Asarin
                manufacture to treat acute upper respiratory system
                infectionJiangling
                Benda
            
            Levofloxacin
                Mesylate API (1)
            
            API
            
            Broad
                spectrum antibiotic drug manufactureYidu
                Benda
            
            Triazol
                carboxylic acid methyl ester (“TCA”)
            
            Bulk
                chemical
            
            Ribavirin
                manufacture, anti-virusYidu
                Benda
            
            L-methionine
            
            Nutrition
            
            Nutrition,
                an essential amino acid for humansYidu
                Benda
            
            Tricabroxylic
                acid amide (“TAA”)
            
            Bulk
                chemical
            
            Ribavirin
                manufacture, anti-virus drug manufactureYidu
                Benda
            
            1,2,3,5-Tetraacetyl-β-D-Ribose
            
            Bulk
                chemical
            
            Ribavirin
                manufacture, anti-virus drug
                manufacture




(1)
            Ribavirin
                API, Asarin API and Levofloxacin mesylate API are not in production
                during
                the Jiangling Benda facilities GMP renovation period. Production
                is
                expected to begin in August 2007.




11




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.




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 three APIs: Ribavirin, Asarin and Levofloxacin Mesylate, which
      have received SFDA production approval:




·
            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.




·
            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.




Yidu
      Benda Products




Yidu
      produces three types of bulk chemicals:




·
            Triazol
                carboxylic acid methyl ester (“TCA”). This is our main bulk chemical
                product. We have an installed capacity of 500 metric tons of TCA
                per year,
                which we believe is the highest in PRC. We expect to increase capacity
                from 500 to at least 700 metric tons per year by the end of 2006.


12


·
            1,2,3,5-Tetraacetyl-β-D-Ribose
                is used mainly for Ribavirin
                production.




·
            Tricabroxylic
                acid amide (“TAA”), used mainly for Ribavirin production. Pfizer has been
                an indirect customer of ours for this product since 2004.




In
      addition to bulk chemicals, Yidu Benda also produces L-methionine, an amino
      acid
      nutrition ingredient. L-methionine is a precursor in protein synthesis and
      also
      participates in a wide range of biochemical reactions.




While
      products produced by Yidu Benda do not represent a high-growth area for us,
      we
      derive significant cash flow from them. High barriers to entry exist in the
      intermediates sector, providing us with a relatively secure and stable market
      position. These barriers derive from: high capital equipment costs; economies
      of
      scale; high installed capacity of incumbents; reciprocal supply agreements;
      consumer-related advantages in established brands and reputation; proprietary
      production processes; long-term relationships with customers; and extensive
      distribution channels.




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. We expect our Yidu Benda plant
      to
      resume production by July 1, 2007.




**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
            
            
            1.80Benda
                Ebei
            
            
            n/a




13




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.




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 most of them
      to
      reestablish supply relationships when the plant reopens in August 2007. We
      also
      expect to bring on other drug companies as new customers.




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.


14


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 for which we recently received SFDA approval as possible.




15




Development
      Status of Key Products in Our Pipeline as of December 31, 2006




**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 necessaryQiweiben
                Capsule
            
            Branded
                TCM
            
            Diabetes
                treatment
            
            SFDA
                Certificate of New Medicine approved; awaiting production
                permitYan
                Long Anti-cancer Oral Liquid
            
            Branded
                TCM
            
            Treatment
                of cancers of the digestive tract
            
            Awaiting
                for SFDA approval500mg:5ml
                Tranexamic Acid Injection vial
            
            Generic
            
            Haemostatic
            
            SFDA
                production approval H20044601 received200mg:2ml
                Ribavirin Injection vial
            
            Generic
            
            Antibiotic
            
            SFDA
                production approval H42021048 received1000mg:2.5mlVitamin
                C Injection vial
            
            Generic
            
            Vitamin
            
            Achieved
                State acceptance and hearing Y0405945; SFDA approval expected by
                the end
                of 20060.1g:2ml
                Lomefloxacin Aspartate Injection vial
            
            Generic
            
            Antibiotic
            
            SFDA
                production approval H20056701 received0.2g:5ml
                Lomefloxacin Aspartate Injection vial
            
            Generic
            
            Antibiotic
            
            SFDA
                production approval H20056702 receivedLappaconitine
                Hydrobromide Injection vial
            
            Branded
                Medicine
            
            Analgesic
            
            SFDA
                production approval H20055966 receivedAsarin
                Injection vial
            
            Generic
            
            Treatment
                of upper respiratory infection
            
            Filing
                completed at provincial bureau level; filed with SFDA in May
                2006Asarin
                pill
            
            Generic
            
            Treatment
                of upper respiratory infection
            
            Filing
                completed at provincial bureau level; filed with SFDA in August
                2006Asarin
                granular medicine
            
            Generic
            
            Treatment
                of upper respiratory infection
            
            Filing
                completed at provincial bureau level; filing with SFDA in September
                2006Asarin
                oral liquid
            
            Generic
            
            Treatment
                of upper respiratory infection
            
            Filing
                completed at provincial bureau level; filing with SFDA in September
                2006Lysine
                Hydrochloride Injection vial
            
            Generic
            
            Amino
                acid
            
            Filing
                completed at provincial bureau level; filed with SFDA in July
                2006Arginine
                Monohydrochloride Injection vial
            
            Generic
            
            Amino
                acid
            
            Filing
                completed at provincial bureau level; filed with SFDA in July
                2006100mg:5ml
                Levofloxacin Hydrochloride Injection vial
            
            Generic
            
            Antibiotic
            
            Filing
                completed at provincial bureau level; filed with SFDA in July
                2006500mg:5ml
                Levofloxacin Hydrochloride Injection vial
            
            Generic
            
            Antibiotic
            
            Filing
                completed at provincial bureau level; filed with SFDA in July
                2006α-Asarin
                raw medicines
            
            API
            
            Upper
                respiratory infection
            
            SFDA
                production approval H20059540 receivedLevofloxacin
                mesylate API
            
            API
            
            Antivirus
            
            Filing
                completed at provincial bureau level; filed with SFDA in June
                2006GCLE
            
            Bulk
                chemical
            
            Production
                of Antibiotics
            
            As
                it is a chemical product, it does not need SFDA
                approval.




16




**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 Therapy**
            
            **Qiweiben
                Capsule**
            
            **Yanlong
                Anti-cancer oral liquid**Targeted
                IP/ Formula Protection Period (1)
            
            Not
                Applicable (2)
            
            7+7
                years
            
            7+7
                yearsOur
                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.




17




(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)
      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.




(4)
      Benda
      owns 75% of Beijing Shusai Pharyngitis Research Co., Ltd., a company that owns
      all product and market exploitation rights to Pharyngitis Killer Therapy.




(5)
      GMP
      certification is expected once the facility is completed.




(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.
      The
      management expects that such situation would still last for an indefinite
      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. 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. 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.




18




*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.




19




Status
      of
      Planned Pharyngitis Clinics as of December 31, 2006




**Hospital
                / Individual Name**
            
            **Status**
            
            **Opening
                Time**
              **/
                Est. Opening Time**Beijing
                Heng An TCM Hospital
            
            Operational
            
            May-05Beijing
                An Yuan TCM Hospital
            
            Operational
            
            Jun-06China
                Aerospace Center Hospital, Second Out-patient Department
            
            Operational
            
            Dec-06Beijing
                Tien Xie Hospital
            
            Operational
            
            Dec-06Bao
                Ding Xing Hua Hospital
            
            Operational
            
            Jan-07Bao
                Ding Disease Control Center
            
            Operational
            
            Mar-07Beijing
                Ming Zhu Hospital
            
            Operational
            
            Mar-07China
                Aerospace Center Hospital, First Out-patient Department
            
            Contract
                signed in Feb-07
            
            May-07Beijing
                Xuwan Hospital
            
            Contract
                signed in Feb 07
            
            May-07Henan
                Xin Hua Hospital
            
            Contract
                signed in Jan-07
            
            May-07General
                Hospital of Second Artillery PLA, Beijing
            
            Pending
            
            Jun-07Dongzhimen
                Hospital Affiliate to Beijing TCM University
            
            Pending
            
            Jun-07Wu
                Biwen, JiLin
            
            Pending
            
            Aug-07Lai
                Jufen, Guilin, Guangxi
            
            Pending
            
            Aug-07Wu
                Yunling, WeiFang, Shandong
            
            Pending
            
            Aug-07Xu
                Haishen, XinXiang, Henan
            
            Pending
            
            Aug-07Shenzhen
                Yang Gong Hospital,
            
            Pending
            
            Aug-07Shi
                Ping, Tsingtao, Shandong
            
            Pending
            
            Aug-07Zhang
                Yajie, Beijing
            
            Pending
            
            Aug-07Wang
                Yu'e, Beijing
            
            Pending
            
            Aug-07Bian
                Yong, LuoYang, Henan
            
            Pending
            
            Aug-07Xie
                Dong, Yun Nan
            
            Pending
            
            Aug-07




*Source:
      Company*




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.




20




(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. We expect that these facilities
      will be ready in August 2007.. 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.




Yan
      Long Anti-cancer Oral Liquid




*Product
      Description* :
      The Yan
      Long Anti-Cancer Oral Liquid (“Yan Long”) is 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.




*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.




21




*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* :
      We
      expect to make the production facilities for Yan Long ready by 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. The achievement of our production
      targets would likely make us the leading domestic producer.




This
      new
      product will be produced in our Yidu plant. 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. We expect our Yidu Benda plant to resume production by July
      1,
      2007.







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 9thlargest 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 5thlargest 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%.




22




·****
            ***Benda
                is uniquely positioned to capture market share*****.**Our
                growth potential will be largely driven by our launch of three innovative
                and proprietary Chinese medicines, recently added to our product
                line:
                Pharyngitis Killer Therapy (anti-respiratory infection treatment),
                Qiweiben Capsule (diabetes) and Yanlong Anti-Cancer Oral Liquid.
                Benda
                also currently produces and sell 81 types of medicines certified
                by the
                SFDA, three types of APIs and five types of bulk chemicals. Several
                additional products are in development, at various stages. Our wide
                range
                of certified medicines, APIs and bulk chemicals have historically,
                and
                will continue to provide us with steady growth in revenues and profits.




·****
            ***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. SFDA data reveals that
                we are
                the only Chinese company that currently synthesizes Asarin (an API
                in
                common treatments of the upper respiratory system) chemically; as
                a
                result, our Asarin production costs are 16 per cent below our
                competitors.




·****
            ***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. By the end of 2007, July,
                our
                Jiangling Benda manufacturing facilities (for the production APIs)
                will be
                GMP compliant. Our Yidu Benda facilities, which produce bulk chemicals,
                are not subject to GMP certification
                requirement.




·****
            ***Potential
                for API export sales*****.**We
                have demonstrated some initial success to date in exporting indirectly
                our
                products and increasing our international exposure. This year, both
                Roche
                Pharmaceuticals and Pfizer Inc. placed orders with one of our customers,
                Star Lake Bioscience Co., Ltd. (“Star Lake”), for our APIs. Star Lake,
                which is located in Zaoqing City, Guangdong province, is the only
                drug
                manufacturer in China to receive U.S. FDA approval to export its
                medicine
                to the U.S. We have an established business relationship with Star
                Lake
                since 2003. We are presently undergoing the FDA certification process
                for
                one of our APIs, which is used to manufacture drugs to alleviate
                SARS and
                SARS-like diseases. We plan to begin exporting this product to the
                U.S. in
                2007.




23




**RAW
      MATERIALS AND PRINCIPAL SUPPLIERS**




Benda
      Ebei Suppliers




Benda
      Ebei plant manufactures injection vials from APIs. Benda Ebei’s largest supplier
      of APIs is Hunan Dongting Pharmaceutical Co., Ltd. In 2005, Benda Ebei purchased
      approximately $600,000 worth of Tranexamic Acid from this supplier, equivalent
      to 11.9 per cent of Benda Ebei’s raw materials purchases by value. In 2006,
      Benda Ebei’s largest supplier of APIs is Nan Yang Pung Gong Co. Ltd and Benda
      Ebei purchased approximately $994,000 worth of Tranexamic Acid from this
      supplier, equivalent to 16 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.




Yidu
      Benda Suppliers




Our
      Yidu
      Benda plant manufactures bulk chemicals from other bulk chemicals. Yidu Benda’s
      largest supplier of bulk chemicals is Zaoqing Star Lake Bioscience Co., Ltd.,
      which is based in Guangdong province. In 2005, Yidu Benda purchased $1,600,000
      worth of bulk chemicals from this supplier, equivalent to 27.4 per cent of
      Yidu’s raw materials purchases by value. In 2006, Yidu Benda’s largest supplier
      of bulk chemicals is Shenzhen Xiang Hua Chemistry Co. Ltd., and it purchased
      approximately $,1270,000 worth of bulk chemicals from this supplier, equivalent
      to 36.92 per cent of Yidu’s raw materials purchases by value.




Packaging
      Material Suppliers




Our
      packaging materials are purchased from two main suppliers. In 2005, we purchased
      $300,000 worth of plastic packaging material from each of Anlu ZhongYa Plastics
      Package Factory and Anlu Zhong’Ao Printing Factory, equivalent in each case to
      33.1 per cent of our packaging supplies by value. In 2006, we purchased
      approximately $1,229,000 worth of plastic packaging material from each of Anlu
      ZhongYa Plastics Package Factory, equivalent to 19 per cent of our packaging
      supplies by value.




**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
      ate
      still in the approval process


24


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.




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 ate 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
      $30,821 and $16,604 on direct research and development (“R&D”) efforts in
      2006 and 2005, respectively. Rather than spend considerable sums internally
      on
      R&D in a market where we can not 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




25




· ****
            Shanghai
                Institute of Pharmacy of Chinese Academy of Sciences.· ****
            Wuhan
                University of Chemical Technology.




**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.




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. We expect our Yidu Benda plant
      to
      resume production by July 1, 2007.




**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 which is an outside
      third party. 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.





**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.




26





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.





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 marketMarch
                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




27




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” productJuly
                2003
            
            Corporate
                restructuring was finished, the registration capital increased to
                be 48.19
                million RMBNovember
                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.





Employees




As
      of
      December 31,,
      2006 ,
      we had
      approximately 516 full-time employees, including 38 sales people, 17 technology
      and R&D staff, and 395 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, 2006, approximately 18 people in our Central China Sales Office
      located in Wuhan, and six people 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.


28


**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.




· ****
            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.




29




· ****
            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 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.
      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.




· ****
            WE
                CURRENTLY DO NOT MAINTAIN ANY INSURANCE FOR OUR PROPERTIES AND ANY
                DAMAGE
                TO, OR DESTRUCTION OF, OUR PROPERTIES CAN RESULT IN CESSATION OF
                OUR
                OPERATIONS RESULTING IN A LOSS OF
                REVENUES




We
      currently do not maintain any insurance for our properties. Since our operations
      are dependent upon the functionality of our operating facilities, if any or
      all
      of our operating facilities were to sustain substantial damage that is not
      covered by insurance, we may not be able to repair such damage and this may
      cause us to cease operations at the damaged operating facility. If this shall
      occur, we will experience in a loss of revenues.




· ****
            IF
                WE ARE NOT ABLE TO IMPLEMENT OUR STRATEGIES IN ACHIEVING OUR BUSINESS
                OBJECTIVES, OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE MAY
                BE
                ADVERSELY AFFECTED.




Our
      business plan is based on circumstances currently prevailing and the bases
      and
      assumptions that certain circumstances will or will not occur, as well as the
      inherent risks and uncertainties involved in various stages of development.
      However, there is no assurance that we will be successful in implementing our
      strategies or that our strategies, even if implemented, will lead to the
      successful achievement of our objectives. If we are not able to successfully
      implement our strategies, our business operations and financial performance
      may
      be adversely affected.




· ****
            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.




30




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.




· ****
            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.




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.




31




Presently,
      we sell our products mainly 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 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
                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. 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.




32




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. 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.




· ****
            WE
                MAY NEVER PAY ANY DIVIDENDS TO SHAREHOLDERS.




We
      did
      not declare any dividends for the year ended December 31, 2006 and have not
      declared any dividends to date in 2007. Our board of directors does not intend
      to distribute dividends in the near future. The declaration, payment and amount
      of any future dividends will be made at the discretion of the board of
      directors, and will depend upon, among other things, the results of our
      operations, cash flows and financial condition, operating and capital
      requirements, and other factors as the board of directors considers relevant.
      There is no assurance that future dividends will be paid, and, if dividends
      are
      paid, there is no assurance with respect to the amount of any such dividend.




· ****
            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, through his common stock
      ownership, currently has voting power equal to approximately 24% of our voting
      securities. Ms. Wei Xu, our Vice President of Operations, through her common
      stock ownership, currently has voting power equal to approximately 24% 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 48% 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.




33




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. 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, 2006.




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.




34




· ****
            WE
                MAY HAVE DIFFICULTY RAISING NECESSARY CAPITAL TO FUND OPERATIONS
                AS A
                RESULT OF MARKET PRICE VOLATILITY FOR OUR SHARES OF COMMON STOCK.




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 our business development plans are successful,
      we may require additional financing to continue to develop and exploit existing
      and new technologies and to expand into new markets. The exploitation of our
      technologies may, therefore, be dependent upon our ability to obtain financing
      through debt and equity or other means.




**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.




35




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 before the end of 2006. 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. In
      addition, 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.




36




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.




SAFE
      issued a public notice in October 2005, or the SAFE notice, 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.




37




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.




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.




38




· ****
            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.




39




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




We
      may be
      subject now and in the future to the SEC’s “penny stock” rules if 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.




· ****
            SALES
                OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK MAY BECOME FREELY TRADABLE
                PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR YOUR SHARES AND
                HAVE A
                DEPRESSIVE EFFECT ON THE PRICE OF THE SHARES OF OUR COMMON
                STOCK.




A
      substantial majority of our outstanding shares of common stock are "restricted
      securities" within the meaning of Rule 144 under the Securities Act. As
      restricted shares, these shares may be resold only pursuant to an effective
      registration statement or under the requirements of Rule 144 or other applicable
      exemptions from registration under the Act and as required under applicable
      state securities laws. Rule 144 provides in essence that a person who has held
      restricted securities for a period of at least one year may, under certain
      conditions, sell every three months, in brokerage transactions, a number of
      shares that does not exceed the greater of 1% of a company's outstanding shares
      of common stock or the average weekly trading volume during the four calendar
      weeks prior to the sale (the four calendar week rule does not apply to companies
      quoted on the OTC Bulletin Board). There is no limit on the amount of restricted
      securities that may be sold by a non-affiliate after the restricted securities
      have been held by the owner for a period of two years or more and such owner
      has
      not been an affiliate for the 90 day period prior to sale. A sale under Rule
      144
      or under any other exemption from the Act, if available, or pursuant to
      subsequent registrations of our shares of common stock, may have a depressive
      effect upon the price of our shares of common stock in any active market that
      may develop.




40




· ****
            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.




41




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. The high-profile Three Gorges Dam is located in
      Yichang, in western Hubei. Hubei's economy ranks 10th in the country and its
      GDP
      in 2004, adjusted for purchasing power parity, was approximately 330 billion
      RMB
      ($4,600 per capita).









Addresses
      of Benda Offices and Plants




**Address**
            
            **Function**
            
            **Size**Hubei
                Tongji Benda Ebei Pharmaceutical Co. Ltd., Changjiang Tower, 23 Floor,
                1
                Minquan Road, Wuhan, Hubei Province, PRC
            
            Headquarters/
                administration office
            
            5,705
                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 feetJiangling
                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 feetYidu
                Chemical Industry Co., Ltd., Chayuansi Village, Yidu City, Hubei
                Province,
                PRC
            
            Bulk
                chemicals production plant
            
            172,000
                sq feetBeijing
                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




42




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
      197 factories with similar manufacturing facilities for injection vials. Benda
      Ebei’s capacity is sixth in PRC and first in Hubei province. In 2005 and 2006,
      Benda Ebei produced approximately 200 million and 250 million units of injection
      vials respectively, equivalent to 25% capacity and 27% capacity respectively,
      leaving substantial excess capacity for future growth. 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.




Benda
      Ebei’s plant will produce lozenges, capsules, granules, oral liquid and pills.
      Benda Ebei plans to invest approximately $5.6 million ($2 million has already
      been invested) on its oral medicine production facilities. To date, we have
      already begun renovation of the upper floor of the Benda Ebei plant, and paid
      the initial deposits for the equipment necessary for this expansion. We expect
      to complete the equipment payment balance using the proceeds anticipated from
      this offering by the end of 2006 and plans for production of oral liquid
      medicines in 2007. 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. We expect to complete construction by  July 2007 and resume
      production by August 2007.




Bulk
      chemicals - The Yidu Benda Plant




The
      Yidu
      Benda plant has four chemical production facilities which produce Benda’s three
      bulk chemicals and a small quantity of nitrogen acid, which is primarily used
      by
      the food industry. The Yidu Benda facility has 165 employees and has capacity
      to
      produce 500 tons of bulk chemicals per year. We believe demand growth in the
      near term justifies expanding the capacity of the Yidu plant to 700 tons per
      year in 2007.




43




Yidu
      Benda's production costs fluctuate significantly because raw material input
      prices are highly volatile. We eventually pass cost increases onto the consumer,
      but our profit margins may suffer temporarily until we can do so.




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. We expect our Yidu Benda plant
      to
      resume production by July 1, 2007.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS** .




We
      are
      not aware of any pending or threatened legal proceedings in which we are
      involved.




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




On
      or
      about December 1, 2006, we received written consents in lieu of a meeting of
      Stockholders from holders of 52,721,507 shares representing approximately 54%
      of
      the 96,964,406 shares of the total issued and outstanding shares of voting
      stock
      of the Company approving the amendment to tour Articles of Incorporation to
      change the name of the Company to “Benda Pharmaceutical, Inc.”




**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 (“OTC BB”) maintained by the NASD. Our common stock, having $.001
      par value per share ("Common Stock"), is traded on the Over-The-Counter Bulletin
      Board ("OTCBB") under the symbol "BPMA". As of April __, 2007, there were
      approximately 845 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
                29, 2006
            
            $
            1.05
            
            $
            .76September
                30, 2006
            
            $
            .55
            
            $
            .40June
                30, 2006
            
            $
            .55
            
            $
            .40March
                31, 2006
            
            $
            .75
            
            $
            .40December
                31, 2005
            
            $
            .50
            
            $
            .15September
                30, 2005
            
            $
            .10
            
            $
            .05





44




**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.**




Pursuant
      to the Investment Agreement, on April 5, 2007, we issued to the Investors a
      total of 252 Units for $7,560,000 with each Unit consisting of (1) a convertible
      promissory note (the “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 (the " **Common
      Stock** "),
      and
      (ii) a warrant (a “ **Warrant** ”)
      to
      acquire 54,087 shares of Common Stock at an exercise price of $0.555 per
      share.




Pursuant
      to the Exchange Agreement, on November 15, 2006, we issued 64,942,360 shares
      of
      our Common Stock to the Ever Leader shareholders in exchange for 100% of the
      outstanding shares of Ever Leader Holdings Limited.




Pursuant
      to the Financing, on November 15, 2006, we issued 480 Units to the Investors,
      with each Unit consisting of 54,087 shares of our Common Stock and a Warrant
      to
      purchase 54,087 shares of our Common Stock at an exercise price of $0.555 per
      share, in exchange for gross proceeds of $12,000,000 (less expenses including
      placement agent fees and non-accountable expenses) that the Company received
      pursuant to Subscription Agreements entered into with the Investors.




Pursuant
      to the Financing, on November 15, 2006, we issued to the Placement Agent five
      year warrants to purchase 2,596,176 shares of our Common Stock at an exercise
      price of $0.555 per share.




On
      March
      10, 2006, the Company issued additional 700,000 shares of its common stock
      to KI
      Equity for a purchase price of $35,000, or $0.05 per share.




On
      January 4, 2006, the Company issued 1,500,000 shares of its common stock to
      KI
      Equity for a purchase price of $75,000, or $0.05 per share. The proceeds from
      the purchase price were intended as working capital to pay expenses to maintain
      the reporting status of the Company. Concurrently, the Company issued 100,000
      shares of its common stock to Kevin R. Keating, the sole officer and director
      of
      the Company, for services rendered to the Company valued at $5,000, or $0.05
      per
      share. The Company also issued 100,000 shares of its common stock to a
      consulting firm for financial consulting services rendered to the Company valued
      at $5,000, or $0.05 per share.





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. The Company
      has
      agreed to grant "piggyback" registration rights to the holders with respect
      to
      the above shares.




45




**ITEM
      6.**  **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-KSB 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-KSB or included in our previous filings with the Securities and Exchange
      Commission.


46


Results
      of Operations




Year
      ended December 31, 2006 Compared to Year ended December 2005




The
      following tables set forth key components of our results of operations for
      the
      periods indicated for Benda Pharmaceutical Inc.


**December
                  31**
              
              **December
                  31****2006**
              
              **2005****Revenue**
              
              $
              15,932,075
              
              $
              15,414,106Cost
                  of Goods Sold
              
              
              (8,925,430
              )
              
              (9,361,497
              )**Gross
                  Profit**
              
              
              7,009,582
              
              
              6,052,609**Selling
                  Expenses**
              
              
              (599,571
              )
              
              (697,521
              )**General
                  and administravive**
              
              
              (3,123,026
              )
              
              (1,446,043
              )**Research
                  and development**
              
              
              (30,821
              )
              
              (16,604
              )**Total
                  operating expenses**
              
              
              (3,753,418
              )
              
              (2,160,168
              )**Operating
                  Income**
              
              
              3,256,164
              
              
              3,892,441Interest
                  expenses
              
              
              (108,811
              )
              
              (150,498
              )Other
                  income (expenses)
              
              
              (530,571
              )
              
              (49
              )**Income
                  before minority interest and income taxes**
              
              
              2,616,782
              
              
              3,741,894Income
                  taxes
              
              
              -
              
              
              -Minority
                  interest
              
              
              (298,024
              )
              
              (256,126
              )**Net
                  Income**
              
              $
              2,318,758
              
              $
              3,485,768**Earnings
                  per share - basic**
              
              $
              0.03
              
              $
              0.05**Weighted
                  average shares outstanding - basic**
              
              
              73,414,057
              
              
              64,942,360**Earnings
                  per share - diluted**
              
              $
              0.03
              
              $
              0.05**Weighted
                  average shares outstanding - diluted**
              
              
              74,864,283
              
              
              64,942,360


*Net
      Revenue:*




Net
      revenue increased $517,969, or 3%, from $15,414,106 in the year ended December
      31, 2005 to $15,932,075 in the year ended December 31, 2006. Revenue from Benda
      Ebei and Yidu Benda grew by 4% and 5% respectively. This growth was mainly
      driven by Benda Ebei’s increased sales of branded medicines and Yidu Benda’s
      increased sales of 1.2.4-triazol carboxylic acid methyl ester. Revenues
      increased modestly overall because higher revenues from Benda Ebei and Yidu
      Benda were offset by reduced revenue from Jiangling Benda, which has been
      temporarily closed for plant overhaul in preparation for GMP certification.
      The
      Jiangling Benda plant is expected to resume production in August 2007.




The
      first
      floor of Benda Ebei’s plant is allocated for the production of injection vials.
      We are in the process of expanding the second floor of Benda’s Ebei’s plant,
      which will be dedicated to the production of branded new drugs in pill, grain
      and capsule form. Production of these items is expected to start in July 2007
      and boost 2007 net revenue significantly.


47


The
      rise
      and fall in our product sales in the year ended December 31, 2006 and 2005
      by
      subsidiary and by category were as follows:




Year
                  ended
              
              Year
                  ended
              
              Increase
                  /Subsidiary
              
              Product
                  Category
              
              2006
              
              2005
              
              (Decrease)
                  %Benda
                  Ebei
              
              Medicines/injection
                vials
              
              
              9,635,938
              
              
              9,241,823
              
              
              4
              %Jiangliang
                  Benda
              
              Active
                Pharmaceutical Ingredients
              
              
              15,564
              
              
              228,666
              
              
              -93
              %Yidu
                  Benda
              
              Bulk
                Chemicals
              
              
              6,237,621
              
              
              5,943,617
              
              
              5
              %Beijing
                  Shusai
              
              Pharynigitis
                Killer therapy
              
              
              42,952
              
              
              -
              
              
              100
              %Total
              
              
              
              
              
              15,932,075
              
              
              15,414,106
              
              
              3
              %


*Source:
        Company*


*Cost
      of Revenue*




Cost
      of
      revenue decreased $436,067, or 5% from $9,361,497 in the year ended December
      31,
      2005 to $8,925,430 in the year ended December 2006. This was primarily because
      of the reduction in cost of materials for production. For instance, in the
      year
      of 2006, we start co-operate with Sanxia University, College of Chemistry and
      Life Science for the production of L-methionine and the cost of such material
      has been reduced therefore.




*Gross
      Profit*




Gross
      Profit increased $956,973, or 16% from $6,052,609 in the year ended December
      31,
      2005 to $7,009,582 in the year ended December 2006 mainly due to the increase
      in
      revenue and reduce in cost of materials.




*Selling
      Expenses:*




Selling
      expenses decreased $97,950, or 14% from $697,521 in the year ended December
      31,
      2005 to $599,571 in the year ended December 2006, primarily due to lower
      distribution costs. Also, higher costs were incurred in the year 2005 for
      establishing Benda’s Southern China office in Shenzhen and boosting sales
      efforts at Benda’s Northern China sales office in Beijing.




*General
      and Administrative Expenses:*




General
      and administrative expenses increased $1,676,983 or 116% from $1,446,043 in
      the
      year ended December 31, 2005 to $3,123,026 in the year ended December 2006.
      The
      increase of these expenses were primarily spending related to the reverse merger
      and $12 million private placement closed on November 15, 2006.




The
      Company acquired a PRC based pharmaceutical manufacturer in accordance with
      a
      Share Exchange Agreement dated September 7, 2006 (“Exchange Agreement”) by and
      among Benda, KI Equity Partners III, LLC, a Delaware limited liability company
      (“KI Equity”), Ever Leader Holdings Limited, a company incorporated under the
      laws of Hong Kong SAR ("Ever Leader"), and each of the equity owners of Ever
      Leader (the “Ever Leader Shareholders”). The close of the transaction (the
      "Closing") took place on November 15, 2006 (the “Closing Date”). On the
      Closing Date, pursuant to the terms of the Exchange Agreement, Benda acquired
      all of the outstanding capital stock and ownership interests of Ever Leader
      (the
“Interests”) from the Ever Leader Shareholders; and the Ever Leader Shareholders
      transferred and contributed all of their Interests to Benda. In exchange, Benda
      issued to the Ever Leader Shareholders 64,942,360 shares of Benda common stock.




As
      a
      result, additional expenses were incurred: (i) auditing and accounting fee,
      $509,839; (ii) legal fee related to the Exchange Transaction, $114,993; (iii)
      insurance policy for director and officer, $66,171; (iv) consulting fee related
      to the Exchange Transaction, $191,248; (v) stock-base compensation to various
      consultants, $326,403; (vi) termination fee for co-operation with a financial
      institution, $280,376; (vii) office expenses, $30,994 and (viii) travel and
      transportation $36,009.


48


*Research
      and Development:*




Research
      and development increased $14,217, or 86% from $16,604 in the year ended
      December 31, 2005 to $30,821 in the year ended December 2006, and was consist
      primarily of salaries and related expenses of personnel engaged in research
      and
      development activities.




Rather
      than spend considerable sums internally on R&D in a market where the Company
      can not easily protect its results of development, the Company prefers to
      leverage its 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.




*Income
      from Operations:*




Operating
      profit decreased $636,277, or 16% from $3,892,441 in the year ended December
      31,
      2005 to $3,256,164 in the year ended December 2006, was mainly due to the
      additional costs were incurred for the reverse merger acquisition as described
      in general and administrative expenses section. However, if we add back those
      additional expenses incurred in the year of 2006, the operating profit of the
      year ended December 2006 would be approximately $4,745,194, approximately
      $852,753 or 22% higher than that for the year ended December 2005.




*Interests
      Expenses:*




Interest
      expenses decreased $41,687, or 27% from $150,498 in the year ended December
      31,
      2005 to $108,811 in the year ended December 2006. Interest expenses during
      these
      two periods were mainly incurred on various short-term loans from local Chinese
      bank and credit union.




*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, 2006 and 2005 as Benda did
      not
      have reportable taxable income for the periods.




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, 2006
      and
      2005 as Ever Leader did not have reportable taxable income for the periods.




Benda
      Ebei was registered as a Sino-Foreign Equity Joint Venture and is subject to
      the
      tax laws applicable to Sino-Foreign Equity Joint Ventures in the PRC. Benda
      Ebei
      is fully 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, 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 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,
      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.




Beijing
      Shusai did not have taxable income for the year ended December 31,
      2006.




The
      Company expects that some of these exemption periods will expire in November
      2007, after which Benda Ebei, Jiangling Benda and Yidu Benda can be expected
      to
      an average 16.5% tax rate. The remaining tax holidays will expire on November
      2010, thereafter these operating companies will be subject to the regular 33%
      tax rate on corporate profits. The Company is in the process of obtaining the
      approval from the relevant government authorities for the tax exemption status
      as a Sino-Foreign Equity Joint Venture from November 2005.




As
      a
      result of the above tax exemptions, there was no income taxes payable for the
      Company for the year ended December 31, 2006 and 2005. Had these tax exemptions
      not been available to the Company, income tax expense would have increased
      by
      approximately $1,398,000 and $1,235,000 for the year ended December 31, 2006
      and
      2005, respectively.




49




*Minority
      Interests:*




Minority
      interest accounted for 5% of net profit after income taxes of Benda Ebei,
      Jiangling Benda and Yidu Benda, and 25% of net profit after incomes taxes of
      Beijing Shusai for the year ended December 31, 2006 and 2005.




*Net
      Income:*




Net
      income was $2,318,758 in the year ended December 2006, compared to $3,485,768
      in
      the year ended December 2005, a decrease of $1,167,010, or 33%, mainly due
      to
      the additional costs incurred for the reverse merger and the $12 million private
      placement as mentioned in general and administrative expenses section. However,
      if we add back those additional expenses in the year of 2006 the net income
      for
      the year ended December 2006 would be approximately $3,807,788, or approximately
      $322,020 or 9% higher than that for the year ended December 2005.




LIQUIDITY
      AND CAPITAL RESOURCES




Net
      cash
      provided by operating activities was $2,475,358 in the year ended December
      2006,
      compared to $4,361,572 in the year ended December 2005, a decrease of
      $1,886,214, or 43%. This was primarily due to an increase in working capital
      needs resulting from increased accounts receivable, inventories and various
      taxes payable.




Net
      cash
      used in investing activities was $9,981,503 in the year ended December 2006
      compared to $5,392,567 in the year ended December 2005, an increase of
      US$4,588,936 or 85%. The major investing items were as follows:




i.
            In
                December 2006, Benda, through its 95% owned subsidiary Benda Ebei,
                plans
                to enter into an agreement with the two controlling shareholders
                of
                Shenzhen Sibiono GeneTech Co. Ltd. (“SiBiono”) to purchase a total of
                approximately 58% of the ownership of SiBiono for total cash consideration
                of approximately RMB 60 million (approximately $7.7 million). Due
                to this
                possible acquisition, Benda, through its subsidiaries Everleader
                and Benda
                Ebei, as of December 31, 2006, theCompany
                had advanced RMB 13,027,618.55 (or approximately $1,670,743) to Shenzhen
                Yuanxing Gene City Development Co., Ltd. and HK$19,419,599.26 (or
                approximately $2,497,058) to Shenzhen Yuanzheng Investment Development
                Co., Ltd. as deposits for the pending acquisition of their shares
                in
                SiBiono by Benda Since the acquisition was not formally signed on
                March
                31, 2007 and closed until April 5, 2007, the total advanced amount
                of
                $4,167,801 was recorded as refundable purchase price paid on December
                31,
                2006.




ii.
            On,
                December 7, 2006, Benda Ebei paid $1.2 million to SECO (Shenzhen)
                Biotech
                Co., Ltd. (“SECO”) pursuant to a purchase agreement signed between SECO
                and Benda Ebei on December 3, 2006 to acquire a technology know-how
                and
                drug specifications / technical parameters in producing a Gastropathy
                drug
                owned by SECO. According to the purchase agreement, Benda Ebei shall
                pay
                $1.5 million in total for the acquisition, of which $1.2 million
                should be
                paid within 5 business days after execution of the purchase agreement
                and
                the balance shall be paid when the Company receives the U.S. FDA
                approval
                on product certification in four months upon the signing date of
                the
                agreement. The purchase price paid was HK$9,341,220.00 (approximately
                $1.2
                million) and was recorded as Refundable Purchase Price Paid on December
                31, 2006 as the deal had not been closed and is refundable per agreement
                if the US FDA approval is not
                obtained.




Net
      cash
      provided by financing activities was $8,451,061 in the year ended December
      2006
      and the major transactions incurred were:




(i)
            According
                to the Exchange Transaction, Benda issued 25,961,760 shares of Benda
                common stock to certain accredited and institutional investors upon
                closing of the Exchange Transaction at a per share issuance price
                of
                $0.4622 and gross proceeds of $120,000,000, less placement agent
                commissions and other transaction related fees of $1,694,326 charged
                against paid in capital as issuance costs. Therefore the net proceeds
                was
                $10,305,674;






50






(ii)
            In
                November 2005, Ever Leader and Hon entered into a shareholder loan
                agreement whereby Hon was to loan an aggregate of $2,298,434 to Ever
                Leader (with this amount to be funded at periodic intervals during
                2006)
                to allow Ever Leader to satisfy its obligation to Benda Science,
                Wan, and
                Xu in relation to the acquisition of its 95% interest in Benda Ebei.
                During the year ended December 31, 2006, $2,298,434 had been received
                by
                Ever Leader under this loan agreement with Hon. On September 5, 2006,
                Hon
                waived the right of the shareholder loan to Ever Leader under the
                condition that Wan assumed the liability of $2,298,434 personally
                to Hon
                pursuant to a Loan Waiver Agreement. Therefore, the loan amount received
                of $2,298,434 was recorded as an increase in paid-in capital and
                the same
                amount was reduced in the proceeds and repayment of borrowing under
                related party.




(iii)
            $1,714,492
                was repaid for the bank loan that previously obtained from the local
                Chinese bank and credit union.




Net
      cash
      used in financing activities was $538,795 in the year ended December 2005,
      in
      which a repayment of short-term loan $20,262 was made to local Chinese banks
      and
      credit union; a net payment of net long term related party loans of $559,057
      was
      made to two executives Mr. Yiqing Wan and Ms. Wei Xu, who are husband and wife,
      and related company, Hubei Benda Science and Technology Co. Ltd, which was
      owned
      by Mr. Yiqing Wan and Ms. Wei Xu.




**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. Also see note 2, Summary of
      Significant Accounting Policies.





**Revenue
      Recognition**




The
      Company recognizes revenue when the significant risks and rewards of ownership
      have been transferred pursuant to PRC law, including such factors as when
      persuasive evidence of an arrangement exists, delivery has occurred, the sales
      price is fixed or determinable, sales and value-added tax laws have been
      complied with, and collectibility is reasonably assured. The Company generally
      recognizes revenue when its products are shipped.




**Accounts
      Receivable**




Accounts
      receivable are carried at original invoice amount less an estimate made for
      doubtful accounts based on a review of all outstanding amounts on a monthly
      basis. Management judgment and estimates are made in connection with
      establishing the allowance for doubtful accounts. Specifically, we analyze
      the
      aging of accounts receivable balances, historical bad debts, customer
      concentrations, customer credit-worthiness, current economic trends and changes
      in our customer payment terms. Significant changes in customer concentration
      or
      payment terms, deterioration of customer credit-worthiness or weakening in
      economic trends could have a significant impact on the collectibility of
      receivables and our operating results. If the financial condition of our
      customers were to deteriorate, resulting in an impairment of their ability
      to
      make payments, additional allowances may be required. The allowances for
      doubtful accounts totaled $457,269 and $90,707 at December 31, 2006 and 2005,
      respectively.




51




**Inventories**




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




**Recent
      Accounting Pronouncements**




In
      July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an
      Interpretation of FASB Statement *No. 109* (“FIN
      48”), which clarifies the accounting for uncertainty in income taxes recognized
      in an enterprise's financial statements. FIN 48 prescribes a two-step process
      to
      determine the amount of tax benefit to be recognized. First, the tax position
      must be evaluated to determine the likelihood that it will be sustained upon
      examination. If the tax position is deemed "more-likely-than-not" to be
      sustained, the tax position is then valued to determine the amount of benefit
      to
      be recognized in the financial statements. FIN 48 will be effective as of the
      beginning of the Company’s 2007 fiscal year. The Company is currently evaluating
      the impact that adopting FIN 48 will have on its financial statements.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      ("SFAS") No. 157, "Fair Value Measurements", which establishes a framework
      for
      reporting fair value and expands disclosures about fair value measurements.
      SFAS
      No. 157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007 and interim periods within those fiscal years. The
      Company is currently assessing the impact of the adoption of this standard
      on
      its financial statements.




In
      September 2006, FASB issued SFAS No. 158,"Employers' Accounting for Defined
      Benefit Pension and Other Postretirement Plans-An amendment of SFAS No. 87,
      88,
      106, and 132(R). This Statement improves financial reporting by requiring an
      employer to recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity or changes in unrestricted net assets of a not-for-profit
      organization. This Statement also improves financial reporting by requiring
      an
      employer to measure the funded status of a plan as of the date of its year-end
      statement of financial position, with limited exceptions. An employer with
      publicly traded equity securities is required to initially recognize the funded
      status of a defined benefit postretirement plan and to provide the required
      disclosures as of the end of the fiscal year ending after December 15, 2006
      with
      earlier application allowed. The Company does not expect the adoption of SFAS
      No. 158 to have a material impact on its consolidated result of operations
      and
      financial condition.




**ITEM
      7.**  **FINANCIAL
      STATEMENTS**





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


**Page**Report
                  of Independent Registered Public Accounting Firm
              F-1Consolidated
                  Balance Sheet - As of December 31, 2006 and 2005
              F-2Consolidated
                  Statements of Operations - For the years ended December 31, 2006
                  and
                  2005
              F-3Consolidated
                  Statement of Stockholders’ Equity - For the years ended December 31, 2006
                  and 2005
              F-4Consolidated
                  Statements of Cash Flows - For the years ended December 31, 2006
                  and 2005
              F-5Notes
                  to Consolidated Financial Statements
              F-6
                  to F-22




52


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        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, 2006 and 2005 and
        the
        related consolidated statements of operations, changes in stockholders' equity
        and cash flows for each of the years in the two year period ended December
        31,
        2006. These consolidated 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 audits provide
        a
        reasonable basis for our opinion.
  In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Benda Pharmaceutical,
        Inc.
        and Subsidiaries as of December 31, 2006 and 2005 and the results of its
        operations and cash flows for each of the years in the two year period ended
        December 31, 2006 in conformity with accounting principles generally accepted
        in
        the United States of America.
 
 
 
 Kempisty
        & Company
 Certified
        Public Accountants PC
 New
        York,
        New York
 April
        14,
        2007




F-1


**Consolidated
      Balance Sheet As of December 31, 2006 and 2005**


**December
                  31**
              
              **December
                  31****2006**
              
              **2005****Assets**Current
                  AssetsCash
                  and cash equivalents
              
              $
              1,676,119
              
              $
              308,082Receivables,
                  net
              
              
              6,661,048
              
              
              4,389,515Refundable
                  purchase price paid (Note 3)
              
              
              5,367,801
              
              
              -Inventories
                  (Note 4)
              
              
              701,339
              
              
              447,082Prepaid
                  expenses and deposits
              
              
              4,818
              
              
              -Total
                  current assets
              
              
              14,411,125
              
              
              5,144,679Due
                  from related parties (Note 10)
              
              
              1,976,815
              
              
              1,444,788Property
                  and equipments, net (Note 5)
              
              
              13,673,067
              
              
              11,096,865Intangible
                  assets (Note 6)
              
              
              1,501,483
              
              
              1,014,923Total
                  Assets
              
              $
              31,562,489
              
              $
              18,701,255**Liabilities
                  & Shareholders' Equity**Current
                  LiabilitiesAccounts
                  payable and accrued liabilities
              
              $
              1,823,030
              
              $
              1,296,473Various
                  taxes payable
              
              
              226,931
              
              
              358,385Bank
                  loans payable (Note 7)
              
              
              256,492
              
              
              1,970,984Short-term
                  loans payable
              
              
              -
              
              
              24,792Wages
                  payable
              
              
              145,903
              
              
              124,847Deferred
                  revenues
              
              
              1,732
              
              
              -Due
                  to related parties, shareholder loans (Note 12)
              
              
              -
              
              
              2,298,434Total
                  current liabilities
              
              
              2,454,088
              
              
              6,073,915Due
                  to related parties (Long-term) (Note 10)
              
              
              3,034,365
              
              
              3,174,486Total
                  liabilities
              
              
              5,488,454
              
              
              9,248,401Minority
                  interest
              
              
              2,154,356
              
              
              1,548,882Shareholders'
                  EquityPeferred
                  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;96,258,411
                  shares issued and outstanding
              
              
              96,258
              
              
              64,942Additional
                  paid in capital (Note 12)
              
              
              13,099,424
              
              
              584,481Retained
                  earnings (unrestricted)
              
              
              7,437,663
              
              
              5,751,566Statutory
                  surplus reserve fund (Note 9)
              
              
              1,869,523
              
              
              1,231,427Accumulative
                  other comprehensive income
              
              
              1,090,408
              
              
              271,555Shares
                  issuable for services (Noter 13)
              
              
              326,403
              
              
              -Total
                  Shareholders' Equity
              
              
              23,919,680
              
              
              7,903,972Total
                  Liabilities & Shareholders' Equity
              
              $
              31,562,489
              
              $
              18,701,255





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




F-2




Consolidated
      Statements of Operations - For the year ended December 31, 2006 and
      2005


**December
                  31**
              
              **December
                  31****2006**
              
              **2005**Revenue
              
              $
              15,932,075
              
              $
              15,414,106Other
                  Sales
              
              
              2,937
              
              
              -Cost
                  of Goods Sold
              
              
              (8,925,430
              )
              
              (9,361,497
              )Gross
                  Profit
              
              
              7,009,582
              
              
              6,052,609Selling
                  Expenses
              
              
              (599,571
              )
              
              (697,521
              )General
                  and administrativeAmortization
              
              
              (254,990
              )
              
              (195,838
              )Depreciation
              
              
              (643,794
              )
              
              (649,726
              )Shares
                  issuable for services (Note 13)
              
              
              (326,403
              )
              
              -Other
                  general and administrative (Note 14)
              
              
              (1,897,839
              )
              
              (600,479
              )Total
                  general and administravive
              
              
              (3,123,026
              )
              
              (1,446,043
              )Research
                  and development
              
              
              (30,821
              )
              
              (16,604
              )Total
                  operating expenses
              
              
              (3,753,418
              )
              
              (2,160,168
              )Operating
                  Income
              
              
              3,256,164
              
              
              3,892,441Interest
                  expenses
              
              
              (108,811
              )
              
              (150,498
              )Other
                  income (expenses)
              
              
              (530,571
              )
              
              (49
              )Income
                  before minority interest and income taxes
              
              
              2,616,782
              
              
              3,741,894Income
                  taxes (Note 11)
              
              
              -
              
              
              -Minority
                  interest
              
              
              (298,024
              )
              
              (256,126
              )Net
                  Income
              
              $
              2,318,758
              
              $
              3,485,768Earnings
                  per share - basic
              
              $
              0.03
              
              $
              0.05Weighted
                  average shares outstanding- basic
              
              
              73,414,057
              
              
              64,942,360Earnings
                  per share - diluted
              
              $
              0.03
              
              $
              0.05Weighted
                  average shares outstanding- diluted
              
              
              74,864,283
              
              
              64,942,360




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




F-3


Consolidated
      Statement of Stockholders’ Equity - For the years ended December 31, 2006 and
      2005


**Statutory**
                
                **Accumulated**
                
                **Shares****Additional**
                
                **Retained**
                
                **Surplus**
                
                **Other**
                
                **Issuable**
                
                **Total****Common
                    Stock**
                
                **Paid-in**
                
                **Earnings**
                
                **Reserve**
                
                **Comprehensive**
                
                **For**
                
                **Stockholder's****Shares**
                
                **Amount**
                
                **Capital**
                
                **(Unrestricted)**
                
                **Fund**
                
                **Income**
                
                **Services**
                
                **Equity****Balance
                    at December 31, 2004**
                
                
                **64,942,360**
                
                **$**
                **649,424**
                ****
                **$**
                **-**
                ****
                **$**
                **2,827,082**
                ****
                **$**
                **670,143**
                ****
                **$**
                **(685**
                **)**
                **$**
                **-**
                ****
                **$**
                **4,145,964**Common
                        stock - par value of $0.001 each after being changed from
                        $0.01 each on
                        11/17/05
                
                
                -
                
                
                (584,481
                )
                
                584,481
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Allocation
                    of retained earnings to statutory reserve fund
                
                
                -
                
                
                -
                
                
                -
                
                
                (561,284
                )
                
                561,284
                
                
                -
                
                
                -
                
                
                -Foreign
                    currency translation adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                272,240
                
                
                -
                
                
                272,240Net
                    income for the year
                
                
                -
                
                
                -
                
                
                -
                
                
                3,485,768
                
                
                -
                
                
                
                
                
                -
                
                
                3,485,768**Balance
                    at December 31, 2005**
                
                
                **64,942,360**
                
                
                **64,942**
                
                
                **584,481**
                
                
                **5,751,566**
                
                
                **1,231,427**
                
                
                **271,555**
                
                
                **-**
                
                
                **7,903,972**Issuance
                    of common stock for cash:to
                    Original Shareholders of Applied Spectrum Technologies,
                    Inc.
                
                
                2,954,141
                
                
                2,954
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,954Issuance
                    of common stock for cash:1/4/06,
                    1,500,000 shares at $0.05 per share
                
                
                1,500,000
                
                
                1,500
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1,500Issuance
                    of common stock for services:1/4/06,
                    200,000 shares at $0.05 per share
                
                
                200,000
                
                
                200
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                200Issuance
                    of common stock for cash:3/10/06,
                    700,000 shares at $0.05 per share
                
                
                700,000
                
                
                700
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                700Collective
                    issuance of common stock on 7/21/06
                
                
                50
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Collective
                    issuance of common stock on 8/30/06
                
                
                100
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Issuance
                    of common stock for cash:11/15/06,
                    25,961,760 shares at $0.4622 per share
                
                
                25,961,760
                
                
                25,962
                
                
                11,974,038
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                12,000,000Allocate
                    items in additional paid-in capital (Note 12)
                
                
                -
                
                
                -
                
                
                540,905
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                540,905Allocation
                    of retained earnings to statutory reserve fund
                
                
                -
                
                
                -
                
                
                -
                
                
                (638,096
                )
                
                638,096
                
                
                -
                
                
                -
                
                
                -Foreign
                    currency translation adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                818,854
                
                
                -
                
                
                818,854Issuance
                    of common stock for services:11/15/06,
                    706,195 shares
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                326,403
                
                
                326,403Eliminate
                    the Net Deficit for the Year 2006
                
                
                
                
                
                
                
                
                
                
                
                5,435
                
                
                
                
                
                
                
                
                
                
                
                5,435Net
                    income for the year
                
                
                -
                
                
                -
                
                
                -
                
                
                2,318,758
                
                
                -
                
                
                -
                
                
                -
                
                
                2,318,758**Balance
                    at December 31, 2006**
                
                
                **96,258,411**
                
                **$**
                **96,258**
                ****
                **$**
                **13,099,424**
                ****
                **$**
                **7,437,663**
                ****
                **$**
                **1,869,523**
                ****
                **$**
                **1,090,408**
                ****
                **$**
                **326,403**
                ****
                **$**
                **23,919,680**




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




F-4


Consolidated
      Statements of Cash Flows - For the year ended December 31,2006 and
      2005


**December
                  31**
              
              **December
                  31****2006**
              
              **2005****Cash
                  Flows From Operating Activities**Net
                  Income
              
              $
              2,318,758
              
              $
              3,485,768Adjustments
                  to reconcile net income to net cash provided by operatingactivities:Share
                  issuable for services (Note 13)
              
              
              326,403
              
              
              -Bad
                  Debt Provision (Recovery)
              
              
              364,064
              
              
              (28,165
              )Minority
                  Interest
              
              
              605,474
              
              
              405,117Depreciation
              
              
              718,387
              
              
              649,726Amortization
              
              
              254,990
              
              
              195,838Changes
                  in operating assets and liabilities:Account
                  receivable
              
              
              (2,271,533
              )
              
              (1,003,504
              )Prepaid
                  expenses and deposits
              
              
              (4,818
              )
              
              5,557Inventories
              
              
              (254,257
              )
              
              704,856Accounts
                  payable and accrued liabilities
              
              
              526,557
              
              
              (205,829
              )Others
                  payable
              
              
              22,787
              
              
              82,503Various
                  taxes payable
              
              
              (131,454
              )
              
              69,704**Net
                  cash provided by operating activities**
              
              
              2,475,358
              
              
              4,361,572**Cash
                  Flows From Investing Activities**Purchases
                  of property and equipment
              
              
              (463,539
              )
              
              (1,722,913
              )Purchases
                  of intangible assets
              
              
              (787,087
              )
              
              (74,889
              )Construction
                  in progress
              
              
              (2,831,051
              )
              
              (2,683,646
              )Loans
                  to related parties, net
              
              
              (532,026
              )
              
              (911,120
              )Refundable
                  purchase price paid (Note 3)
              
              
              (5,367,801
              )
              
              -**Net
                  cash used in investing activities**
              
              
              (9,981,503
              )
              
              (5,392,567
              )**Cash
                  Flows From Financing Actives**Proceeds
                  of sales unit of common stock, net of Financing Cost (Note
                  12)
              
              
              10,305,674
              
              
              -Proceeds
                  of shareholder loan from Ever Leader (Note 12)
              
              
              2,298,434
              
              
              -Proceeds
                  and repayments of borrowings under related parties, net
              
              
              (2,438,555
              )
              
              559,057Proceeds
                  and repayments of borrowings under bank loans, net
              
              
              (1,714,492
              )
              
              (20,262
              )**Net
                  cash provided by (used in) financing activities**
              
              
              8,451,061
              
              
              538,795Effect
                  of exchange rate changes on cash
              
              
              423,121
              
              
              260,639**Net
                  increase in cash and cash equivalents**
              
              
              1,368,037
              
              
              (231,562
              )**Cash
                  and cash equivalents, beginning of  period**
              
              
              308,082
              
              
              539,644**Cash
                  and cash equivalents, end of  period**
              
              $
              1,676,119
              
              $
              308,082**Interest 
                  paid**
              
              $
              113,458
              
              $
              150,104**Income
                  taxes paid**
              
              $
              -
              
              $
              -**Supplemental
                  investing and financing activities:****Contribution
                  of shareholder loan to capital (Note 12 )**
              
              $
              2,298,434
              
              $
              -**Common
                  stock to be issued for consulting fees (Note 13)**
              
              $
              326,403
              
              $
              -






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




F-5




Notes
      to
      Consolidated Financial Statements




1.
            Organization
                and Principal Activities




Benda
      Pharmaceutical, Inc. (formerly known as “Applied Spectrum Technologies Inc.”)
      (the “Company” or “Benda”) is a corporation organized under the Florida Laws and
      headquartered in Hubei Province, the People’s Republic of China (“PRC”). Before
      September 7, 2006, the Company had no meaningful business assets, operations
      or
      sources of revenue. Applied Sepctrum Technologies Inc. changed its name to
      Benda
      Pharmaceutical, Inc. on January 29, 2007..




Benda
      acquired a Hong Kong based pharmaceutical manufacturer in accordance with a
      Share Exchange Agreement dated September 7, 2006 (“Exchange Agreement”) by and
      among Benda, KI Equity Partners III, LLC, a Delaware limited liability company
      (“KI Equity”), Ever Leader Holdings Limited, a company incorporated under the
      laws of Hong Kong SAR ("Ever Leader"), and each of the equity owners of Ever
      Leader (the “Ever Leader Shareholders”). The close of the transaction (the
      "Closing") took place on November 15, 2006 (the “Closing Date”). On the
      Closing Date, pursuant to the terms of the Exchange Agreement, Benda acquired
      all of the outstanding capital stock and ownership interests of Ever Leader
      (the
“Interests”) from the Ever Leader Shareholders; and the Ever Leader Shareholders
      transferred and contributed all of their Interests to Benda. In exchange, Benda
      issued to the Ever Leader Shareholders 64,942,360 shares of Benda common stock.




Ever
      Leader owns 95% of the issued and outstanding capital of Hubei Tongi 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.,
      a company formed under the laws of PRC (“Jiangling Benda”); (ii) 95% of the
      issued and outstanding capital stock of Yidu Benda Chemical Co. Ltd., a company
      incorporated under the laws of PRC (“Yidu Benda”); and (iii) 75% of the issued
      and outstanding capital stock of Beijing Shusai Pharyngitis Research Co. Ltd.,
      a
      company incorporated under the laws of PRC (“Beijing Shusai”). 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.




Ever
      Leader, Benda Ebei, Jingling Benda, Yidu Benda and Beijing Shusai shall be
      referred to herein collectively as “Ever Leader Group”. The Ever Leader Group is
      principally engaged in the development, manufacturing and distribution of
      medicines, active pharmaceutical ingredients and pharmaceutical intermediaries.




Following
      the Closing of the Exchange Agreement on November 15, 2006, Ever Leader became
      a
      wholly-owned subsidiary of Benda.




*Ownership
      Structure Prior to Reorganization*




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 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.




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 Ebei 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.




F-6




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 up.
      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 Good
      Manufacturing Practices (“GMP”) certification from the Chinese State Food and
      Drug Administration (“SFDA”). This facility is expected to reopen and resume
      production in July of 2007.




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 up. 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.




Beijing
      Shusai Pharyngitis Research Co Ltd., (“Beijing Shusai”) was incorporated in
      Beijing, PRC in June 2006. Beijing Shusai has registered capital of $150,133
      which is fully paid up. Benda Ebei, through the trust agreement with Xu as
      the
      trustee and Feng Wang were the sole owners of Beijing Shusai with ownership
      interests of 75% and 25%, respectively. Beijing Shusai operates, promotes and
      distributes Pharyngitis Killer Therapy.




*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, is 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.




In
      November 2005, Ever Leader and Hon entered into a shareholder loan agreement
      whereby Hon was to loan an aggregate of $2,298,434 to Ever Leader (with this
      amount to be funded at periodic intervals during 2006) to allow Ever Leader
      to
      satisfy its obligation to Benda Science, Wan, and Xu in relation to the
      acquisition of its 95% interest in Benda Ebei. During the year ended December
      31, 2006, $2,298,434 had been received by Ever Leader under this loan agreement
      with Hon. On September 5, 2006, Hon waived the right of the shareholder loan
      to
      Ever Leader under the condition that Wan assumed the liability of $2,298,434
      personally to Hon pursuant to a Loan Waiver Agreement. Therefore, the loan
      amount received of $2,298,434 was recorded as an increase in paid-in capital.




F-7




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 for 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 Phamarceutical, 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.




Pursuant
      to an Equity Transfer Agreement entered into on December 3, 2005 among Benda
      Ebei, Benda Science, and Wan, Benda Science transferred and assigned, without
      consideration, 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,
      without consideration, 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).




In
      June
      of 2006, Benda Ebei invested approximately $112,500, in the form of cash and
      one
      automobile, for a 75% ownership interest in Beijing Shusai Pharyngitis Research
      Co., Ltd. (“Beijing Shusai”), with the remaining 25% owned by an unrelated PRC
      individual, Mr. Feng Wang. Beijing Shusai, a PRC limited liability company,
      was
      incorporated on June 15, 2006. It has registered capital of $150,000 and
      commenced primary operations in July 2006. It is setting up and operates
      self-operated and franchised Pharyngitis Clinics in leading hospitals throughout
      major cities in China.




In
      accordance with the provisions of Statement of Financial Accounting Standards
      (“SFAS”) No. 141 “Business Combinations”, transfers of net assets or exchanges
      of equity interest between entities under common control do not constitute
      business combinations. As Ever Leader, Benda Ebei, Jiangling Benda, and Yidu
      Benda were all either directly or indirectly 100% owned and controlled by Wan
      and Xu immediately prior to and subsequent to the exchanges of equity interests
      as summarized in the paragraphs above, these transactions have been accounted
      for as combinations of entities under common control on a historical cost basis
      in a manner similar to a pooling of interests (no adjustments were made to
      the
      historical cost basis of the assets and liabilities of Benda Ebei, Jiangling
      Benda, or Yidu Benda).


F-8


Upon
      the
      Closing of the Exchange Agreement on November 15, 2006 and subsequent to the
      consummation of the reorganization as summarized in the paragraphs above, the
      organization and ownership structure of the Company is as follows:









**2.**
            **Summary
                of Significant Accounting
                Policies**




**Basis
      of Presentation**




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




These
      consolidated financial statements include the accounts of Benda,
      Ever Leader, Benda Ebei, Jiangling Benda, Yidu Benda for the full year and
      Beijing Shusai from June 15, 2006 (date of commencement of operations)
      (collectively referred to as the “Company”). All significant inter-company
      balances and transactions have been eliminated in consolidation.




The
      merger of a private operating company into a non-operating public shell
      corporation with nominal net assets typically results in the owners and
      management of the private company having actual or effective operating control
      of the combined company after the transaction, with shareholders of the former
      public shell continuing only as passive investors. These transactions are
      considered to be capital  transactions
      in substance, rather than business combinations. That is, the transaction is
      equivalent to the issuance of stock by the private company for the net monetary
      assets of the shell corporation, accompanied by a recapitalization. The
      accounting is identical to that resulting from a reverse acquisition, except
      that no goodwill or other intangible should be recorded.




The
      exchange transaction per the Exchange Agreement closed on November 15, 2006
      was
      deemed to be a reverse acquisition. In accordance with the Accounting and
      Financial Reporting Interpretations and Guidance provided by the staff of the
      U.S. Securities and Exchange Commission, Benda (the public shell and the legal
      acquirer) is considered the accounting acquiree and Ever Leader (the legal
      acquiree) is considered the accounting acquirer. .The consolidated financial
      statements of the combined entity are in substance those of Ever Leader, with
      the assets and liabilities, and revenues and expenses, of Benda being included
      effective from the date of effectiveness of the Exchange Agreement. Benda is
      deemed to be a continuation of the business of Ever Leader. The outstanding
      stock of Benda prior to the effectiveness of Exchange Agreement was accounted
      for at its net book value and no goodwill was recognized.




F-9




**Use
      of Estimates**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities as well as
      the
      reported amounts of revenues and expenses. Actual results could differ from
      these estimates.




**Cash
      and Cash Equivalents**




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




**Accounts
      Receivable**




Accounts
      receivable are carried at original invoice amount less an estimate made for
      doubtful accounts based on a review of all outstanding amounts on a monthly
      basis. Management judgment and estimates are made in connection with
      establishing the allowance for doubtful accounts. Specifically, we analyze
      the
      aging of accounts receivable balances, historical bad debts, customer
      concentrations, customer credit-worthiness, current economic trends and changes
      in our customer payment terms. Significant changes in customer concentration
      or
      payment terms, deterioration of customer credit-worthiness or weakening in
      economic trends could have a significant impact on the collectibility of
      receivables and our operating results. If the financial condition of our
      customers were to deteriorate, resulting in an impairment of their ability
      to
      make payments, additional allowances may be required. The allowances for
      doubtful accounts totaled $457,269 and $90,707 at December 31, 2006 and 2005,
      respectively.





**Inventories**




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




**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
                  yearsMachinery
                  and equipment
              10-15
                  yearsMotor
                  Vehicle
              5
                  yearsElectronic
                  and office equipment
              5
                  years




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




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




**Impairment
      of Long-Lived Assets**




The
      Company evaluates potential impairment of long-lived assets, in accordance
      with
      Statement of Financial Accounting Standards (“SFAS”) No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      which
      requires the Company to (a) recognize an impairment loss only if the carrying
      amount of a long-lived asset is not recoverable from its undiscounted cash
      flows
      and (b) measure an impairment loss as the difference between the carrying amount
      and fair value of the asset. The Company believes that long-lived assets in
      the
      accompanying consolidated balance sheets are appropriately valued at December
      31, 2006 and 2005.




F-10




**Intangible
      Assets**




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




**Revenue
      Recognition**




The
      Company recognizes revenue when the significant risks and rewards of ownership
      have been transferred pursuant to PRC law, including such factors as when
      persuasive evidence of an arrangement exists, delivery has occurred, the sales
      price is fixed or determinable, sales and value-added tax laws have been
      complied with, and collectibility is reasonably assured. The Company generally
      recognizes revenue when its products are shipped.




**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 $30,821 and $16,604 on direct research and
      development (“R&D”) efforts in 2006 and 2005, respectively. Rather than
      spend considerable sums internally on R&D in a market where the Company can
      not easily protect its results of development, the Company prefers to leverage
      its 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.




**Income
      Taxes**




The
      Company accounts for income taxes under the liability method in accordance
      with
      SFAS No. 109, *Accounting
      for Income Taxes* .
      Deferred tax assets and liabilities are recorded for the estimated future tax
      effects of temporary differences between the tax basis of assets and liabilities
      and amounts reported in the accompanying consolidated balance sheets. Deferred
      tax assets are reduced by a valuation allowance if current evidence indicates
      that it is considered more likely than not that these benefits will not be
      realized.




**Comprehensive
      Income**




The
      Company has adopted SFAS No. 130, *Reporting
      Comprehensive Income,* which
      establishes standards for reporting and displaying comprehensive income, its
      components, and accumulated balances in a full-set of general-purpose financial
      statements. Accumulated other comprehensive income represents the accumulated
      balance of foreign currency translation adjustments.




**Concentration
      of Credit Risk**




A
      significant portion of the Company's cash at December 31, 2006 and 2005 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.




**Basic
      and Diluted Earnings Per Share**




The
      Company adopted Statement of Financial Accounting Standards No. 128, “Earnings
      Per Share” (SFAS128). SFAS 128 requires the presentation of earnings per share
      (EPS) as Basic and Diluted EPS. Basic earnings per share are calculated by
      taking net income divided by the weighted average shares of common stock
      outstanding during the period. Diluted earnings per share is calculated by
      taking basic weighted average shares of common stock and increasing it for
      dilutive common stock equivalents such as warrants that are in the money.




**Foreign
      Currency Translation**




The
      functional currency of the 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 determination of net income (loss) for the respective
      periods.




F-11




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, 2006 and December 31, 2005 were RMB
      1
      for $0.12825 and $0.12509, respectively.




**Fair
      Value of Financial Instruments**




The
      Company's financial instruments include cash equivalents, accounts receivable,
      other receivables, accounts payable, accrued expenses, value-added taxes,
      short-term and long-term bank loans, and loans payable to related parties.
      The
      carrying amounts of financial instruments other than long-term obligations
      approximate fair value due to their short maturities. Long-term obligations
      approximate fair value based upon rates currently available for similar
      instruments.




**Recent
      Accounting Pronouncements**




In
      July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an
      Interpretation of FASB Statement *No. 109* (“FIN
      48”), which clarifies the accounting for uncertainty in income taxes recognized
      in an enterprise's financial statements. FIN 48 prescribes a two-step process
      to
      determine the amount of tax benefit to be recognized. First, the tax position
      must be evaluated to determine the likelihood that it will be sustained upon
      examination. If the tax position is deemed "more-likely-than-not" to be
      sustained, the tax position is then valued to determine the amount of benefit
      to
      be recognized in the financial statements. FIN 48 will be effective as of the
      beginning of the Company’s 2007 fiscal year. The Company is currently evaluating
      the impact that adopting FIN 48 will have on its financial statements.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      ("SFAS") No. 157, "Fair Value Measurements", which establishes a framework
      for
      reporting fair value and expands disclosures about fair value measurements.
      SFAS
      No. 157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007 and interim periods within those fiscal years. The
      Company is currently assessing the impact of the adoption of this standard
      on
      its financial statements.




In
      September 2006, FASB issued SFAS No. 158,"Employers' Accounting for Defined
      Benefit Pension and Other Postretirement Plans-An amendment of SFAS No. 87,
      88,
      106, and 132(R). This Statement improves financial reporting by requiring an
      employer to recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity or changes in unrestricted net assets of a not-for-profit
      organization. This Statement also improves financial reporting by requiring
      an
      employer to measure the funded status of a plan as of the date of its year-end
      statement of financial position, with limited exceptions. An employer with
      publicly traded equity securities is required to initially recognize the funded
      status of a defined benefit postretirement plan and to provide the required
      disclosures as of the end of the fiscal year ending after December 15, 2006
      with
      earlier application allowed. The Company does not expect the adoption of SFAS
      No. 158 to have a material impact on its consolidated result of operations
      and
      financial condition.




F-12




**Recently
      Adopted Accounting Pronouncements**




SFAS
      No. 123R, *Share-Based
      Payment, an Amendment of SFAS No. 123* ,
      was
      issued in December 2004 and was effective as of the beginning of the
      Company’s 2006 fiscal year. SFAS No. 123R requires all share-based payments
      to qualified individuals, including grants of employee stock options, to be
      recognized as compensation expense in the financial statements based on their
      grant date fair values. Upon the reverse acquisition of the Company and Ever
      Leader, the Company agreed to issue 706,195 shares of its common stock to
      various consultants as compensation, which were valued at $0.4622 each and
      recognized as consulting fees in the year ended December 31, 2006.




**3.**
            **Refundable
                Purchase Price Paid**




In
      December 2006, Benda, through its 95% owned subsidiary Benda Ebei, plans to
      enter into an agreement with the two controlling shareholders of Shenzhen
      Sibiono GeneTech Co. Ltd. (“SiBiono”) to purchase a total of approximately 58%
      of the ownership of Sibiono for total cash consideration of approximately Rmb
      60
      million (approximately $7.7 million). Due to this possible acquisition, Benda,
      through its subsidiaries Everleader and Benda Ebei, as of December 31, 2006,
      the Company
      had advanced RMB 13,027,618.55 (or approximately $1,670,743) to Shenzhen
      Yuanxing Gene City Development Co., Ltd. and HK$19,419,599.26 (or approximately
      $2,497,058) to Shenzhen Yuanzheng Investment Development Co., Ltd. as deposits
      for the pending acquisition of their shares in SiBiono by Benda Since the
      acquisition was not formally signed on March 31, 2007 and closed until April
      5,
      2007, the total advanced amount of $4,167,801 was recorded as refundable
      purchase price paid on December 31, 2006.




On,
      December 7, 2006, Benda Ebei paid $1.2 million to SECO (Shenzhen) Biotech Co.,
      Ltd. (“SECO”) pursuant to a purchase agreement signed between SECO and Benda
      Ebei on December 3, 2006 to acquire a technology know-how and drug
      specifications / technical parameters in producing a Gastropathy drug owned
      by
      SECO. According to the purchase agreement, Benda Ebei shall pay $1.5 million
      in
      total for the acquisition, of which $1.2 million should be paid within 5
      business days after execution of the purchase agreement and the balance shall
      be
      paid when the Company receives the U.S. FDA approval on product certification
      in
      four months upon the signing date of the agreement. The purchase price paid
      was
      HK$9,341,220.00 (approximately $1.2 million) and was recorded as Refundable
      Purchase Price Paid on December 31, 2006 as the deal had not been closed and
      is
      refundable per agreement if the US FDA approval is not obtained.




**4.**
            **Inventories**




The
      Company’s inventories at December
      31, 2006 and 2005 are comprised as follows:


December
                  31,
              
              December
                  31,2006
              
              2005Raw
                  materials
              
              $
              311,064
              
              $
              329,590Packing
                  materials
              
              
              80,639
              
              
              70,689Finished
                  goods
              
              
              309,637
              
              
              46,803Total
                  inventories at cost
              
              
              701,339
              
              
              447,082Less:
                  Reserves
              
              
              -
              
              
              -Total
                  inventories, net
              
              $
              701,339
              
              $
              447,082





No
      reserve for obsolete, slow-moving or non-salable inventory was required at
      December 31, 2006 and 2005.


F-13


**5.**
            **Property
                and Equipment**




The
      Company’s property and equipment at December
      31, 2006 and 2005 is comprised as follows:


December
                  31,
              
              December
                  31,2006
              
              2005Buildings
              
              $
              2,227,710
              
              $
              2,148,931Machinery
                  and equipment
              
              
              3,941,187
              
              
              3,592,059Office
                  equipment
              
              
              10,672
              
              
              8,012Motor
                  Vehicles
              
              
              32,971
              
              
              -Cost
              
              
              6,212,540
              
              
              5,749,001Less:
                  Accumulated DepreciationBuildings
              
              $
              (875,351
              )
              $
              (731,738
              )Machinery
                  and equipment
              
              
              (1,837,221
              )
              
              (1,271,456
              )Office
                  equipment
              
              
              (4,558
              )
              
              (2,679
              )Motor
                  Vehicles
              
              
              (7,129
              )
              
              -Accumulated
                  Depreciation
              
              
              (2,724,260
              )
              
              (2,005,873
              )Construction
                  in progress
              
              $
              10,184,787
              
              $
              7,353,737Total
                  property and equipment, net
              
              $
              13,673,067
              
              $
              11,096,865




Total
      depreciation expense allocated to general and administrative expense was
      $657,382 and $649,726 for years ended December 31, 2006 and 2005,
      respectively.




**6.**
            **Intangible
                Assets**




The
      Company’s intangible assets at December
      31, 2006 and 2005 are comprised as follows:


December
                  31,
              
              December
                  31,2006
              
              2005Land-use
                  rights
              
              $
              1,068,036
              
              $
              1,014,032Drugs
                  permits and licenses
              
              
              1,055,893
              
              
              1,002,511Technology
                  formulas
              
              
              679,700
              
              
              -Cost
              
              
              2,803,630
              
              
              2,016,543Less:
                  Accumulated amortizationLand-use
                  rights
              
              
              (150,465
              )
              
              (106,790
              )Drugs
                  permits and licenses
              
              
              (1,085,471
              )
              
              (894,830
              )Technology
                  formulas
              
              
              (66,210
              )
              
              0Accumulated
                  amortization
              
              
              (1,302,146
              )
              
              (1,001,620
              )Total
                  intangible assets, net
              
              $
              1,501,483
              
              $
              1,014,923




The
      technology formulas represent the formulas special know how for Yanlong
      Anti-Cancer Oral Liquid, and the Pharyngitis Killer Therapy. On December 31,
      2006, the values of these formulas are $641,250 and $38,450,
      respectively.


F-14


**7.**
            **Bank
                Loans**




The
      Company’s bank loans at December
      31, 2006 and 2005 are comprised as follows:


December
                  31,
              
              December
                  31,2006
              
              2005Bank
                  loans due within one year
              
              $
              256,492
              
              $
              1,363,564Bank
                  loans due after one year
              
              
              -
              
              
              607,420Total
                  debt
              
              $
              256,492
              
              $
              1,970,984




As
      of
      December 31, 2006 and 2005, the Company had several outstanding bank loans
      which
      were used primarily to fund construction in progress projects and for general
      working capital purposes. These loans carry annual interest rates ranging from
      5.3% to 9.3% with original maturity dates ranging from 2 to 10 months. Each
      of
      these loans was considered term loans and was not revolving or renewable. Each
      of these loans was secured by land-use rights, buildings and equipment of the
      Company, except for $256,492 which is unsecured but guaranteed by an unrelated
      party.




Total
      interest expense related to the Company’s outstanding bank loans was
      $ 113,458
      and $150,104 for the year ended December 31, 2006 and 2005, respectively.




**8.**
            **Pension
                and Employment Liabilities**




As
      stipulated by the relevant laws and regulations for enterprises operating in
      the
      PRC, the Company is required to maintain a defined contribution retirement
      plan
      for all of its employees who are residents of the PRC. All retired employees
      of
      the Company are entitled to an annual pension equal to their basic annual salary
      upon retirement. The Company contributes to a state sponsored retirement plan
      approximately 20% of the base salary of each of its employees and has no further
      obligations for the actual pension payments or post-retirement benefits beyond
      the annual contributions. The state sponsored retirement plan is responsible
      for
      the entire pension obligations payable for all past and present
      employees.




**9.**
            **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, as determined in accordance
      with the PRC accounting standards applicable to the Company, to a statutory
      surplus reserve until such reserve reaches 50% of the registered capital of
      the
      Company. As of December 31, 2006 and 2005, the registered capital of the
      Company’s PRC subsidiaries was $12,017,575 and $7,620,996
      respectively.




**10.**
            **Related
                Party Transactions**




Due
      from related
      parties at December 31, 2006 and 2005 are comprised as follows:


December
                  31,
              
              December
                  31,2006
              
              2005Yiqing,
                  WanDue
                  to Ever Leader Holdings Co. Ltd.
              
              $
              455,275
              
              $
              -Due
                  to Jiangliang Benda Pharamaceutical Co. Ltd.
              
              
              -
              
              
              207,335Hubei
                  Benda Science and Technology Co. LtdDue
                  to Yidu Benda Chemicals Co. Ltd.
              
              
              1,299,479
              
              
              1,237,453Due
                  to Ever Leader Holdings Co. Ltd.
              
              
              210,518
              
              
              -Feng
                  WangDue
                  to Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              11,543
              
              
              -Total
                  due from related parties
              
              $
              1,976,815
              
              $
              1,444,788


F-15


Due
      to
      related parties at December 31, 2006 and 2005 are comprised as
      follows:


December
                  31,
              
              December
                  31,2006
              
              2005Hubei
                  Benda Science and Technology Co. LtdDue
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              $
              236,205
              
              $
              295,760Due
                  from Jiangliang Benda Pharamaceutical Co. Ltd.
              
              
              1,833,358
              
              
              1,977,139Wei
                  XuDue
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              
              943,865
              
              
              867,720Due
                  from Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              20,937
              
              
              -Hua
                  Xu
              
              
              -Due
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              
              
              
              
              33,868Total
                  due to related parties
              
              $
              3,034,365
              
              $
              3,174,486


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. Long-term
        debts are due on December 31, 2012. Proceeds from the above loans were used
        primarily for general working capital purposes.
  All
        those
        related parties incur advances to different companies within the group when
        those companies have cash flow shortages from time to
        time, or withdraw funds when those companies have excessive funds in
        order to inject funds to another companies within the group.
  The
        overall net impact on the relative party transactions was always negative.
        In
        other words, the related parties lend money to the companies within the group
        during the reported period ended at December 31, 2006 and
        2005.




**11.**
            **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, 2006 and 2005 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, 2006
      and
      2005 as Ever Leader did not have reportable taxable income for the periods.




Benda
      Ebei was registered as a Sino-Foreign Equity Joint Venture on June 16, 2004
      and
      is subject to the tax laws applicable to Sino-Foreign Equity Joint Ventures
      in
      the PRC. Benda Ebei is fully 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, 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 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,
      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.




Beijing
      Shusai does not have taxable income for the year ended December 31,
      2006.




The
      Company expects that some of these exemption periods will expire in November
      2007, after which Benda Ebei, Jiangling Benda and Yidu Benda can be expected
      to
      an average 16.5% tax rate. The remaining tax holidays will expire on November
      2010, thereafter these operating companies will be subject to the regular 33%
      tax rate n corporate profits. The Company is in the process of obtaining the
      approval from the relevant government authorities for the tax exemption status
      as a Sino-Foreign Equity Joint Venture from November 2005.




F-16




As
      a
      result of the above tax exemptions, there was no income taxes payable for the
      Company for the year ended December 31, 2006 and 2005. Had these tax exemptions
      not been available to the Company, income tax expense would have increased
      by
      approximately $1,398,000 and $1,235,000 for the year ended December 31, 2006
      and
      2005, respectively.




**12.**
            **Common
                Stock, Preferred Stock, Additional Paid-in Capital, Warrants and
                Options**




The
      Closing of the Exchange Agreement 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”) for the purchase of shares of Benda common
      stock (the “Common Shares”) promptly after the closing of the Exchange under
      terms and conditions approved by our board of directors immediately following
      the Exchange (“Financing”).




Upon
      Closing, we received gross proceeds of $12,000,000 in connection with the
      Financing from the Investors. Pursuant to Subscription Agreements entered into
      with these Investors, we sold 480 Units, with each Unit consisting of 54,087
      shares of our Common Stock, and Warrants to purchase 54,087 shares of our Common
      Stock at an exercise price of $0.555 per share (the “Units”). The price of each
      Unit was $25,000. We are required to register the Common Stock and the shares
      underlying the Warrants issued in the Financing with the Securities and Exchange
      Commission for resale by the Investors. After commissions and expenses, we
      received net proceeds of approximately $10,470,000 from the
      Financing.




Upon
      completion of the Exchange, and after giving effect to the Financing, the Ever
      Leader Shareholders own 64,942,360 shares of Common Stock and the Investors
      in
      the aggregate received 25,961,760 shares of our Common Stock. The Ever Leader
      Shareholders and the Investors own, in the aggregate, 90,904,120 of our issued
      and outstanding shares of common stock. Upon the exercise of the Warrants to
      purchase an additional 25,961,760 shares of Benda’s common stock sold in
      connection with the financing, the Investors and the Ever Leader Shareholders
      will own, in the aggregate, 93.1% of our shares of common stock, and our current
      stockholders will own approximately 4.3% of the total outstanding shares of
      our
      common stock.




Upon
      Closing, Keating Securities, LLC, as the authorized agent of the investors
      (the
“Investor Agent”), Benda, Mr. Yiqing Wan and Ms. Wei Xu, as individuals and
      Moveup Investments Limited, a company organized under the laws of British Virgin
      Islands, one of the shareholders of Benda, (“Moveup” and together with Benda,
      Mr. Yiqing Wan and Ms. Wei Xu, collectively, the “Depositors”), entered into a
      Make Good Agreement.




Pursuant
      to Make Good Agreement, the Depositors has presented financial projections
      indicating that the net income of at least $9 million, with an allowable grace
      margin of $1 million, equating to net income of $8 million for the fiscal year
      ending December 31, 2007 (the “Performance Threshold”, “FY2007”)), based upon an
      audit conducted in conformity with United State General Accepted Accounting
      Principles and United State auditing standards. As an inducement to the
      investors in this private equity financing, the Investors Agent, Benda, the
      Depositors entered into a Make Good Escrow Agreement (the “Make Good Escrow
      Agreement”) whereby the Depositors agreed that they placed a total of $15
      million shares (to be equitably adjusted for stock splits, stock dividends
      and
      similar adjustments) of Benda Common Stock into escrow (the “Escrow Shares”) at
      the Closing for the benefit of the investors in the event that the Company
      fails
      to satisfy the Performance Threshold.




In
      the
      event the Performance Threshold is not attained, the Company shall issue Common
      Stock from the Escrow Shares to the investors who hold at least 100 shares
      of
      Common Stock as of April 28, 2008, based on the following formula:




(($8
      million - FY2007 Net Income) / $8 million) X Escrow Shares.




The
      issuance of the Common Stock to the Ever Leader Shareholders is intended to
      be
      exempt from registration under the Securities Act of 1933, as amended (the
      “Securities Act”), pursuant to Regulation S and regulation D promulgated
      thereunder and to Section 4(2) of the Securities Act. The issuances of the
      Units
      to the Investors and the Warrants to the Placement Agent are intended to be
      exempt from registration under the Securities Act pursuant to Regulation D
      and
      Section 4(2) thereof and such other available exemptions. As such, the Common
      Shares, the Warrants, and the common stock underlying the Warrants upon
      conversion thereof may not be offered or sold in the United States unless they
      are registered under the Securities Act, or an exemption from the registration
      requirements of the Securities Act is available. The registration statement
      covering these securities will be filed with the SEC and with any required
      state
      securities commission in respect of the Exchange and/or the Financing subsequent
      to the Closing.




F-17




Benda
      has
      agreed to register for resale: (i) the shares of Common Stock (“Registered
      Common Stock”); and (ii) 150% of the shares of our common stock underlying the
      Warrants (“Underlying Common Stock”), on a registration statement to be filed
      with the SEC (“Registration Statement”). Such Registration Statement shall be
      filed on or prior to sixty (60) days from the Closing of this Offering (the
      “Filing Deadline”) and shall be declared effective within 180 days from the
      Closing Date (the “Effectiveness Deadline”). If the Registration Statement is
      not filed by the Filing Deadline or does not become effective by the
      Effectiveness Deadline or if we fail to maintain the effectiveness of the
      Registration Statement, for any reason, we will be required to pay Investors
      in
      cash an amount equal to 1% of the purchase price of each Unit held by Investors
      on such Filing Deadline, Effectiveness Deadline or the first day of such failure
      to maintain the Registration Period, as applicable, and for every 30 day period
      (or part) thereafter, in each case until cured (“Registration Delay Payments”),
      provided that the Registration Delay Payments shall not exceed 10% of the
      purchase price of the Offering. In the event that the Registration Delay
      Payments are not made in a timely manner, such Registration Delay Payments
      shall
      bear interest at a rate of 1.5% per month until paid in full. We shall pay
      the
      usual costs of such registration.




Except
      as follows, no holder of any of our currently outstanding securities has any
      registration rights with respect to the securities held by them: (i) 2,400,000
      shares of our Common Stock held by various parties, (ii) 4,481,302 shares of
      our
      Common Stock held by KI Equity; and (iii) 423,294 shares of our Common Stock
      held by the principals of Anslow & Jaclin, LLP. We shall not file any other
      registration statement for any of our securities (other than the shares of
      Common Stock sold in this offering, the
      Underlying Common Stock and the Common Stock underlying the Agent Warrants)
      until such time as the Registration Statement has been filed and declared
      effective; provided, however, we may, subject to stockholder approval, establish
      an equity performance or stock option plan for the benefit of our employees
      and
      directors for up to 5% of the outstanding shares of our Common Stock and file
      a
      registration statement to register such shares on Form S-8 or a comparable
      form
      for such purpose.




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”). The
      Placement Agent Warrants will have registration rights similar to the
      registration rights afforded to the purchasers of the Units. 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 a cash fee
      (“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. We shall pay such cash Warrant
      Solicitation Fees to the Placement Agent, in immediately available funds, within
      three (3) business days following receipt, directly or indirectly, of any cash
      or other proceeds from the exercise of such Warrant.




As
      of
      December 31, 2006, the Company had an aggregate of:




(a)
            96,258,,411
                shares of Common Stock issued and
                outstanding:





(b)
            706,195
                shares of Common Stock to be issuable for services for various
                consultants;





(c)
            None
                shares of Preferred Stock issued and
                outstanding;





(d)
            28,557,936
                Warrants, each convertible into one (1) share of the Company’s Common
                Stock, issued and outstanding, and;





(e)
            None
                Options issued and outstanding




The
      balance of
      Additional Paid-in Capital as of December 31, 2006 was $13,099,424 and the
      details of its components were stated as follows:




a)
            On
                November 17, 2005, the Company adjusted its Common Stock par value
                from
                $0.01 per share to $0.001 per share, therefore the difference,$584,481,
                between the original Common Stock amount, $649,424 and the adjusted
                Common
                Stock amount, $64,942, was recorded as an increase in additional
                paid-in
                capital.




F-18




b)
            According
                to the Exchange Transaction, Benda issued 25,961,760 shares of Benda
                common stock to certain accredited and institutional investors upon
                closing of the Exchange Transaction at a per share issuance price
                of
                $0.4622 and gross proceeds of$120,000,000, less placement agent
                commissions and other transaction related fees of $1,694,326 charged
                against paid in capital as issuance costs. Therefore the net proceeds
                was
                $10,305,674, whereas the detail breakdown of the placement agent
                commissions and other transaction related fees are stated as
                follows:




Keating
                  Investment - non-accountable 1.5% of placement expenses
              
              $
              180,000.00Keating
                  Investment - 7.5% of placement fee
              
              
              897,797.62Computershare
                  Trust - escrow fee & make good escrow agreement
              
              
              5,000.00John
                  B. Lowy, P.C. - legal fee
              
              
              10,000.00RR
                  Donnelley- printing fee
              
              
              21,228.64H.
                  Rivkin & Co. - consulting Fee
              
              
              50,000.00Keating
                  Investment - reverse merger advisory fee)
              
              
              395,000.00Anslow
                  & Jaclin LLP - legal fee
              
              
              135,300.00Total
              
              $
              1,694,326.26




c)
            According
                to the Exchange Transaction, Benda issued 64,942,360 shares of Benda
                Stock
                (legal acquirer) with par value at $0.001 per share for all of the
                issued
                and outstanding shares of Ever Leader common stock (legal acquiree,
                but
                accounting acquirer) upon closing of the Exchange Transaction, resulting
                in the elimination of all issued and outstanding shares of Ever Leader
                common stock (1,000,000 shares with a par value of $1,285). Therefore,
                a
                net $63,657 was recorded as common
                stock.




d)
            According
                to the Exchange Transaction, Benda issued 25,961,760 shares of Benda
                Common Stock to certain accredited and institutional investors upon
                closing of the Exchange Transaction with par value at $0.001 per
                share.
                Therefore a net $25,962 was recorded as common stock.




e)
            Due
                to Exchange Transaction, the accumulated deficit of Benda upon closing
                of
                the Exchange Transaction would be eliminated against additional paid-in
                capital. As of November 30, 2006, the additional paid-in capital
                was
                $16,210,416 while the accumulated deficit was $16,209,962 Thus, a
                net
                impact on the additional paid-in capital would be $454.




f)
            In
                November 2005, Ever Leader and Hon entered into a shareholder loan
                agreement whereby Hon was to loan an aggregate of $2,298,434 to Ever
                Leader (with this amount to be funded at periodic intervals during
                2006)
                to allow Ever Leader to satisfy its obligation to Benda Science,
                Wan, and
                Xu in relation to the acquisition of its 95% interest in Benda Ebei.
                During the year ended December 31, 2006, $2,298,434 had been received
                by
                Ever Leader under this loan agreement with Hon. On September 5, 2006,
                Hon
                waived the right of the shareholder loan to Ever Leader under the
                condition that Wan assumed the liability of $2,298,434 personally
                to Hon
                pursuant to a Loan Waiver Agreement. Therefore, the loan amount received
                of $2,298,434 was recorded as an increase in paid-in capital.




As
      per
      the consolidated statement of changes in stockholders’ equity, the total net
      changes, other than the gross proceeds of $12,000,000, of the allocation items
      in the additional paid-in capital was $504,905 and that are reflected from
      the
      above mentioned events (b) to (f).




F-19




**13.**
            **Shares
                I****ssuable
                For Services**




In
      connection with the Share Exchange Agreement dated September 7, 2006 which
      was
      entered by the Company (previously know as “Applied Spectrum Technologies, Inc.”
KI equity Partners III, LLC, Ever Leader Holdings Limited, and each of the
      shareholders of Ever Leader, the Company should issued 706,195 shares of common
      stock to various consultants for the services rendered and the services valued
      at the offering price at $0.4622 per shares or total US$326,403.




**14.**
            **Other
                General And Administrative**




The
      total
      amount of other general and administrative was $1,897,839 which was mainly
      composed of: (i) auditing and accounting fee, $521,997; (ii) provision of bad
      debt, $364,064; (iii) legal fee related to the Exchange Transaction, $114,993;
      (iv) insurance policy for director and officer, $66,171; (v) office expenses,
      $210,696; (vi) salary and wages, $221,174 and (vii) consulting fee related
      to
      the Exchange Transaction, $191,248.




**15.**
            **Commitments
                and Contingencies**




As
      of
      December 31, 2006, the Company did not have any significant outstanding
      commitments or contingent liabilities.




**16.**
            **Segment
                Information**




The
      Company has four core operating segments: Benda Ebei, Jiangling Benda, Yidu
      Benda and Beijing Shusai. Benda Ebei manufactures injection solutions and other
      conventional medicines, Jiangling Benda manufactures active pharmaceutical
      ingredients, Yidu Benda manufactures bulk chemicals and Beijing Shusai operates
      and distributes Pharyngitis Killer Therapy.




Selected
      financial information for each of these segments for the year ended December
      31,
      2006 and 2005 is as follows:


Benda
                  Ebei2006
              
              2005Revenue
                  from external customers
              
              $
              9,635,938
              
              $
              9,241,823Intersegement
                  revenue
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              $
              2,484,701
              
              $
              2,484,009
  Jiangling
                  Benda2006
              
              2005Revenue
                  from external customers
              
              $
              15,564
              
              $
              228,666Intersegement
                  revenue
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              $
              (169,979
              )
              $
              (57,523
              )
  Yidu
                  Benda2006
              
              2005Revenue
                  from external customers
              
              $
              6,237,621
              
              $
              5,943,617Intersegement
                  revenue
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              $
              2,343,081
              
              $
              1,465,955




F-20


Beijing
                    Shusai2006
                
                2005Revenue
                    from external customers
                
                $
                42,952
                
                $
                -Intersegement
                    revenue
                
                
                -
                
                
                -Segment
                    profit (loss)
                
                $
                (39,337
                )
                $
                -
  Total2006
                  
                  2005Revenue
                      from external customers
                  
                  $
                  15,932,075
                  
                  $
                  15,414,106Intersegement
                      revenue
                  
                  
                  -
                  
                  
                  -Segment
                      profit (loss)
                  
                  $
                  4,618,466
                  
                  $
                  3,892,441






There
      were material changes in segment assets, basis of segmentation or the way in
      which segment profit was measured for the year ended December 31, 2006 and
      2005.


Total2006
              
              2005ProfitTotal
                  profit for reportable segment
              
              $
              4,618,466
              
              $
              3,892,441Unallocated
                  amounts:
              
              
              -
              
              
              -Other
                  corporate expense
              
              
              (2,001,684
              )
              
              (150,547
              )Total
                  consolidated profit after income taxes
              
              $
              2,616,782
              
              $
              3,741,894




In
      the
      year ended December 31, 2006, other corporate expense was $2,001,684 and which
      was mainly composed of (i) auditing and accounting fee, $509,839; (ii) legal
      fee
      related to the Exchange Transaction, $114,993; (iii) insurance policy for
      director and officer, $66,171; (iv) consulting fee related to the Exchange
      Transaction, $191,248; (v) stock-base compensation to various consultants,
      $326,403; (vi) termination fee for co-operation with a financial institution,
      $280,376; (vii) office expenses, $30,994 and (viii) travel and transportation
      $36,009.




**17.**
            **Basic
                and Diluted Weighted Average Number of
                Shares**




Year
                  Ended December 31,2006
              
              2005Basic
                  weighted average number of shares
              
              
              73,414,057
              
              
              64,942,360Assumed
                  exercise of warrants
              
              
              1,450,226
              
              
              -Diluted
                  weighted average number of shares
              
              
              74,864,283
              
              
              64,942,360




F-21




**18.**
            **Subsequent
                Events**




(a)
      Temporary close of Yidu Benda plant




Due
      to an
      government order issued by the local government on January 10, 2007, The
      Company’s Yidu Benda plant has closed down since the mid of January 2007 for
      improvement of our waste water treatment systems. The order requires the Company
      to finish the improvement and be compliant by June 30, 2007. The Company expects
      the Yidu Benda plant to resume production by July 1, 2007.




(b)
      Subsequent acquisition and financing




On
      April
      5, 2007, Benda, through its 95% owned China-based subsidiary Benda Ebei, entered
      into an agreement with the two controlling shareholders of Shenzhen SiBiono
      GeneTech Co., Ltd. (“SiBiono”) to purchase a total of approximately 57.57% of
      the of the shares ownership of SiBiono’s common stock for total cash
      consideration of RMB 60.0 million (approximately $7.7million).




In
      addition, Benda issued 2,100,000 shares of restricted common stock as
      consideration for services rendered under a financial consultancy agreement
      (the
“Consulting Agreement”). Under terms of the Consulting Agreement, in the event
      that (a) Benda’s stock does not reach $3.60 per share, and (b) the Company is
      not listed on either the NASDAQ Capital Market or the American Stock Exchange
      within three months from the last date of a twelve-month restriction period
      following the issuance of such shares per the Consulting Agreement, then the
      consulting firm has the right to cause Benda to redeem 1,960,000 (out of a
      total
      of 2.1 million issued) Benda shares for cash consideration of $7,056,000.




Simultaneous
      with the acquisition of the majority of the shares in SiBiono, on April 5,
      2007
      Benda completed a $7,560,000 private placement to certain institutional and
      accredited investors who had also participated in the Company’s previous $12.0
      million private offering, which closed on November 15, 2006. This most recent
      offering consisted of 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 which can be exercised into common shares of Benda beginning in two
      years. The Notes shall bear an interest rate of four percent (4%) per annum
      until the Buyer elects to exercise the right to convert, and shall mature on
      March 28, 2009.




Pursuant
      to this financing, in March 2007 the Company has entered into a Modification
      Agreement amending the November Financing Documents with the Investors. The
      securities underlying the Notes and Warrants issued to the Investors pursuant
      to
      the terms of the Investment Agreement shall be subject to the terms of the
      Make
      Good Agreement entered into in connection with the November Financing (the
“Make
      Good Agreement”). The targeted net income of the Company for fiscal year end
      2007 (“FY07 Net Income”) will be greater than or equal to $10.0 million,
      adjusted for any non-cash charges, as the Performance Threshold.




Prior
      to
      the offering, Benda had 96,964,606 shares of common stock issued and outstanding
      and a total of 125,522,542 shares of common stock issued and outstanding on
      a
      fully diluted basis. Following the offering, Benda now has 112,694,530 shares
      of
      common stock issued and outstanding and a total of 154,882,390 shares of common
      stock issued and outstanding on a fully diluted basis.




The
      shares sold were not registered under the Securities Act of 1933, as amended
      (the "Securities Act"), and were sold in reliance upon exemptions from the
      registration requirements of the Securities Act pursuant to Regulations D
      promulgated under the Securities Act. Unless the shares are registered, they
      may
      not be offered or sold in the United States except pursuant to an exemption
      from
      the registration requirements of the Securities Act and applicable state
      laws.




F-22


**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**




On
      November 14, 2006, we dismissed De Joya Griffith & Company, LLC (“De Joya”),
      as our independent registered public accounting firm.




The
      report of De Joya on the Company’s financial statement for the fiscal year ended
      September 30, 2005 did not contain an adverse opinion or disclaimer of opinion.
      During the fiscal year ended September 30, 2005, our financial statements did
      not contain any adverse opinions or disclaimers of opinion, and were not
      qualified or modified as to uncertainty, audit scope, or accounting principles.
      The Company and De Joya did not have any disagreements with regard to any matter
      of accounting principles or practices, financial statement disclosure, or
      auditing scope or procedure for the audited financials for the fiscal year
      ended
      September 30, 2005 and subsequent interim period from October 1, 2005 through
      the date of dismissal. During the Company’s fiscal year ended September 30, 2005
      and subsequent interim period from October 1, 2005 through the date of
      dismissal, the Company did not experience any reportable events.




On
      November 14, 2006, Rotenberg & Co. LLP (“Rotenberg”) was engaged as our new
      independent registered public accounting firm. Prior to engaging Rotenberg,
      the
      Company had not consulted Rotenberg regarding the application of accounting
      principles to a specified transaction, completed or proposed, the type of audit
      opinion that might be rendered on the Company’s financial statements or a
      reportable event, nor did the Company consult with Rotenberg regarding any
      disagreements with its prior auditor on any matter of accounting principles
      or
      practices, financial statement disclosure, or auditing scope or procedure,
      which
      disagreements, if not resolved to the satisfaction of the prior auditor, would
      have caused it to make a reference to the subject matter of the disagreements
      in
      connection with its report.




Commencing
      January 2007, Rotenberg has decided to no longer undertake audits of Chinese
      based companies. Therefore, Schwartz Levitsky Feldman LLP, as Rotenberg's
      sub-contractor on the Company's audit shall be the Company's independent
      registered public accounting firm.





On
      February 8, 2007, we dismissed Schwartz Levitsky Feldman LLP (“SLF”) as our
      independent registered public accounting firm. SLF was previously appointed
      on
      January 9, 2007 as our independent auditors for the fiscal year ended September
      30, 2006 on whose financial statements they rendered an unqualified opinion
      on
      January 11, 2007. On November 17, 2006, SLF was also engaged to audit the
      financial statements of Everleader for the fiscal years ended December 31,
      2005
      and 2004. Benda and SLF did not have any disagreements with regard to any matter
      of accounting principles or practices, financial statement disclosure, or
      auditing scope or procedure during the year ended September 30, 2006 for which
      SLF issued an audit report, and the subsequent interim period through February
      8, 2007.  As
      required by applicable Securities legislation, Benda engaged SLF to audit the
      financial statements of Everleader for the fiscal years ended December 31,
      2005
      and 2004. During the period of the engagement with SLF, neither Benda nor
      Everleader had retained a qualified Chief Financial Officer. Accordingly,
      neither Benda nor Everleader had the technical expertise and as a result was
      unable to provide sufficient audit documentation and/or information to allow
      SLF
      to complete the audit of Everleader for the years ended December 31, 2005 and
      2004.




On
      March
      7, 2007, we engaged Kempisty and Company Certified Public Accountants, P.C.
      (“Kempisty”) to be our new independent registered public accounting firm. Prior
      to engaging Kempisty, the Company had not consulted Kempisty regarding the
      application of accounting principles to a specified transaction, completed
      or
      proposed, the type of audit opinion that might be rendered on the Company’s
      financial statements or a reportable event, nor did the Company consult with
      Kempisty regarding any disagreements with its prior auditor on any matter of
      accounting principles or practices, financial statement disclosure, or auditing
      scope or procedure, which disagreements, if not resolved to the satisfaction
      of
      the prior auditor, would have caused it to make a reference to the subject
      matter of the disagreements in connection with its report.




**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES**




Evaluation
      of disclosure controls and procedures




53




Our
      principal executive officer and principal financial officer evaluated our
      disclosure controls and procedures (as defined in rule 13a-14(c) and 15d-14(c)
      under the Securities Exchange Act of 1934, as amended) as of a date within
      90
      days before the filing of this annual report (the Evaluation Date). Based on
      that evaluation, our principal executive officer and principal financial officer
      concluded that, as of the Evaluation Date, the disclosure controls and
      procedures in place were adequate to ensure that information required to be
      disclosed by us, including our consolidated subsidiaries, in reports that we
      file or submit under the Exchange Act, is recorded, processed, summarized and
      reported on a timely basis in accordance with applicable rules and regulations.
      Although our principal executive officer and principal financial officer
      believes our existing disclosure controls and procedures are adequate to enable
      us to comply with our disclosure obligations, we intend to formalize and
      document the procedures already in place and establish a disclosure
      committee.




Changes
      in internal controls




We
      have
      not made any significant changes to our internal controls subsequent to the
      Evaluation Date. We have not identified any significant deficiencies or material
      weaknesses or other factors that could significantly affect these controls,
      and
      therefore, no corrective action was taken.




**PART
      III**




**ITEM
      9.**  **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
            
            45
            
            Chief
                Executive Officer and Chairman
            
            November
                10, 2006Wei
                Xu
            
            44
            
            Vice
                President, Operations
            
            November
                15, 2006John
                Micek, III
            
            54
            
            Director
            
            November
                15, 2006Daping
                Gu
            
            59
            
            Vice
                President, Marketing Director
            
            November
                15, 2006Hui
                Long
            
            46
            
            Vice
                President of Technology
            
            November
                15, 2006Ruilu
                Song
            
            64
            
            Vice
                President
            
            November
                15, 2006Jingbo
                Wu
            
            45
            
            Vice
                President
            
            November
                15, 2006Dr.
                Q.Y. Ma
            
            50
            
            Director
            
            March
                20, 2007Eric
                Yu
            
            39
            
            Chief
                Financial Officer and Director
            
            February
                9, 2007




Business
      Experience Descriptions:




*Mr.
      Yiqing Wan, Chairman, Chief Executive Officer, and Vice
      President*




Mr.
      Wan
      was appointed as Chairman and Chief Executive Officer upon Closing. 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.


54


*Ms.
      Wei Xu, Vice President of Operations*




Ms.
      Xu
      was appointed as Vice President of Operations upon Closing. Ms. Xu has over
      20
      years of experience in the medical industry and in public relations with Chinese
      government departments and organizations. From 2002 to present, she served
      as
      Chairperson of a related company, Hubei Benda Science and Technology Co., Ltd.
      Prior to such time, she was 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). Ms. Xu holds
      an M.B.A. from Beijing University. She received her certificate of completion
      of
      Master courses in General Medicines from Peking University in 2005.




*John
      Micek, III* *,
      Director.*




John
      Micek III is Managing Director of Silicon Prairie Partners, LP, a Palo Alto,
      California-based family-owned venture fund. Before founding Silicon Prairie
      Partners, John was President of JAL, Inc., a family-owned group of
      insurance-related companies in Omaha, Nebraska, which markets and services
      financial products nationwide to financial institutions and credit unions.
      John
      is a member of the Boards of several technology-based companies including UTEK
      (a university technology transfer company) and Enova Systems (enabling
      technology for fuel cell and distributed power management). He is a cum laude
      graduate of Santa Clara University, and the University of San Francisco School
      of Law, where he was Senior Articles Editor of the Law Review. He is a
      practicing California attorney specializing in financial services.




*Mr.
      Daping Gu, Vice President of Marketing*




Mr.
      Gu
      was appointed as Vice President of Marketing upon Closing. Mr. Gu became the
      general director of Hubei Yidu Benda Chemical Co., Ltd in 2002. He was formerly
      the supply and marketing section chief of Wuhan Medicine Supply Co., Ltd. (from
      1981 to 1984), the vice general manager of Hubei Medicine Supply Co., Ltd.
      (from
      1984 to 1996), and the general manager of Hubei Pharmaceutical Co. Ltd. (from
      1996 to 2002). Mr. Gu brings 25 years of experience in marketing medical
      products. He earned a B.A. in Business Administration from Hubei University
      in
      1987.




*Mr.
      Hui Long, Vice President of Technology*




Mr.
      Long
      was appointed as Vice President of Technology upon Closing. Mr. Long has held
      senior technical and production management positions with pharmaceutical
      enterprises for approximately 20 years. He was formerly the Chief of Technical
      Division of Sanxia Pharmaceutical Co., Ltd and the deputy general manager of
      Zhanjiang Jinhui Pharmaceuticals Co. Ltd. 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.
      Ruilu Song, Vice President*




Mr.
      Song
      was appointed as Vice President and Director upon Closing. Mr. Song became
      the
      General Manager of Ebei Pharmaceutical Corp. in 1999. He was also the general
      manager of Wuhan Technologies Trust and Investment Co. (from 1995 to 1999)
      and
      the director of Hubei Province Science Committee Financial Division. (from
      1985
      to 1995). Mr. Song received B.S. in organic chemical synthesis from Beijing
      Chemical University in 1966 and was granted senior engineer qualification of
      technology management in 1993.




*Mr.
      Jingbo Wu, Vice President*




Mr.
      Wu
      was appointed as Vice President and Director upon Closing. 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
      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.




55





*Eric
      Yu Tak Shing, Director*





Mr.
      Yu is
      a Certified Public Accountant with thirteen years of experience in public and
      corporate accounting and finance. In February of 2007, Mr. Yu was appointed
      as
      the Chief Financial Officer of the Company. Mr. Yu has served as the Financial
      Controller for Beijing Teletron Telecom Engineering Co. Ltd. from March of
      2006
      to January of 2007 and was in charge of the company’s issuance of private
      placements and Pre-IPO issues. From March of 2005 to March of 2006, Mr. Yu
      served as the Financial Controller for Payease Inc., where he was in charge
      of
      merger and acquisition fund raising and arranging bridge loans. From June of
      2001 to February of 2005, Mr. Yu served as the Financial Controller for several
      companies including Dynegy Network Technology Services (BJ) Ltd., an internet
      data center, China Gas Holdings, Ltd. and Tianjin East Ocean Gas Co. Ltd.,
      manufacturers in natural gas. From May of 2000 to February of 2005, Mr. Yu
      also
      served as the Financial Controller of the project companies of AsiaVest
      Investment Advisory Limited. His responsibilities included managing the
      accounting and listing department, and planning for an IPO with a fund raising
      target of HK$150 million.





Mr.
      Yu
      received a Bachelor of Commerce degree with a Accountancy and Legal Studies
      major in 1993 from University of Wollongong, Australia. Mr. Yu has worked
      closely with investment bankers for Pre-IPO and Private Placements, and in
      constructing financial and accounting systems and practice according to the
      high
      standards required for public listing.





Mr.
      Yu
      has served as a professional accountant to a widespread range of clients in
      China, Hong Kong, and the United States, and has worked in several different
      industries including Natural Gas, Telecom, Manufacturing, Infrastructure
      Construction, Hospitality, and Auditing.





**Employment
      Agreements**




As
      of the
      Closing, 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;
      Ruilu Song, our Vice President 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




Our
      board
      of directors functions as an audit committee and performs some of the same
      functions as an audit committee including: (1) selection and oversight of our
      independent accountant; (2) establishing procedures for the receipt, retention
      and treatment of complaints regarding accounting, internal controls and auditing
      matters; and (3) engaging outside advisors. We are not a "listed company" under
      SEC rules and is therefore not required to have an audit committee comprised
      of
      independent directors. Our board of directors has determined that its members
      do
      not include a person who is an "audit committee financial expert" within the
      meaning of the rules and regulations of the SEC. Our board of directors has
      determined that each of its members is able to read and understand fundamental
      financial statements and has substantial business experience that results in
      that member's financial sophistication. Accordingly, the board of directors
      believes that each of its members have the sufficient knowledge and experience
      necessary to fulfill the duties and obligations that an audit committee would
      have.




56




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.




Conflicts
      of Interest




Certain
      conflicts of interest existed at December 31, 2006 and may continue to exist
      between us and our current officers and directors due to the fact that they
      may
      have other business interests to which they devote their attention. Each officer
      and director may continue to do so notwithstanding the fact that management
      time
      should be devoted to our business.




Certain
      conflicts of interest may exist between us and our management, and conflicts
      may
      develop in the future. We have not established policies or procedures for the
      resolution of current or potential conflicts of interests between us, our
      officers and directors or affiliated entities. There can be no assurance that
      management will resolve all conflicts of interest in favor of us, and conflicts
      of interest may arise that can be resolved only through the exercise by
      management their best judgment as may be consistent with their fiduciary duties.
      Our management will try to resolve conflicts to the best advantage of all
      concerned.




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.


57


**ITEM
      10.**  **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 2006 fiscal
      year; (ii) the two other most highly compensated executive officers (in terms
      of
      salary and bonus) serving at the end of the 2006 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
            
            
            2006
            
            $
            20,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            20,000Wei
                Xu, Vice President
            
            
            2006
            
            $
            17,500
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            17,500Hui
                Long, Vice President
            
            
            2006
            
            $
            6,170
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            6,170Daping
                Gu, Vice President
            
            
            2006
            
            $
            5,553
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            5,553Ruilu
                Song, Vice President
            
            
            2006
            
            $
            5,553
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            5,553Jingbo
                Wu, Vice President (5)
            
            
            2006
            
            $
            3,085
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            3,085





No
      stock
      options were granted or exercised by any executive officer during the fiscal
      year ended December 31, 2006.





We
      did
      not pay any compensation to any director in the year ended December 31, 2006.




**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**




The
      following table sets forth information as of April 30, 2007 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.




**Name
                of Beneficial Owner**
            
            **Amount
                of**
              **Beneficial
                Ownership**
            
            **Percent
                of**
              **Beneficial
                Ownership (4)**XIA
                Pharmaceutical Inc. (1)
            
            
            46,187,136
            (2)
            
            47.63
            %Hui
                Long (1)
            
            
            0
            
            
            0Daping
                Gu (1)
            
            
            0
            
            
            0Ruilu
                Song (1)
            
            
            0
            
            
            0Jingbo
                Wu (1)
            
            
            0
            
            
            0Huilian
                Song (1)
            
            
            0
            
            
            0Pope
                Investments, LLC (3)
              5100
                Poplar Ave., Suite 805
              Memphis,
                TN 38137
            
            
            13,325,574
            
            
            13.74
            %All
                Executive Officers and Directors as a group (7 persons)
            
            
            46,187,136
            
            
            47.63
            %








(1)
            Address
                is c/o Changjiang Tower, 23rd Floor, No. 1 Minquan Road, Wuhan, Hubei
                Province, PRC.




58




(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 13,325,574 shares of common stock, Pope also holds warrants for
                the
                right to purchase a total of 20,953,060 additional shares, and a
                Convertible Promissory Note convertible into 9,952,008 additional
                shares.(4)
            Applicable
                percentage of ownership is based on 96,964,606 shares of common stock
                outstanding as of May 4, 2007 together with securities
                exercisable or convertible into shares of common stock within sixty
                (60)
                days of May 4, 2007 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 4, 2007 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.




**CHANGE
      OF CONTROL**




The
      Company entered into a Share Exchange Agreement dated September 7, 2006
      (“Exchange Agreement”) with KI Equity Partners III, LLC, a Delaware limited
      liability company (“KI Equity”), Ever Leader Holdings Limited, a company
      incorporated under the laws of Hong Kong SAR ("Ever Leader"), and each of the
      equity owners of Ever Leader (the “Ever Leader Shareholders”), whereby the
      Company acquired all of the equity interest of Ever Leader in exchange for
      issuing 64,942,360 shares of our common stock to the Ever Leader shareholders.
      The Exchange Agreement was contingent upon the Company receiving a minimum
      of
      $10,000,000 in signed subscriptions (the “Subscription Agreements”) to purchase
      Units in a private placement offering (the “Financing”) exempt from registration
      under the Securities Act. On November 15, 2006, the Company received the
      requisite amount of Subscription Agreements and the transactions contemplated
      by
      the Exchange Agreement closed.




59




In
      connection with the Exchange Agreement and Financing: (i) effective November
      15,
      2006, Mr. Kevin R. Keating resigned as member of the board of directors of
      the
      Company. There were no disagreements between or among Mr. Kevin R. Keating
      and
      any officer or director of the Company; (ii) effective November 15, 2006, Mr.
      Kevin R. Keating resigned as the Chief Executive Officer, President, Chief
      Financial Officer, Secretary and Treasurer of the Company; (iv) effective
      November 15, 2006, Yiqing Wan, Ruilu Song, Jingbo Wu, Hulian Song, and John
      Micek, III were appointed as members of the Company’s Board of Directors (the
“New Board”); and (v) effective November 15, 2006, the New Board appointed
      Yiqing Wan as the Chief Executive Officer and President, Wei Xu as the Vice
      President of Operations, Hui Long as the Vice President of Technology, Daping
      Gu
      as the Vice President of Marketing, Ruilu Song as Vice President, and Jingbo
      Wu
      as Vice President of the Company.




The
      consummation of the Exchange 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 for the purchase of shares of the Common Shares promptly
      after the closing of the Exchange under terms and conditions approved by our
      board of directors immediately following the Exchange.




Upon
      Closing, we received gross proceeds of $12,000,000 in connection with the
      Financing from the Investors. Pursuant to Subscription Agreements entered into
      with these Investors, we sold 480 Units, with each Unit consisting of 54,087
      shares of our Common Stock, and Warrants to purchase 54,087 shares of our Common
      Stock at an exercise price of $0.555 per share. The price of each Unit was
      $25,000. After commissions and expenses, we received net proceeds of
      approximately $10,470,000 from the Financing. Upon completion of the Financing,
      the Investors in the aggregate received 25,961,760 shares of our Common Stock.
      The Investors also received Warrants to purchase an additional 25,961,760 shares
      of Applied Spectrum’s common stock in connection with the
      financing.




**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**




Described
      below are certain transactions or series of transactions since inception between
      Applied Spectrum 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 $60,000 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.




60




Kevin
      R.
      Keating 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




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.




***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.




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).




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).




61




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, operating two clinics 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.




62




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:





63




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




(a)
            Exhibits.




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)




64




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)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-KSB.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-KSB.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-KSB.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-KSB.




(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).




(b)
            Reports
                on Form 8-K.




On
      September 7, 2006, in its Current Report on Form 8-K dated September 7, 2006,
      the Company reported the disclosing the entry into an exchange agreement with
      KI
      Equity Partners III, LLC, Ever Leader Holdings Limited, and each of the equity
      owners of Ever Leader Holdings Limited as described elsewhere in this Report.




On
      November 14, 2006, in its Current Report on Form 8-K dated November 14, 2006,
      the Company reported the change of its certifying accountants described more
      fully in Item 8 of this Report.




On
      November 17, 2006, in its Current Report on Form 8-K dated November 15, 2006,
      the Company reported the closing of exchange agreement described more fully
      in
      Note 8 to the financial statements of this Report.




65


**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-KSB (17 CFR 249.308a) or 10-QSB (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 NIL for the fiscal
      year ended December 31, 2005 and $521,997 **** for
      the
      fiscal year ended December 31, 2006.




(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.




66




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
                4, 2007
            By:
            /s/
                Yiqing WanYiqing
                WanChief
                Executive Officer and President, and
                Director


Date: May
                  4, 2007
              By:
              /s/ Eric
                YuEric
                YuChief
                  Financial Officer
                Principal Accounting Officer
                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 May 4, 2007.




Name
            
            Title
            
            Date/s/
                Yiqing Wan
            
            Chief
                Executive Officer and
            
            May
                4, 2007Yiqing
                Wan
            
            President
                / Director/s/
                John Micek, III
            
            Director
            
            May
                4, 2007John
                Micek III/s/
                Dr. Q.Y. Ma
            
            Director
            
            May
                4, 2007Dr.
                Q.Y. Ma/s/
                Eric Yu
            
            Chief
                Financial Officer and Director
            
            May
                4, 2007Eric
                Yu




67