**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**


**(Mark
      One)**




**x**
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934.**




**For
      the quarterly period ended June 30, 2007**




**or**




**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 registrant as specified in its charter)


**Delaware**
            **41-2185030**(State
                or other jurisdiction of
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)




**Changjiang
                Tower, 23rd Floor**
              **No.
                1 Minquan Road**
              **Wuhan,
                Hubei Province, PRC**(Address
                of principal executive offices)
            (Zip
                Code)




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


(Registrant’s
      telephone number, including area code)




(Former
      name, former address and former fiscal year, if changed since last
      report)




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




Indicate
      by check mark whether the registrant is a shell company as defined in Rule
      12b-2
      of the Exchange Act.




Yes
                oNox





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of August 16, 2007: 99,701,160 shares of common stock.
















**BENDA
      PHARMACEUTICAL, INC.**


**FINANCIAL
      STATEMENTS**




**INDEX**




**PART
      I-- FINANCIAL INFORMATION**




Item
                1.
            
            Financial
                Statements
            3Item
                2.
            
            Management’s
                Discussion and Analysis of Financial Condition
            22Item
                3.
            
            Controls
                and Procedures
            27




**PART
      II-- OTHER INFORMATION**




Item
                1.
            
            Legal
                Proceedings
            28Item
                2.
            
            Changes
                in Securities
            28Item
                3.
            
            Defaults
                Upon Senior Securities
            28Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            29Item
                5.
            
            Other
                Information
            29Item
                6.
            
            Exhibits
                and Reports on Form 8-K
            29




**SIGNATURE**




-2-







**Item
      1. Financial Information**




BASIS
      OF
      PRESENTATION




The
      accompanying reviewed financial statements are presented in accordance with
      generally accepted accounting principles for interim financial information
      and
      the instructions to Form 10-QSB and item 310 under subpart A of Regulation
      S-B.
      Accordingly, they do not include all of the information and footnotes required
      by generally accepted accounting principles for complete financial statements.
      In the opinion of management, all adjustments (consisting only of normal
      occurring accruals) considered necessary in order to make the financial
      statements not misleading, have been included. Operating results for the three
      and six months ended June 30, 2007 are not necessarily indicative of results
      that may be expected for the year ending December 31, 2007. The financial
      statements are presented on the accrual basis.






-3-


**Benda
      Pharmaceutical, Inc.**


**Consolidated
      Balance Sheets**


**(Amounts
      expressed in U.S. Dollars)**






**June
                  30**
              
              **December
                  31****2007**
              
              **2006****Assets**
              
              (Unaudited)Current
                  AssetsCash
                  and cash equivalents
              
              $
              1,986,585
              
              $
              1,676,119Account
                  receivables, net
              
              
              6,442,629
              
              
              6,193,585Other
                  receivables
              
              
              636,629
              
              
              99,733Refundable
                  purchase price paid (Note 5)
              
              
              1,195,032
              
              
              5,367,801Inventories
                  (Note 6)
              
              
              2,037,383
              
              
              701,339Prepaid
                  expenses and deposits
              
              
              903,790
              
              
              372,548Total
                  current assets
              
              
              13,202,048
              
              
              14,411,124Due
                  from related parties (Note 15)
              
              
              2,630,010
              
              
              1,976,815Long-term
                  loan receivable (Note 15)
              
              
              131,497
              
              
              -Property
                  and equipments, net (Note 7)
              
              
              21,407,356
              
              
              13,673,067Intangible
                  assets, net (Note 8)
              
              
              5,303,313
              
              
              1,501,483Goodwill
                  (Note 9)
              
              
              7,093,631
              
              
              -Restricted
                  cash (Note 10)
              
              
              1,304,972
              
              
              -Debt
                  issue costs (Note 20)
              
              
              461,931
              
              
              -Total
                  Assets
              
              $
              51,534,758
              
              $
              31,562,489**Liabilities
                  & Shareholders' Equity**Current
                  LiabilitiesBank
                  indebtedness (Note 10)
              
              $
              836,539
              
              $
              -Bank
                  loans payable (current portion) (Note 11)
              
              
              3,024,422
              
              
              256,492Long
                  term debt payable (current portion) (Note 12)
              
              
              3,816,859
              
              
              -Accounts
                  payable and accrued liabilities
              
              
              1,834,348
              
              
              1,823,030Taxes
                  payable
              
              
              400,405
              
              
              226,931Acquisition
                  price payable (Note 9)
              
              
              1,749,880
              
              
              -Wages
                  payable
              
              
              431,849
              
              
              145,903Deferred
                  revenues
              
              
              -
              
              
              1,732Total
                  current liabilities
              
              
              12,094,302
              
              
              2,454,088Long
                  term debt payable (long term portion) (Note 12)
              
              
              407,639
              
              
              -Long-term
                  convertible promissory notes (Note 20)
              
              
              960,985
              
              
              -Due
                  to related parties (Long-term) (Note 15)
              
              
              2,971,038
              
              
              3,034,365Total
                  liabilities
              
              
              16,433,964
              
              
              5,488,454Minority
                  interest
              
              
              3,462,087
              
              
              2,154,356Redeemable
                  common stock, 2,049,560 shares at $3.6 per share (Note 16)
              
              
              7,378,416
              
              
              -Shareholders'
                  EquityPreferred
                  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;96,964,606
                  shares issued and outstanding as of 6/30/2007;96,258,411
                  shares issued and outstanding as of 12/31/2006
              
              
              96,964
              
              
              96,258Additional
                  paid in capital (Note 21)
              
              
              20,985,121
              
              
              13,099,424Retained
                  earnings (unrestricted)
              
              
              (1,044,206
              )
              
              7,437,663Statutory
                  surplus reserve fund (Note 14)
              
              
              1,869,523
              
              
              1,869,523Accumulative
                  other comprehensive income
              
              
              1,848,888
              
              
              1,090,408Shares
                  issuable for acquisition and services
              
              
              504,000
              
              
              326,403Total
                  Shareholders' Equity
              
              
              24,260,291
              
              
              23,919,680Total
                  Liabilities & Shareholders' Equity
              
              $
              51,534,758
              
              $
              31,562,489


The
        accompanying notes are an integral part of these
        consolidated financial statements.
  
 -4-




**Benda
      Pharmaceutical, Inc.**


**Consolidated
      Statements of Operations (UNAUDITED)**


**(Amounts
      expressed in U.S. Dollars)**







**SIX
                  MONTHS ENDED JUNE 30,**
              
              **THREE
                  MONTHS ENDED JUNE 30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Revenue
              
              $
              8,236,852
              
              $
              7,638,628
              
              $
              5,207,817
              
              $
              3,981,852Cost
                  of goods sold
              
              
              (4,293,280
              )
              
              (4,137,171
              )
              
              (2,484,378
              )
              
              (2,249,654
              )Gross
                  profit
              
              
              3,943,572
              
              
              3,501,457
              
              
              2,723,439
              
              
              1,732,198Selling
                  expenses
              
              
              (344,886
              )
              
              (279,519
              )
              
              (256,703
              )
              
              (139,311
              )General
                  and administrative expensesAmortization
                  of intangible assets
              
              
              (202,746
              )
              
              (133,645
              )
              
              (135,340
              )
              
              (64,363
              )Amortization
                  of debt issue costs
              
              
              (67,269
              )
              
              -
              
              
              (58,526
              )
              
              -Depreciation
              
              
              (355,231
              )
              
              (277,514
              )
              
              (158,632
              )
              
              (139,087
              )Bad
                  debts
              
              
              (776,859
              )
              
              (971,506
              )
              
              (847,845
              )
              
              (863,013
              )Director
                  remuneration
              
              
              (33,945
              )
              
              -
              
              
              (33,945
              )
              
              -Penalty
                  to investors
              
              
              (120,000
              )
              
              -
              
              
              -
              
              
              -Finder Fees
              
              
              (239,963
              )
              
              -
              
              
              (239,963
              )
              
              -Cash
                  bonus
              
              
              (173,400
              )
              
              -
              
              
              (173,400
              )
              
              -Consulting
                  and professional fees (Note 16)
              
              
              (7,882,416
              )
              
              -
              
              
              (7,882,416
              )
              
              -Other
                  general and administrative expenses (Note 17)
              
              
              (974,139
              )
              
              (276,361
              )
              
              (649,426
              )
              
              (150,691
              )Total
                  general and administrative expenses
              
              
              (10,825,968
              )
              
              (1,659,026
              )
              
              (10,179,493
              )
              
              (1,217,154
              )Research
                  and development expenses
              
              
              (97,119
              )
              
              (6,231
              )
              
              (97,119
              )
              
              (6,231
              )Total
                  operating expenses
              
              
              (11,267,973
              )
              
              (1,944,776
              )
              
              (10,533,315
              )
              
              (1,362,696
              )Operating
                  income / (loss)
              
              
              (7,324,401
              )
              
              1,556,681
              
              
              (7,809,876
              )
              
              369,502Interest
                  expense
              
              
              (1,066,406
              )
              
              (79,237
              )
              
              (1,048,821
              )
              
              (39,019
              )Other
                  income (expenses)
              
              
              90,158
              
              
              (246,390
              )
              
              101,246
              
              
              380Government
                  subsidies / grants (Note 18)
              
              
              273,115
              
              
              -
              
              
              273,115
              
              
              -Income
                  / (loss) before minority interest and income taxes
              
              
              (8,027,534
              )
              
              1,231,054
              
              
              (8,484,336
              )
              
              330,863Income
                  taxes (Note 19)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Minority
                  interest
              
              
              (454,335
              )
              
              (77,608
              )
              
              (413,570
              )
              
              (26,104
              )Net
                  income / (loss)
              
              $
              (8,481,869
              )
              $
              1,153,446
              
              $
              (8,897,906
              )
              $
              304,759Earnings
                  / (loss) per share - basic
              
              $
              (0.09
              )
              $
              0.02
              
              $
              (0.09
              )
              $
              0.00Weighted
                  average shares outstanding - basic
              
              
              96,625,164
              
              
              70,240,401
              
              
              96,625,164
              
              
              70,240,401Earnings
                  / (loss) per share - diluted
              
              $
              (0.09
              )
              $
              0.02
              
              $
              (0.09
              )
              $
              0.00Weighted
                  average shares outstanding - diluted
              
              
              128,465,870
              
              
              70,240,401
              
              
              128,465,870
              
              
              70,240,401


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




-5-




**Benda
      Pharmaceutical, Inc.**


**Consolidated
      Statements of Cash Flows (UNAUDITED)**


**(Amounts
      expressed in U.S. Dollars)**







**SIX
                  MONTHS ENDED JUNE 30,****2007**
              
              **2006**(Unaudited)
              
              (Unaudited)**Cash
                  Flows From Operating Activities**Net
                  income / (loss)
              
              $
              (8,481,869
              )
              $
              1,153,446Adjustments
                  to reconcile net income / (loss) to net cash provided by operating
                  activities:Redeemable
                  common stock issuable for services (Note 16)
              
              
              7,882,416
              
              
              -Bad
                  Debt provision
              
              
              776,859
              
              
              971,506Minority
                  interest
              
              
              454,335
              
              
              77,608Loss
                  on disposals of fixed assets
              
              
              14,931
              
              
              247,494Depreciation
              
              
              512,370
              
              
              375,081Amortization
                  of intangible assets
              
              
              202,746
              
              
              133,645Amortization
                  of debt issue costs (Note 20)
              
              
              67,269
              
              
              -Interest
                  expense (amortization of debt discount) (Note 20)
              
              
              960,985
              
              
              -Changes
                  in operating assets and liabilities:Account
                  receivables
              
              
              (451,147
              )
              
              (913,977
              )Other
                  receivables
              
              
              (164,133
              )
              
              (7,825
              )Prepaid
                  expenses and deposits
              
              
              (374,486
              )
              
              194,495Inventories
              
              
              (611,943
              )
              
              (468,716
              )Accounts
                  payable and accrued liabilities
              
              
              (377,837
              )
              
              247,394Others
                  payable
              
              
              (18,329
              )
              
              (4,262
              )Taxes
                  payable
              
              
              (143,156
              )
              
              (109,976
              )**Net
                  cash provided by operating activities**
              
              
              249,010
              
              
              1,895,913**Cash
                  Flows From Investing Activities**Acquisition
                  cost paid
              
              
              (1,532,159
              )
              
              -Purchases
                  of property and equipment
              
              
              (1,277,234
              )
              
              (237,043
              )Purchases
                  of intangible assets
              
              
              (1,972,500
              )
              
              (660,486
              )Construction
                  in progress
              
              
              (787,882
              )
              
              (643,972
              )Loans
                  to related parties, net
              
              
              (646,127
              )
              
              (18,957
              )**Net
                  cash used in investing activities**
              
              
              (6,215,903
              )
              
              (1,560,459
              )**Cash
                  Flows From Financing Actives**Proceeds
                  from issuance of convertible promissory note (Note 20)
              
              
              7,030,800
              
              
              -Proceeds
                  and repayments of borrowings under related parties, net
              
              
              (63,327
              )
              
              (55,851
              )Proceeds
                  and repayments of borrowings under government debts payable,
                  net
              
              
              (273,115
              )
              
              -Proceeds
                  and repayments of borrowings under bank loans, net
              
              
              (451,574
              )
              
              (54,994
              )**Net
                  cash provided by (used in) financing activities**
              
              
              6,242,784
              
              
              (110,845
              )Effect
                  of exchange rate changes on cash
              
              
              34,575
              
              
              55,701**Net
                  increase in cash and cash equivalents**
              
              
              310,466
              
              
              280,310**Cash
                  and cash equivalents, beginning of period**
              
              
              1,676,119
              
              
              308,082**Cash
                  and cash equivalents, end of period**
              
              $
              1,986,585
              
              $
              588,392**Supplemental
                  Disclosure of Cash Flow Information****Cash
                  paid for interest**
              
              $
              123,584
              
              $
              75,875**Cash
                  paid for income taxes**
              
              $
              -
              
              $
              -


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





-6-




**Benda
      Pharmaceutical, Inc.**


**Notes
      to Consolidated Financial Statements**


**(Amounts
      expressed in U.S. Dollars)**







**1.**
            **Organization**





Benda
      Pharmaceutical, Inc. is engaged in the business of identifying, discovering,
      developing, and manufacturing conventional medicines, active pharmaceuticals,
      bulk chemicals (or pharmaceutical immediates), and Traditional Chinese Medicines
      (“TCM”) for the treatment of some of the most widespread common ailments and
      diseases (e.g. common cold, diabetes, and cancer).




On
      April
      5, 2007, Hubei Tongji Benda Ebei Pharmaceutical Co., Ltd. (“Benda Ebei”), of
      which Ever Leader Group Limited a wholly owned subsidiary of Benda
      Pharmaceutical, Inc. (“Benda”) and owns 95% of Benda Ebei’s outstanding common
      stock, has entered into Equity Transfer Agreements with Shenzhen Yuanzheng
      Investment Development Co., Ltd. and Shenzhen Yuanxing Gene City Development
      Co., Ltd., the then shareholders of Shenzhen
      SiBiono GeneTech Co., Ltd (“SiBiono”), to purchase 27.57% and 30% respectively of the shares of SiBiono’s
      common stock for total consideration of Rmb60 million or approximately $7.88
      million due and payable on or before April 30, 2007.





On
      June
      11, 2007, Benda, through its subsidiary Benda
      Ebei, entered
      into an Equity Transfer Agreements with Huimin Zhang and Yaojin Wang, the
      individual shareholders of SiBiono, and to purchase 1.6% and 0.96% respectively
      of the shares of S iBiono’s common
      stock for the total consideration of Rmb2,560,000 or approximately $0.34 due
      and
      payable on or before June 30, 2007.







**2.**
            **Basis
                of Preparation**





The
      unaudited consolidated financial statements of Benda Pharmaceutical Inc. and
      subsidiaries (the "Company") have been prepared in accordance with U.S.
      generally accepted accounting principles for interim financial information
      and
      pursuant to the requirements for reporting on Form 10-QSB. Accordingly, they
      do
      not include all the information and footnotes required by accounting principles
      generally accepted in the United States of America for annual financial
      statements. However, the information included in these interim financial
      statements reflects all adjustments (consisting solely of normal recurring
      adjustments) which are, in the opinion of management, necessary for the fair
      presentation of the consolidated financial position and the consolidated results
      of operations. Results shown for interim periods are not necessarily indicative
      of the results to be obtained for a full year. The consolidated balance sheet
      information as of December 31, 2006 was derived from the audited consolidated
      financial statements included in the Company's Annual Report on Form 10-KSB,
      dated on May 4, 2007. These interim financial statements should be read in
      conjunction with that report.





**3.**
            **Use
                of Estimates**





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





**4.**
            **Significant
                Accounting Policies**





**Cash
      and Cash Equivalents**


Cash
      and
      cash equivalents include cash on hand, cash on deposit with various financial
      institutions 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.




-7-


**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
              20-30yearsMachinery
                  and equipment
              10-15
                  yearsMotor
                  Vehicles
              5
                  yearsElectronics
                  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 June 30,
      2007 and 2006.




**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.





-8-


**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 quarter ended June 30, 2007 and
      2006 is maintained at various financial institutions in the PRC which do not
      provide insurance for amounts on deposit.





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




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




The
      following table shows the individual customer’s revenue and account receivable
      balance which was higher than 5% of total revenue and total account receivables
      for the reporting periods, in the six months and three months ended June 30,
      2007 and 2006:




SIX
                  MONTHS ENDED June 30,
              
              THREE
                  MONTHS ENDED June 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Revenue
              
              $
              8,236,852
              
              
              %
              
              $
              7,638,628
              
              
              %
              
              $
              5,207,817
              
              
              %
              
              $
              3,981,852
              
              
              %*Individual
                  customer's revenue*Zhuhai
                  Gongbei Pharmaceutical Co, Ltd.
              
              
              1,854,228
              
              
              23
              %
              
              1,549,453
              
              
              20
              %
              
              1,166,225
              
              
              22
              %
              
              718,706
              
              
              18
              %Jiangxi
                  Huiren Pharmaceutical Co. Ltd.
              
              
              1,354,460
              
              
              16
              %
              
              1,169,501
              
              
              15
              %
              
              1,100,517
              
              
              21
              %
              
              633,208
              
              
              16
              %Shenzhen
                  Huihua Pharmaceutical Co. Ltd.
              
              
              1,231,284
              
              
              15
              %
              
              1,132,992
              
              
              15
              %
              
              692,851
              
              
              13
              %
              
              480,267
              
              
              12
              %Shenyang
                  Pharmaceutical Co. Ltd.
              
              
              1,129,144
              
              
              14
              %
              
              962,726
              
              
              13
              %
              
              681,995
              
              
              13
              %
              
              615,048
              
              
              15
              %Guangdong
                  Shaoqing Xinghu Technology Development Co. Ltd.
              
              
              109,976
              
              
              1
              %
              
              734,002
              
              
              10
              %
              
              -
              
              
              0
              %
              
              387,281
              
              
              10
              %Shenzhen
                  Sailede Bio-Tech. Development Co. Ltd.
              
              $
              95,409
              
              
              1
              %
              $
              653,456
              
              
              9
              %
              $
              -
              
              
              0
              %
              $
              323,054
              
              
              8
              %Account
                  receivable, gross
              
              $
              7,286,772
              
              
              %
              
              $
              4,975,613
              
              
              %
              
              $
              7,286,772
              
              
              %
              
              $
              4,975,613
              
              
              %*Individual
                  customer's account receivable gross balance*Zhuhai
                  Gongbei Pharmaceutical Co, Ltd.
              
              
              1,372,259
              
              
              19
              %
              
              397,184
              
              
              8
              %
              
              1,372,259
              
              
              19
              %
              
              397,184
              
              
              8
              %Jiangxi
                  Huiren Pharmaceutical Co. Ltd.
              
              
              1,551,073
              
              
              21
              %
              
              586,922
              
              
              12
              %
              
              1,551,073
              
              
              21
              %
              
              586,922
              
              
              12
              %Shenzhen
                  Huihua Pharmaceutical Co. Ltd.
              
              
              543,612
              
              
              7
              %
              
              773,052
              
              
              16
              %
              
              543,612
              
              
              7
              %
              
              773,052
              
              
              16
              %Shenyang
                  Pharmaceutical Co. Ltd.
              
              
              595,254
              
              
              8
              %
              
              530,722
              
              
              11
              %
              
              595,254
              
              
              8
              %
              
              530,722
              
              
              11
              %Guangdong
                  Shaoqing Xinghu Technology Development Co. Ltd.
              
              
              799,488
              
              
              11
              %
              
              534,195
              
              
              11
              %
              
              799,488
              
              
              11
              %
              
              534,195
              
              
              11
              %Shenzhen
                  Sailede Bio-Tech. Development Co. Ltd.
              
              $
              341,874
              
              
              5
              %
              $
              215,725
              
              
              4
              %
              $
              341,874
              
              
              5
              %
              $
              215,725
              
              
              4
              %




**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.




-9-


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 June 30, 2007 and 2006 were stated as follows:
      (for
      RMB 1.00):


June
                  30,
              
              June
                  30,2007
              
              2006Fixed
                  rate
              
              $
              0.1350
              
              $
              0.1252Average
                  rate
              
              $
              0.1297
              
              $
              0.1246




In
      the
      six months and three months ended June 30, 2007, the foreign exchange losses
      were $13,467 and $23,327, 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
      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
      February 2007, the Financial Accounting Standards Board ("FASB") issued FASB
      159
      "The Fair Value Option for Financial Assets and Financial Liabilities" ("FASB
      159"). FASB 159 permits entities to measure financial instruments and certain
      other items at fair value that are not currently measured at fair value. We
      are
      currently evaluating the impact of the adoption of SFAS 159 will have, if any,
      on our financial statements.




**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.





**Interim
      Financial Information**


The
      unaudited balance sheets, the unaudited statements of income and cash flows
      have
      been prepared in accordance with United States generally accepted accounting
      principles for interim financial information. In the opinion of management,
      all
      adjustments (consisting solely of normal recurring accruals) considered
      necessary for a fair presentation of the financial position, results of
      operations and cash flows, have been included in the interim periods reported.
      Readers of these financial statements should note that the interim results
      are
      not necessarily indicative of the results that may be expected for the fiscal
      year as a whole.




-10-





**5.**
            **Refundable****Purchase
                Price Paid**




As
      of
      December 31, 2006, a total amount of approximately $4.2 million was paid as
      a
      part of the total consideration to the shareholders of SiBiono, Shenzhen
      Yuanxing Gene City Development Co., Ltd. and Shenzhen Yuanzheng Investment
      Development Co., Ltd., for acquiring 57.57% of the ownership of SiBiono. With
      the effective of this acquisition, dated on April 1, 2007, the deposit amount
      paid approximately $4.2 million was reallocated from the refundable purchase
      price paid to the investment in subsidiaries and eliminate against the total
      equity when preparing the consolidated financial statements as of quarter ended
      June 30, 2007.





On,
      December 7, 2006, Benda Ebei paid approximately $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. As of quarter ended June 30, 2007, the deal has not been closed as the
      product certificate still not received from United States of America FDA and
      the
      amount paid is refundable per agreement if such approval is not
      obtained.




**6.**
            **Inventories**




The
      Company’s inventories a t
      June
      30, 2007 and December 31, 2006 were comprised as follows:


June
                  30, 2007
              
              December
                  31, 2006(Unaudited)Raw
                  materials
              
              $
              1,108,091
              
              $
              311,064Packing
                  materials
              
              
              61,084
              
              
              80,639Other
                  materials / supplies
              
              
              75,333
              
              
              -Finished
                  goods
              
              
              434,545
              
              
              309,637Work-in-progress
              
              
              4,095,177
              
              
              -Total
                  inventories at cost
              
              
              5,774,231
              
              
              701,339Less:
                  Reserves on work-in-progress
              
              
              (3,736,848
              )
              
              -Total
                  inventories, net
              
              $
              2,037,383
              
              $
              701,339


No
      reserve for obsolete, slow-moving or non-salable inventory were required at
      year
      ended December 31, 2006, and an amount $3,736,848 was made a reserve on
      work-in-progress at quarter ended June 30, 2007.





**7.**
            **Property
                and Equipment**




The
      Company’s property and equipment a t
      June
      30, 2007 and December 31, 2006 were comprised as follows:




-11-


June
                  30, 2007
              
              December
                  31, 2006(Unaudited)Buildings
              
              $
              2,743,121
              
              $
              2,227,710Machinery
                  and equipment
              
              
              7,467,815
              
              
              3,941,187Office
                  equipment
              
              
              123,752
              
              
              10,672Motor
                  Vehicles
              
              
              191,777
              
              
              32,971Cost
              
              
              10,526,465
              
              
              6,212,540Less:
                  Accumulated DepreciationBuildings
              
              $
              (1,039,240
              )
              $
              (875,351
              )Machinery
                  and equipment
              
              
              (3,186,207
              )
              
              (1,837,221
              )Office
                  equipment
              
              
              (111,133
              )
              
              (4,558
              )Motor
                  Vehicles
              
              
              (157,503
              )
              
              (7,129
              )Accumulated
                  Depreciation
              
              
              (4,494,084
              )
              
              (2,724,260
              )Construction
                  in progress
              
              $
              15,374,975
              
              $
              10,184,787Total
                  property and equipment, net
              
              $
              21,407,356
              
              $
              13,673,067




Total
      depreciation expense allocated to general and administrative expense was
      $355,139 and $657,382 for quarter ended June 30, 2007 and year ended December
      31, 2006.




**8.**
            **Intangible
                Assets**




The
      Company’s intangible assets a t
      June
      30, 2007 and December 31, 2006 were comprised as follows:


June
                  30, 2007
              
              December
                  31, 2006(Unaudited)Land-use
                  rights
              
              $
              2,319,556
              
              $
              1,068,036Drugs
                  permits and licenses
              
              
              2,237,892
              
              
              1,055,893Technology
                  formulas
              
              
              696,932
              
              
              679,700Patent
              
              
              2,622,239
              
              
              2,803,630Cost
              
              
              7,876,619
              
              
              2,803,630Less:
                  Accumulated amortizationLand-use
                  rights
              
              
              (205,021
              )
              
              (150,465
              )Drugs
                  permits and licenses
              
              
              (1,194,806
              )
              
              (1,085,471
              )Technology
                  formulas
              
              
              (102,732
              )
              
              (66,210
              )Patent
              
              
              (1,070,748
              )
              
              (1,302,146
              )Accumulated
                  amortization
              
              
              (2,573,306
              )
              
              (1,302,146
              )Total
                  intangible assets, net
              
              $
              5,303,313
              
              $
              1,501,483




As
      of
      June 30, 2007, the cost of intangible assets was increased by $5,072,989 which
      was mainly composed of the followings:




a)
            Due
                to the acquisition of SiBiono, two items were included: (1) patent,
                the
                innovation and research results of Genedicine, with cost $2,622,239;
                (2)
                land use right with a total area 20,574 square meters, with cost
                $379,729




b)
            Benda
                Ebei purchased a land use right with total purchase cost Rmb9.9 million
                or
                approximately $1.3 million. During the quarter ended as of June 30, 2007,
                an amount Rmb6 million or approximately $0.8 million was paid.




Benda
      Ebei purchased a license for a new drug, which is a kind of anti-virus product
      in nature with total purchase cost Rmb10 million or approximately $1.32 million.
      During the quarter ended as of June 30, 2007, an amount Rmb9 million or
      approximately $1.18 million was paid.




-12-




**9.**
            **Goodwill
                and Acquisition Cost
                Payable**




FASB
      141
      requires all acquisitions must be accounted for by allocating the acquisition
      consideration to the assets acquired based upon the fair market value of those
      assets. Consideration value that cannot be allocated to the acquired assets
      must
      be assigned to goodwill. In addition, it also requires eliminating the pooling
      treatment and eliminating the amortization of goodwill. FASB 142 requires that
      a
      company carrying goodwill on its books must revalue the assets acquired in
      a
      business combination. It there is an overall decline in the value of the
      acquired assets, then earlier booked goodwill is deemed “impaired” and must be
      written down. FASB 142 requires a two step impairment test. The fair value
      of a
      reporting unit is first compared to its carrying value, including goodwill.
      Then
      the implied fair value of the goodwill is compared to the carrying value of
      the
      goodwill. If the fair value is lower, it is considered to be
      impaired.




As
      of
      June 30, 2007, there was an amount approximately $7 million was recorded as
      goodwill. Since SiBiono was turned to profitable in the six months ended June
      30, 2007, therefore no impairment would be provided.




As
      of
      June 30, 2007, an accumulated amount, approximately Rmb49.25 million or
      approximately $6.47 million was paid and leaving a balance approximately $1.75
      million as acquisition cost payable.




**10.**
            **Other
                Assets****-
                Restricted Cash and Bank
                Indebtedness**




Restricted
      cash and bank indebtedness were recorded due to the fact that restricted
      cash was obtained from the various government technology agencies as long term
      debt payable (see note 12 for the related details) and it could only be
      dedicated to the related project’s research and development activities and
      purchase of fixed assets and construction in progress, therefore the cash
      balances for that part would be classified as restricted cash. Therefore, due
      to
      this reason, the company relocated the balances of restricted cash from the
      cash
      and cash equivalents balances with an amount $1,304,972 as of quarter ended
      June
      30, 2007.




However,
      since the balances of the restricted cash were larger than the balance of cash
      and cash equivalents balances, thus bank indebtedness were resulted with an
      amount $836,539 as of June 30, 2007.




**11.**
            **Bank
                Loan****s
                Payable**




The
      Company’s bank loans at
      June
      30, 2007 and December 31, 2006 were comprised as follows:


June
                  30, 2007
              
              December
                  31, 2006(Unaudited)Bank
                  loans due within one year
              
              $
              3,024,422
              
              $
              256,492Bank
                  loans due after one year
              
              
              -
              
              
              -Total
                  debt
              
              $
              3,024,422
              
              $
              256,492


At
      December 31, 2006, the Company had one outstanding bank loans with an amount
      $256,492 which was used primarily to fund construction in progress projects
      and
      for general working capital purposes and this loan had been settled as of
      quarter ended June 30, 2007.





At
      June
      30, 2007, the Company’s subsidiary, Sibiono, had one outstanding bank loan with
      an amount $3,024,422 which was used primarily to fund construction in progress
      projects and for general working capital purposes. This loan carries annual
      interest rate of 6.34% and payable monthly on the 20 th day of
      each month with maturity in 3 years, starting from April 30, 2005 and matures
      on
      April 29, 2008. This loan is considered as a term loan and is not revolving
      or
      renewable. This loan is personal guaranteed by Zhaohui Peng, the Chairman and
      a
      shareholder of SiBiono.





Total
      interest expense paid
      related to the Company’s outstanding bank loans was $51,505 and $48,941 in the
      six months and three months ended June 30, 2007 respectively.




-13-




**12.**
            **Long
                Term Debt Payable**




At
      June
      30, 2007, loan term debt payable was raised due to the fact that various
      technology funds were obtained from various government
      technology agencies to support its gene therapy research and development
      activities during the past years and recorded as long term debt payable.




The
      long
      term debt payable at June 30, 2007 and December 31, 2006 were comprised as
      follows:


June
                  30, 2007
              
              December
                  31, 2006(Unaudited)Bank
                  loans due within one year
              
              $
              3,816,859
              
              $
              -Bank
                  loans due after one year
              
              
              407,639
              
              
              -Total
                  debt
              
              $
              4,224,498
              
              $
              -




Even
      though there were $3,816,859 long term debt payable due within one year as
      of
      quarter ended June 30, 2007, because of its non-repayable feature (except the
      one formed with 3 Nanshan District Technology Funds dated on August 8, 2005.
      The
      remaining balance of this debt payable was Rmb2,000,000 or $256,500 and due
      on
      August 8, 2006. However, the company has obtained the consent from the 3 Nanshan
      District Technology Funds for delaying the payment till August 31, 2007), the
      obligations will be discharged once the examination by the various government
      technology agencies is conducted and most of the examination will be carried
      out
      and completed on or before the end of the third quarter of 2007.




During
      the reporting period ended June 30, 2007, an amount of Rmb2,100,000 or $273,115
      of long term debt payable was discharged and recorded as government subsidies,
      (see note 18 for the related details).




**13.**
            **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 welfare plan for all of its employees
      who are residents of the PRC. Based on the wages payable and according to the
      labor law of the PRC, the Company accrues 14%, 2%, and 1.5% on a monthly basis,
      for employees’ welfare, labor union fees, and education and training programs,
      respectively.





**14.**
            **Statutory
                Reserves**




As
      stipulated by the relevant laws and regulations for enterprises operating in
      the
      PRC, the Company is required to make annual appropriations to a statutory
      surplus reserve fund for each of its PRC subsidiaries. Specifically, the Company
      is required to allocate 15% its profits after taxes at the fiscal year ended,
      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 June 30, 2007, and December 31, 2006,
      the registered capital of the Company’s PRC subsidiaries was $20,206,617 and
      $12,017,575 respectively.





**15.**
            **Related
                Party Transactions****and Long Term Loan
                Receivable**




Due
      from
      related parties at June 30, 2007 and December 31, 2006 were comprised as
      follows:




-14-


June
                  30, 2007
              
              December
                  31,2006(Unaudited)Yiqing,
                  WanDue
                  to Ever Leader Holdings Co. Ltd.
              
              $
              828,793
              
              $
              455,275Hubei
                  Benda Science and Technology Co. LtdDue
                  to Yidu Benda Chemicals Co. Ltd.
              
              
              1,458,644
              
              
              1,299,479Due
                  to Ever Leader Holdings Co. Ltd.
              
              
              208,997
              
              
              210,518Hua
                  XuDue
                  to Ever Leader Holdings Co. Ltd.
              
              
              49,956
              
              
              -Due
                  to Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              164
              
              
              -Hui
                  XuDue
                  to Ever Leader Holdings Co. Ltd.
              
              
              49,956
              
              
              -Xiaozhi
                  ZhangDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              4,875
              
              
              -Xiaozhi
                  ZhangDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              1,818
              
              
              -Feng
                  WangDue
                  to Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              26,806
              
              
              11,543Total
                  due from related parties
              
              $
              2,630,010
              
              $
              1,976,815




Due
      to
      related parties at June 30, 2007 and December 31, 2006 were comprised as
      follows:


June
                  30, 2007
              
              December
                  31,2006(Unaudited)Hubei
                  Benda Science and Technology Co. LtdDue
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              $
              137,772
              
              $
              236,205Due
                  from Jiangliang Benda Pharamaceutical Co. Ltd.
              
              
              1,805,087
              
              
              1,833,358Wei
                  XuDue
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              
              967,815
              
              
              943,865Due
                  from Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              60,363
              
              
              20,937$
              2,971,038
              
              $
              3,034,365




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.





A t
      June
      30, 2007, there was a long term loan receivable, with an amount $131,497 which
      was advanced to Hua Shen, Deputy General Manager of Sales of SiBiono, for the
      promotion, marketing, and conference activities. This advance for the related
      parties is unsecured, non-interest bearing and the repayment period would be
      18
      months, and starting date was December 29, 2006. This was under the normal
      course of business and those expenses would be settled in due
      course.




**16.**
            **Redeemable
                Common Stock Issuable For
                Services**




On
      April
      5, 2007, Benda Ebei entered into Equity Transfer Agreements with certain
      shareholders of SiBiono to purchase a total of approximately 57.57% of the
      shares of SiBiono’s common stock for total consideration of RMB60,000,000 due
      and payable on or before April 30, 2007.





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





In
      connection with the above Equity Transfer Agreements, Benda Pharmaceutical,
      Inc.
      (the “Company”) entered into a Financial Consultancy Agreement with Super
      Pioneer International Limited (“Super Pioneer”) and Technical Consultancy
      Agreements with Wang and Zhang for financial and technical consultancy services
      to be rendered. Pursuant to the Financial and Technical Consultancy Agreements
      (the “Agreements”), the Company agreed to issue an aggregate of 2,189,560 shares
      of its common stock to Super Pioneer, Wang and Zhang within three months from
      the date of the Agreements. Super Pioneer, Wang and Zang also agreed to refrain
      from selling shares of the Company’s common stock for a period of twelve months
      from the date of the issuance of the shares (the “Lock-up Period”). Within three
      months from expiration of the Lock-up Period, in the event that the public
      trading price of the Company’s common stock has not reach $3.60 per share and
      the Company’s common stock has not been listed on either the NASDAQ or AMEX
      stock exchanges, Super Pioneer, Wang, and Zang will have the option to require
      the Company to redeem an aggregate 2,049,560 shares of the Company’s common
      stock owned by Super Pioneer, Wang, and Zhang at a price of $3.60 per
      share.





-15-


In
      accordance EITF Topic D-98, “Classification and Measurement of Redeemable
      Securities” (“EITF Topic D-98”), as the Agreements governing the issuance of the
      2,189,560 shares of common stock to Super Pioneer, Wang, and Zang contain
      provisions requiring the Company to repurchase 2,049,560 of these shares at
      a
      redemption price of $3.60 per share at the option of the holders (if certain
      events outside of control of the Company do not occur), these 2,049,560 shares
      have been classified as redeemable common stock, at their redemption price
      of
      $3.60 per share, outside of permanent equity at June 30, 2007.





**17.**
            **Other
                general and administrative**





In
      the
      six months ended 30, June 2007, the amount of other general and administrative
      expenses was $974,139 and mainly composed of the following events:


a)
            $198,710
                was incurred for the audit services
                fee;


b)
            $14,853
                was incurred for advertisement
                expense;


c)
            $18,739
                was incurred for postage, courier and printing
                expenses;


d)
            $80,677
                was incurred for legal fee;


e)
            $142,079
                was incurred for office expenses;


f)
            $224,600
                was incurred for salary and wages;


g)
            $20,150
                was incurred for conference
                expenses;


h)
            $35,000
                was incurred for consultation services
                fee;


i)
            $28,744
                was incurred for rental and
                utilities;


j)
            $65,853
                was incurred for filing, investor relationship activities
                expenses;


k)
            $83,757
                was incurred for travel and transportation
                expenses.





In
      the
      six months ended 30, June 2006, the amount of other general and administrative
      expenses was $276,361 and mainly composed of the following events:


a)
            $58,397
                was incurred for audit services
                fee;


b)
            $54,043
                was incurred for office expenses;


c)
            $93,187
                was incurred for salary and wages;


d)
            $8,010
                was incurred for rental and
                utilities;


e)
            $32,144
                was incurred for travel and transportation
                expenses.




**18.**
            **Government
                Subsidies / Grants**




As
      mentioned in the note 12, long term debt payable, various technology funds
      were
      obtained from various government technology agencies to support its gene therapy
      research and development activities during the past years and recorded as long
      term debt payable. According to the technology fund agreements, the various
      government technology agencies will examine the results of research and
      development according to the status of the projects. Once the examination is
      taken place, the obligation of a particular debt payable is discharge
      accordingly.





According
      to US GAAP, once the obligation of a particular debt payable is discharged,
      the
      amount of this particular debt payable should be treated as government subsidies
      / grants. During the reporting period, in the six months ended June 30, 2007,
      an
      amount of Rmb2,100,000 or $273,115 was recognized as government subsidies /
      grants and the corresponding debt payable was discharged.





**19.**
            **Income
                Taxes**




Benda
      is
      subject to Delaware, United State of America tax, but no provision for income
      taxes were made for the six months and three months ended June 30, 2007 and
      2006
      as Benda did not have reportable taxable income for the period.





-16-


Ever
      Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax, but
      no
      provisions for income taxes were made for the six months and three months ended
      June 30, 2007 and 2006 as Ever Leader did not have reportable taxable income
      for
      the periods.





Benda
      Ebei was registered as a Sino-Foreign Equity Joint Venture on May 26, 2004
      and
      is subject to the tax laws applicable to Sino-Foreign Equity Joint Ventures
      in
      the PRC. Benda Ebei, starting from November 4, 2005, is fully exempt from PRC
      enterprise income tax for two years starting from the first profit-making year,
      followed by a 50% reduction in income taxes for the following three years,
      commencing from the first profitable year,





Jiangling
      Benda and Yidu Benda are cross-municipal investment entities and enjoy the
      same
      tax treatment as Sino-Foreign Joint Ventures, starting from November 4, 2005,
      and were therefore exempt from PRC enterprise income tax for two years starting
      from the first profit-making year, followed by a 50% reduction in income taxes
      for the following three years, 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 six months and three months ended
      June 30, 2007 and 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.





According
      to the taxation regulations of Shenzhen, a Special Economic District of PRC,
      SiBiono is subject to the full income tax rate of 15% on taxable income. The
      net
      losses for the previous year can be carried forward for a maximum period of
      five
      years. If the company is approved and recognized as high-tech company, the
      company can enjoy three years of 50% of the full tax rate with an extension
      for
      the coming next three years. Therefore, there was no provision for income taxes
      made for the quarter ended June 30, 2007. SiBiono also plans to apply for the
      PRC enterprise tax exemption for two years starting from the first profit-making
      year, followed by a 50% reduction in income taxes for the following three years
      in the near future.





As
      a
      result of the above tax exemptions, there was no income taxes payable for the
      Company for the six months and three months ended June 30, 2007 and 2006. Had
      these tax exemptions not been available to the Company, income tax expense
      would
      have increased by approximately $547,000, $624,000, $296,000 and $213,000 for
      the six months and three months ended June 30, 2007 and 2006,
      respectively.





**20.**
            **Long
                Term Convertible Promissory
                Note**





In
      March
      and April of 2007, the Company entered into Investment Agreements (“Agreements”)
      with certain accredited and institutional investors (“Investors”) pursuant to
      which the Investors purchased from the Company a total of 252 Units (“Units”),
      resulting in aggregate gross proceeds to the Company $7,560,000, with each
      Unit
      consisting of: (i) a Convertible Promissory Note (“Note”) in the principal
      amount of $30,000 and convertible into 54,087 shares of the Company's common
      stock; and (ii) a Common Stock Warrant (“Warrant”) to acquire 54,087 shares
      of the Company’s common stock at an exercise price of $0.555 per share and
      expiring on November 14, 2011. The Notes are immediately convertible at the
      option of each Investor, bear interest at a rate of 4% per annum, and mature
      on
      March 28, 2009. At June 30, 2007, the aggregate $7,560,000 principal balance
      of
      the notes remained outstanding and during the three and six months ended June
      30, 2007, the Company recorded $72,079 of interest expense related to the
      Notes.





The
      Company has accounted for the Warrants issued in conjunction with the Notes
      in
      accordance with the provisions of APB No. 14, “Accounting for Convertible Debt
      and Debt Issued with Stock Purchase Warrants” (“APB 14”). Accordingly, the
      Warrants were valued using a Black-Scholes option pricing model with the
      following assumptions: (i) a risk free interest rate of 4.63%, (ii) a
      contractual life of 4.6 years, (iii) an expected volatility of 25%, and (iv)
      a
      dividend yield of zero. The relative fair value of the Warrants, based on an
      allocation of the value of the Notes and the value of the Warrants issued in
      conjunction with the Notes, was recorded as a debt discount (with a
      corresponding increase to additional paid-in capital) in the amount of
      $5,174,911, and is being amortized to interest expense over the expected term
      of
      the Notes.





-17-


Additionally,
      the difference between the effective conversion price of the Notes into shares
      of the Company’s common stock, and the fair value of the Company’s common stock
      on the date of issuance of the Notes, resulted in a beneficial conversion
      feature of $2,385,089 (capped at the $7,560,000 of gross proceeds raised less
      the previously calculated $5,174,911 debt discount associated with Warrants
      issued in conjunction with the Notes) and was calculated in accordance with
      EITF
      98-5, “Accounting for Convertible Securities with Beneficial Conversion Features
      or Contingently Adjustable Conversion Ratios” and EITF 00-27, “Application of
      Issue No. 98-5 to Certain Convertible Instruments”. This beneficial conversion
      feature was recorded as an additional debt discount (with a corresponding
      increase to additional paid-in capital) and is being amortized to interest
      expense over the expected term of the Notes.





During
      the three and six months ended June 30, 2007, the Company recorded $945,488
      and
      $960,985, respectively, in interest expense related to the amortization of
      the
      debt discount associated with the Warrants and the debt discount associated
      with
      the beneficial conversion feature.





The
      Company also incurred $529,200 in placement agent commissions related to the
      issuance of the Notes and Warrants. This amount was recorded by the Company
      as
      debt issue costs and is being amortized over expected term of the Notes. For
      the
      three and six months ended June 30, 2007, the Company recorded $58,526 and
      $67,269, respectively, in amortization expense related to debt issue
      costs.





The
      securities underlying the Notes and Warrants issued to the Investors are also
      subject to the terms of a Make Good Agreement entered into in connection with
      a
      financing the Company executed in November of 2006 (the “Make Good Agreement”).
      The Company further represented to the Investors that its target net income
      for
      fiscal year 2007 (“FY07 Net Income”) will be greater than or equal to $10.0
      million (adjusted for a variety of non-cash charges) (the “Performance
      Threshold”). In the event the Performance Threshold is not attained, the Company
      is required to issue to the Investors a pro rata portion of 1,000,000 shares
      of
      the Company’s common stock for every one (1) cent by which the Company’s
      earnings per share, determined on a fully diluted basis, is less than $0.065.





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




-18-





**21.**
            **Common
                Stock, Preferred Stock,****Additional
                Paid-in Capital, Warrants and
                Options**




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


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


(b)
            96,258,411
                shares of Common Stock issued and outstanding, par value $0.001
                each;


(c)
            The
                balance of additional paid-in capital was $13,099,424, see the
                Consolidated Statements of Changes in Stockholders’ Equity for the
                details;


(d)
            706,195
                shares of Common Stock to be issuable for services rendered related
                to the
                Exchange Transaction and those services rendered by the various
                consultants were valued at the private placement offering price of
                the
                Company Common Stock on November 15, 2006 at $0.4622 per share or
                total
                $326,403;


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


(f)
            None
                Options issued and outstanding.





At
      March
      31, 2007, the amount of 706,195 shares of the Company Common Stock ($0.001
      par
      value) were issued to various consultants for services rendered as mentioned
      in
      above (d) Therefore, at June 30, 2007, the Company has an aggregate
      of:


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


(b)
            96,964,606
                shares of Common Stock issued and outstanding, par value $0.001 each,
                whereas 706 shares of common stock was recorded as the issuance of
                706,195
                shares to various consultants at par value $0.001
                each;


(c)
            The
                balance of additional paid-in capital was $20,985,121, whereas $7,560,000
                was received from the issuance of convertible promissory note, see
                note 20
                for details; $325,697 was recorded as additional paid-in capital
                for the
                issuance of 706,195 shares to various
                consultants;


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


(e)
            None
                Options issued and outstanding.





**22.**
            **Commitments
                and Contingencies**




A
      legal
      litigation was outstanding on September 22, 2006 in SiBiono. The litigation
      was
      about a purchase of an equipment by the company with the total contract amount
      of Rmb1,730,000 or approximately $217,236. According to the judicial decision
      of
      the People’s Court (Junior) of Lian Yun District of Lian Yun City, PRC dated on
      April 20, 2007, since the company had already paid the initial deposit, thus
      the
      company should compensate the supplier with an amount of Rmb398,625 or
      approximately $50,055. The company appealed the case to the People’s Court
      (Senior) of Lian Yun District of Lian Yun City, PRC dated on May 18, 2007.
      The
      case is still under first appeal process.





As
      of
      reporting periods at June 30 2007 and December 31, 2006, there was an operating
      lease commitment and the amount for the respective periods are stated as
      follows;


June
                    30,
                  2007
                
                December
                    31,
                  2006(Unaudited)Operating
                    LeaseRental
                    and Property Management FeeWithin
                    one year
                
                $
                26,979
                
                $
                -One
                    to two year
                
                
                16,210
                
                
                -Total
                    commitments payable
                
                $
                43,189
                
                $
                -






**23.**
            **Segment
                Information**




The
      Company has five core operating segments: Benda Ebei, Jiangling Benda, Yidu
      Benda, Beijing Shusai and SiBiono. 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, SiBiono is a gene
      therapy company dedicated to the development, manufacturing and
      commercialization of gene therapy products.





-19-




Selected
      financial information for each of these segments for the six months and three
      months ended June 30, 2007 and 2006 were as follows:





SIX
                    MONTHS ENDED June 30,
                
                THREE
                    MONTHS ENDED June 30,2007
                
                2006
                
                2007
                
                2006(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)Benda
                    Ebei*Products
                    produced*
                
                2007
                
                2006
                
                2007
                
                2006*Conventional
                    medicines/injection vials*Revenue
                    from external customers
                
                $
                6,030,722
                
                $
                4,861,374
                
                $
                3,691,259
                
                $
                2,488,298Intersegement
                    revenue
                
                
                -
                
                
                -
                
                
                -
                
                
                -Segment
                    profit (loss)
                
                
                1,181,666
                
                
                1,043,350
                
                
                611,220
                
                
                197,486Total
                    assets, segment
                
                $
                23,947,450
                
                $
                9,270,845
                
                $
                23,947,450
                
                $
                9,270,845
  Jiangling
                  Benda*Products
                  produced*
              
              2007
              
              2006
              
              2007
              
              2006*Active
                  pharmaceutical ingredients*Revenue
                  from external customers
              
              $
              -
              
              $
              15,446
              
              $
              -
              
              $
              42Intersegement
                  revenue
              
              
              -
              
              
              -
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              
              (21,611
              )
              
              (308,286
              )
              
              (41,562
              )
              
              (230,125
              )Total
                  assets, segment
              
              $
              4,891,813
              
              $
              3,643,914
              
              $
              4,891,813
              
              $
              3,643,914
  Yidu
                  Benda*Products
                  produced*
              
              2007
              
              2006
              
              2007
              
              2006*Bulk
                  chemicals*Revenue
                  from external customers
              
              $
              698,519
              
              $
              2,761,808
              
              $
              14,054
              
              $
              1,493,512Intersegement
                  revenue
              
              
              -
              
              
              -
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              
              (475,236
              )
              
              927,771
              
              
              (657,860
              )
              
              486,989Total
                  assets, segment
              
              $
              8,424,467
              
              $
              7,154,584
              
              $
              8,424,467
              
              $
              7,154,584
  Beijing
                  Shusai*Products
                  produced*
              
              2007
              
              2006
              
              2007
              
              2006*Pharynigitis
                  killer therapy*Revenue
                  from external customers
              
              $
              23,053
              
              $
              -
              
              $
              17,946
              
              $
              -Intersegement
                  revenue
              
              
              -
              
              
              -
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              
              (52,264
              )
              
              (24,035
              )
              
              (30,023
              )
              
              (24,035
              )Total
                  assets, segment
              
              $
              117,492
              
              $
              112,318
              
              $
              117,492
              
              $
              112,318
  SiBiono*Products
                  produced:*
              
              2007
              
              2006
              
              2007
              
              2006*Genedicin
                  (Ad-p53)*Revenue
                  from external customers
              
              $
              1,484,558
              
              $
              -
              
              $
              1,484,558
              
              $
              -Intersegement
                  revenue
              
              
              -
              
              
              -
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              
              683,379
              
              
              -
              
              
              683,379
              
              
              -Total
                  assets, segment
              
              $
              11,891,466
              
              $
              -
              
              $
              11,891,466
              
              $
              -
  TOTALSIX
                  MONTHS ENDED June 30,
              
              THREE
                  MONTHS ENDED June 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Revenue
                  from external customers
              
              $
              8,236,852
              
              $
              7,638,628
              
              $
              5,207,817
              
              $
              3,981,852Intersegement
                  revenue
              
              
              -
              
              
              -
              
              
              -
              
              
              -Segment
                  profit (loss)
              
              
              1,315,934
              
              
              1,638,800
              
              
              565,154
              
              
              430,315Total
                  assets, segment
              
              $
              49,272,688
              
              $
              20,181,660
              
              $
              49,272,688
              
              $
              20,181,660


-20-




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




TOTALSIX
                  MONTHS ENDED June 30,
              
              THREE
                  MONTHS ENDED June 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)ProfitTotal
                  profit for reportable segment
              
              $
              1,315,934
              
              $
              1,638,800
              
              $
              565,154
              
              $
              430,315Unallocated
                  amounts:
              
              
              -
              
              
              -
              
              
              -
              
              
              -Other
                  corporate expense
              
              
              (9,343,468
              )
              
              (407,746
              )
              
              (9,049,490
              )
              
              (99,452
              )Total
                  consolidated profit before income taxes
              
              
              (8,027,534
              )
              
              1,231,054
              
              
              (8,484,336
              )
              
              330,863Total
                  assets
              
              $
              51,534,758
              
              $
              20,261,967
              
              $
              51,534,758
              
              $
              20,261,967


The
      other
      corporate expense was $9,343,468 in the six months ended June 30, 2007 and
      they
      were composed of the following events:


a)
            $67,269
                was incurred for the amortization expense of the placement agent
                commission related to debt issue costs, see not 20 for details;


b)
            $960,958
                was incurred for the interest expense related to the amortization
                of debt
                discount associated with the Warrants and debt discount associated
                with
                the beneficial conversion feature, see note 20 for
                details;


c)
            $72,079
                was incurred for the interest expense of the convertible promissory
                notes,
                4% per annum, see note 20 for
                details;


d)
            $7,882,416
                was incurred for the consultant and professional fees, see the note
                16 for
                details;


e)
            $198,710
                was incurred for the audit services
                fee;


f)
            $173,400
                was incurred for cash bonus;


g)
            $120,000
                was incurred for registration statement late filing penalty;


h)
            $35,000
                was incurred for the consultation services fee.





The
      other
      corporate expense was $407,746 in the six months ended June 30, 2006 and they
      were composed of the following events:


a)
            $58,148
                was incurred for audit services;


b)
            $20,484
                was incurred for foreign exchange
                losses;


c)
            $247,494
                was incurred for loss on disposals of fixed
                assets;


d)
            $79,237
                was incurred for interest expenses.





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




The
      following table shows the reconciliation between the segments assets and the
      total assets for the reporting periods, in the six months ended and three months
      ended of 2007 and 2006:




SIX
                  MONTHS ENDED June 30,
              
              THREE
                  MONTHS ENDED June 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Total
                  assets, segment
              
              $
              49,272,688
              
              $
              20,181,660
              
              $
              49,272,688
              
              $
              20,181,660Total
                  assets of corporate:Cash
                  and cash equivalent
              
              
              648,313
              
              
              80,307
              
              
              648,313
              
              
              80,307Prepaid
                  expesnes and deposit
              
              
              2,716
              
              
              -
              
              
              2,716
              
              
              -Refundable
                  purchase price paid
              
              
              1,195,032
              
              
              -
              
              
              1,195,032
              
              
              -Debit
                  issue costs:
              
              
              
              
              
              
              
              
              -placement
                  agent commission
              
              
              461,931
              
              
              -
              
              
              461,931
              
              
              -Accumulative
                  other comprehensive income
              
              
              (45,922
              )
              
              -
              
              
              (45,922
              )
              
              -Total
                  assets
              
              $
              51,534,758
              
              $
              20,261,967
              
              $
              51,534,758
              
              $
              20,261,967




**24.**
            **Subsequent
                Events**




Jiangling
      Benda, reopened and began production of one of its primary products, Ribose,
      on
      August 10, 2007. Jiangling Benda was closed while the plant underwent an upgrade
      to meet GMP certification standards. Jiangling Benda expects to receive its
      GMP
      certification during the month of September; however, on August 10, 2007, the
      plant began production of Ribose which does not require GMP
      certification.





-21-


**Item
      2. 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-QSB 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-QSB or included in our previous filings with the Securities and Exchange
      Commission.







**Results
      of Operations**





Six
      months ended June 30, 2007 Compared to Six months ended June 30,
      2006





The
      following table provides key components of our operational results for the
      periods ended June 30 for Benda Pharmaceutical, Inc.




-22-


SIX
                  MONTHS ENDED June 302007
              
              2006(Unaudited)
              
              (Unaudited)Revenue
              
              $
              8,236,852
              
              $
              7,638,628Cost
                  of goods sold
              
              
              (4,293,280
              )
              
              (4,137,171
              )Gross
                  profit
              
              
              3,943,572
              
              
              3,501,457Selling
                  expenses
              
              
              (344,886
              )
              
              (279,519
              )General
                  and administravive expenses
              
              
              (10,825,968
              )
              
              (1,659,026
              )Research
                  and development expenses
              
              
              (97,119
              )
              
              (6,231
              )Total
                  operating expenses
              
              
              (11,267,973
              )
              
              (1,944,776
              )Operating
                  income / (loss)
              
              
              (7,324,401
              )
              
              1,556,681Interest
                  expenses
              
              
              (1,066,406
              )
              
              (79,237
              )Other
                  income (expenses)
              
              
              90,158
              
              
              (246,390
              )Government
                  subsidies / grants
              
              
              273,115
              
              
              -Income
                  / (loss) before minority interest and income taxes
              
              
              (8,027,534
              )
              
              1,231,054Income
                  taxes
              
              
              -
              
              
              -Minority
                  interest
              
              
              (454,335
              )
              
              (77,608
              )Net
                  Income / (loss)
              
              $
              (8,481,869
              )
              $
              1,153,446Earnings
                  / (loss) per share - basic
              
              $
              (0.09
              )
              $
              0.02Weighted
                  average shares outstanding - basic
              
              
              96,625,164
              
              
              70,240,401Earnings
                  / (loss) per share - diluted
              
              $
              (0.09
              )
              $
              0.02Weighted
                  average shares outstanding - diluted
              
              
              128,465,870
              
              
              70,240,401





*Net
      Revenue:*


Net
      revenue increased $600K or 8% to $8.2 MM in H1 2007, from $7.6 MM in H1 2006.
      Increase in revenue is contributed to the following factors,





1.
            Benda’s
                subsidiary, Ebei Benda’s net revenue increased $1.17 MM or 24% to $6.0 MM
                in H1 2007 from $4.86 MM in H1 2006, it was due to new products sales
                in
                H1 2007. New products introduced in H1 2007 are Ribavirin, B12 Vitamin,
                Inosine, Gentamycin 80 Thousand Unit, B6 Vitamin, Huitening and Methiouine
                and they contributed approximately $1.0 MM to our net revenue.




2.
            Benda’s
                subsidiary, Jiangling Benda’s net revenue dropped to zero in H1 2007 as
                the plant was temporarily closed while it underwent an upgrade to
                meet GMP
                certification standards. Jiangling Benda was reopened on Aug 10,
                2007 and
                resumes its production. The management expects that its sales will
                boost
                up in the coming months.





3.
            Benda’s
                subsidiary, Yidu Benda’s net revenue dropped $2.0 MM or 75% to $700K in H1
                2007 from $2.8 MM in H1 2006 as the plant was temporarily closed
                since mid
                January to upgrade its waster water treatment system to comply with
                new
                environmental standards. Yidu Benda has completed the upgrade and
                filed
                the status report with related regulatory bodies for approval. The
                regulatory body is conducting environmental assessment for Benda.
                While
                awaiting the approval, the Company is transferring part of production
                from
                Yidu Benda to Jiangling Benda to minimize the negative impact on
                sales.





4.
            Benda’s
                subsidiary, Beijing Shusai, incorporated on July 15, 2006, realized
                net
                revenue of $23K in H1 2007. China’s State Food and Drug Administration
                (SFDA) recently experienced an overhaul in its policies and regulatory
                systems in an effort to fight against corruption in Chinese pharmaceutical
                industry. Beijing Shusai’s operation is adversely affected by this recent
                policy changes which prohibits some state-owned hospitals from forming
                alliances with us. The management is now changing its strategy to
                put more
                effort in Wuhan province as an expansion point since Benda has a
                strong
                base and relation in this area.





5.
            Benda’s
                newly acquired entity SiBiono (acquired and effective on April 1,
                2007)
                realized net revenue of $1.5 MM in H1 2007. (Refer to note 1 of Note
                to
                Consolidation Financial Statements for details.) SiBiono’s flagship
                product, Gendicine is the world’s only commercialized gene therapy. While
                only 1,869 vials of Gendicine were sold in Q1 2007 by SiBiono, sales
                ramped to 6,316 vials in Q2 2007 after Benda’s taking over SiBiono in
                April





-23-


*Cost
      of Goods Sold*


Cost
      of
      goods sold increased $156K or 4% to 4.2 MM in H1 2007 from $4.1 MM in H1 2006,
      primarily due to the acquisition of SiBiono and the resulting production of
      Gendicine.





*Gross
      Profit*


Gross
      Profit increased $442K or 13% to $3.9 MM in H1 2007 from $3.5 MM in H1 2006
      mainly due to the followings factors:





1.
            Ebei
                Benda - gross profit margin dropped by 7% from 45% to 38% during
                the
                reporting period due to the following reasons,


a)
            Launch
                new products with lower gross margin of 35%. However, the management
                believes that those new products will increase our net revenue as
                they
                gain market acceptance, therefore we will continue and extend our
                efforts
                to produce and promote these new products.


b)
            Increase
                in production cost. For example, the unit (per box) production cost
                of
                Jixuening increased by 33% and Vitamin C Injection cost increased
                by
                33%.





The
      above
      situations explain why the gross profit margin dropped in H1 2007. However,
      we
      will expand our production of high profit, branded new drugs starting from
      late
      August 2007 once the capacity expansion of the Eibei plant is completed.
      Resultingly, gross margin is expected to get improved.





SiBiono
      -
      the gross margin of Gendicine, SiBiono’s flagship product was 88% in H1 2007 as
      a result of low procurement and manufacturing cost and high sales price.





*Selling
      Expenses:*


Selling
      expenses increased $65K or 23% to $345K in H1 2007 from $280K in H1 2006,
      primarily due to the promotional fees for Gendicine.





*General
      and Administrative Expenses:*


General
      and administrative expenses increased $9.2 MM or 553% to $11 MM in H1 2007
      from
      $1.7 MM in H1 2006. The increase of G&A expenses in the reporting period was
      primarily due to the following factors:


a)
            $240K finder
                fee to China Hi-Tech Funds Co.
                Ltd.;


b)
            $68K
                amortization expense of the placement agent commission related to
                debt
                issue costs, (Refer to note 20 of Note to Consolidated Financial
                Statements for details);


c)
            $8
                MM consulting and professional fees, (Refer to note 16 of Note to
                Consolidated Financial Statements for
                details);


d)
            $120K
                resale registration late filing
                penalty


e)
            $173K
                cash bonus;


f)
            $150K
                audit fee;


g)
            $35K
                consulting fee;


h)
            $78K
                depreciation expense occurred to
                SiBiono;


i)
            $103K
                salary and wages for SiBiono
                employees;


j)
            $81K
                legal fee for filing 8K and 10K;


k)
            $34K
                directors remuneration;


l)
            $20K
                conference expenses for events including MoneyShow, Gene Therapy
                Conference and etc.





*Operating
      Income/ (Loss):*


The
      Company experienced an operating loss of $7.3 MM in H1 2007, slipping $8.9
      MM
      from last year’s comparative period, due to significant increase in G&A
      expenses. However, item a) to e) mentioned above are one-time charges. Excluding
      these items, operating income in H1 2007 would be $1.3 MM, 19% lower than last
      year’s figure.




-24-


*Interest
      Expenses:*


Interest
      expenses increased to $1.1 MM in H1 2007 from $79K in H1 2006 primarily due
      to
      financial expense associated with the offering of convertible promissory note.
      (Refer to note 20 of the Note to Consolidation Financial Statements for
      details.)





*Government
      Subsidies / Grants:*


The
      Company recognized RMB 2.1 MM, US equivalent of $273K, as government subsidies
      /
      grant in H1 2007. (Refer to note 18 of the Note to Consolidated Financial
      Statements for details)





*Income
      Taxes:*


Benda
      Pharmaceutical, Inc is subject to the tax code of Delaware, United States of
      America., There were no provisions made for income tax in H1 2007 as Benda
      Pharmaceutical, Inc did not realize taxable income in this reporting
      period.





Ever
      Leader, a wholly owned subsidiary of Benda Pharmaceutical, Inc is subject to
      the
      tax code of Hong Kong Special Administration Region. There were no provisions
      made for income tax in H1 2007 as Ever Leader did not realize taxable income
      in
      this reporting period.





Ebei
      Benda was registered as a Sino-Foreign Joint Venture on May 26, 2004 and is
      subject to the tax code applicable to Sino-Foreign Joint Ventures in PRC which
      stipulates that Ebei Benda is fully exempt from PRC enterprise income tax for
      two years, starting from the first profit-making year after 2005, followed
      by a
      50% income tax reduction, namely 16.5% tax rate, for the next three consecutive
      years





Jiangling
      Benda and Yidu Benda as cross-municipal investment entities, enjoy the same
      tax
      treatment applied to Ebei Benda.





Beijing
      Shusai did not have taxable income in H1 2007.





SiBiono,
      located in Shenzhen, a special economic region in PRC, is subject to a full
      income tax rate of 15% on taxable income. The net loss SiBiono occurred in
      the
      previous years is allowed to be carried forward for a maximum of five years.
      If
      SiBiono gets approved and recognized as a high-tech company, it can enjoy 50%
      of
      tax deduction, namely 7.5% tax rate for three years starting from the first
      profit-making year, with a likely extension for another three years. There
      were
      no income tax provisions for SiBiono in H1 2007.





*Net
      Income/(Loss):*


The
      Company experienced a net loss of $8.5 MM in H1 2007 due to significant increase
      in G&A expense.





LIQUIDITY
      AND CAPITAL RESOURCES


Operating
      cash flow decreased $1.65 MM to $249K in H1 2007 from $1.9 MM in H1 2006
      primarily due to the following factors,





a)
            Other
                receivables increased by $156K, mainly due to $138K deposit for raw
                materials procurement


b)
            Prepaid
                expenses and deposits increased by $569K partly due
                to,


i.
            $45K
                prepayment for raw materials procurement


ii.
            $240K
                bank deposit for securing a commercial bank note to procure raw
                materials


c)
            Inventories
                increased by $144K, as an increase in raw materials procurement





Investing
      cash outflow was $6.2 MM in H1 2007 due to the following factors





a)
            $1.5
                MM as part of the total consideration for SiBiono acquisition


b)
            $1.3
                MM for fixed assets and equipment
                purchase


c)
            $0.8
                MM for plant’s construction


d)
            $1.2
                MM for new drug license acquisition


e)
            $0.8
                MM for the purchase of land use right





Investing
      cash inflow was $6.2 MM in H1 2007 mainly due to the proceeds from issuance
      of
      convertible promissory note.





-25-


**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.




**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
      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
      February 2007, the Financial Accounting Standards Board ("FASB") issued FASB
      159
      "The Fair Value Option for Financial Assets and Financial Liabilities" ("FASB
      159"). FASB 159 permits entities to measure financial instruments and certain
      other items at fair value that are not currently measured at fair value. We
      are
      currently evaluating the impact of the adoption of SFAS 159 will have, if any,
      on our financial statements.








-26-


**Item
      3. Controls and Procedures**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of our disclosure controls and procedures, as such term is defined
      under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
      Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2007. Based
      on
      this evaluation, our principal executive officer and principal financial officer
      have concluded that our disclosure controls and procedures are effective to
      ensure that information required to be disclosed by us in the reports we file
      or
      submit under the Exchange Act is recorded, processed, summarized, and reported
      within the time periods specified in the Securities and Exchange Commission’s
      rules and forms and that our disclosure and controls are designed to ensure
      that
      information required to be disclosed by us in the reports that we file or submit
      under the Exchange Act is accumulated and communicated to our management,
      including our principal executive officer and principal financial officer,
      or
      persons performing similar functions, as appropriate to allow timely decisions
      regarding required disclosure.




There
      were no changes (including corrective actions with regard to significant
      deficiencies or material weaknesses) in our internal controls over financial
      reporting that occurred during the first quarter of fiscal 2007 that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.




-27-




**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




Sibiono
      had an outstanding litigation matter. The litigation was about a purchase of
      equipment with a total contract amount of Rmb1,730,000 or approximately
      $217,236. According to the judicial decision of the People’s Court (Junior) of
      Lian Yun District of Lian Yun City, PRC dated April 20, 2007, since the company
      had already paid the initial deposit, the company should compensate the supplier
      with an amount of Rmb398,625 or approximately $50,055. The company appealed
      the
      case to the People’s Court (Senior) of Lian Yun District of Lian Yun City, PRC
      dated on May 18, 2007. The case is still under first appeal
      process.




**Item
      2. Changes in Securities.**




On
      April
      5, 2007, pursuant to an Investment Agreement entered into between the Company
      and certain accredited investors and institutional investors (“Buyers”), the
      Company 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. Such securities
      were not registered under the Securities Act of 1933. The issuance of these
      shares was exempt from registration, in part pursuant to Regulation S and
      Regulation D under the Securities Act of 1933 and in part pursuant to Section
      4(2) of the Securities Act of 1933. We made this determination based on the
      representations of Benda which included, in pertinent part, that such
      shareholders were either (a) "accredited investors" within the meaning of Rule
      501 of Regulation D promulgated under the Securities Act, or (b) not a "U.S.
      person" as that term is defined in Rule 902(k) of Regulation S under the Act,
      and that such shareholders were acquiring our common stock, for investment
      purposes for their own respective accounts and not as nominees or agents, and
      not with a view to the resale or distribution thereof, and that the shareholders
      understood that the shares of our common stock may not be sold or otherwise
      disposed of without registration under the Securities Act or an applicable
      exemption therefrom.





**Item
      3. Defaults Upon Senior Securities.**




None




-28-


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




No
      matter
      was submitted during the quarter ending June 30, 2007, covered by this report
      to
      a vote of the Company’s shareholders, through the solicitation of proxies or
      otherwise.




**Item
      5. Other Information.**




None




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





(a)    Exhibits





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





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





(b)   Reports
      of Form 8-K





On
      April
      6, 2007, in its Current Report on Form 8-K for an event dated April 5, 2007,
      the
      Company reported the entry into a material definitive agreement for the
      financing of $7,410,000 for the purchase of majority ownership of Shenzhen
      SiBiono Gene Technology Co., Ltd. It also announced the purchase of majority
      ownership of Shenzhen SiBiono Gene Technology Co., Ltd.





On
      June
      15, 2007, in its Current Report on Amendment No. 1 to Form 8-K for an event
      dated April 5, 2007, the Company filed the exhibits, including required
      financial statements for the purchase of majority ownership of Shenzhen SiBiono
      Gene Technology Co., Ltd.





On
      June
      18, 2007, in its Current Report on Amendment No. 2 to Form 8-K for an event
      dated April 5, 2007, the Company filed the pro-forma financial statements for
      the purchase of majority ownership of Shenzhen SiBiono Gene Technology Co.,
      Ltd.







-29-






**SIGNATURES**




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




**BENDA
                PHARMACEUTICAL, INC.**RegistrantDate:
                August 17, 2007
            
            By:*/s/
                Yiqing Wan*Yiqing
                WanPresident,
                Chief Executive OfficerChairman
                of Board of Directors






-30-