**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


_______________




**FORM
      10-Q**


_______________




**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the quarterly period ended June 30, 2008**




**o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





**For
      the transition period from ______to______.**




**BENDA
      PHARMACEUTICAL, INC.**


**(Exact
      name of registrant as specified in Charter**




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





**Room
      13, Floor 25, Sunny New World Tower,**


**No.
      231 Xin Hua Road, Jianghan District,**


**Wuhan,
      Hubei, PRC. Post Code: 430015**


**(Address
      of Principal Executive Offices)**


**_______________**





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


**(Issuer
      Telephone number)**


**_______________**




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




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




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




Large
      Accelerated Filer o Accelerated
      Filer o Non-Accelerated
      Filer o Smaller
      Reporting Company x








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


Yes o No x




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of August 14, 2008: 101,344,379 shares
      of
      common stock.


1




**BENDA
      PHARMACEUTICAL, INC.**




**FORM
      10-Q**




**June
      30, 2008**




**INDEX**




**PART
      I-- FINANCIAL INFORMATION**




Item
                1.
            Financial
                StatementsItem
                2.
            Management’s
                Discussion and Analysis of Financial ConditionItem
                3.
            Quantitative
                and Qualitative Disclosures About Market RiskItem
                4T.
            Control
                and Procedures






**PART
      II-- OTHER INFORMATION**




Item
                1
            Legal
                ProceedingsItem
                2.
            Unregistered
                Sales of Equity Securities and Use of ProceedsItem
                3.
            Defaults
                Upon Senior SecuritiesItem
                4.
            Submission
                of Matters to a Vote of Security HoldersItem
                5.
            Other
                InformationItem
                6.
            Exhibits
                and Reports on Form 8-K






**SIGNATURE**




2


**Item
      1. Financial Information**





**BENDA
      PHARMACEUTICAL, INC.**


**(an
      exploration stage company)**




**FINANCIAL
      STATEMENTS**




**AS
      OF JUNE 30, 2008**








**CONTENTS**








PAGE
            F1
            CONDENSED
                BALANCE SHEETS AS OF JUNE 30, 2008 (UNAUDITED) AND AS OF DECEMBER
                31, 2007
                (AUDITED).PAGE
            F2
            CONDENSED
                STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND
                2007
                AND FOR THE PERIOD FROM DECEMBER 17, 1999 (INCEPTION) TO JUNE 30,
                2008
                (UNAUDITED).PAGES
            F3
            CONDENSED
                STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY) FOR THE PERIOD
                FROM DECEMBER 17, 1999 (INCEPTION) TO JUNE 30, 2008
                (UNAUDITED).PAGE
            F4
            CONDENSED
                STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND
                2007
                AND FOR THE PERIOD FROM DECEMBER 17, 1999 (INCEPTION) TO JUNE 30,
                2008
                (UNAUDITED).PAGES
            F5
                - F8
            NOTES
                TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED).


3


**Benda
                  Pharmaceutical, Inc.**
                **Consolidated
                  Balance Sheets**
                **(Amounts
                  expressed in U.S.
                  Dollars)**


**June
                      30**
                  
                  **December
                      31****2008**
                  
                  **2007****(Unaudited)****Assets**Current
                      AssetsCash
                      and cash equivalents
                  
                  $
                  1,035,931
                  
                  $
                  1,266,240Trade
                      receivables, net (Note 5)
                  
                  
                  11,487,967
                  
                  
                  10,472,233Other
                      receivables (Note 5)
                  
                  
                  346,170
                  
                  
                  453,595Refundable
                      purchase price paid (Note 6)
                  
                  
                  -
                  
                  
                  1,200,000Short-term
                      loan receivables (Note 5)
                  
                  
                  145,947
                  
                  
                  -Due
                      from related parties (Note 18)
                  
                  
                  33,807
                  
                  
                  -Inventories
                      (Note 7)
                  
                  
                  3,250,625
                  
                  
                  1,952,348Prepaid
                      expenses and deposits (Note 5)
                  
                  
                  1,200,021
                  
                  
                  933,299Total
                      current assets
                  
                  
                  17,500,468
                  
                  
                  16,277,715Due
                      from related parties (Note 18)
                  
                  
                  2,722,081
                  
                  
                  2,630,019Property
                      and equipments, net (Note 8)
                  
                  
                  28,544,953
                  
                  
                  27,123,035Intangible
                      assets, net (Note 9)
                  
                  
                  6,589,805
                  
                  
                  6,494,510Goodwill
                      (Note 10)
                  
                  
                  7,873,166
                  
                  
                  7,395,752Restricted
                      cash (Note 11)
                  
                  
                  5,676,297
                  
                  
                  3,957,624Other
                      assets (Note 12)
                  
                  
                  1,821,419
                  
                  
                  1,710,972Refundable
                      purchase price paid (Note 6)
                  
                  
                  1,200,000
                  
                  
                  -Debt
                      issue costs (Note 24)
                  
                  
                  196,188
                  
                  
                  327,945Total
                      Assets
                  
                  $
                  72,124,377
                  
                  $
                  65,917,572**Liabilities
                      & Shareholders' Equity**Current
                      LiabilitiesBank
                      indebtedness (Note 11)
                  
                  $
                  1,272,103
                  
                  $
                  874,490Bank
                      loans payable (current portion) (Note 13)
                  
                  
                  2,969,537
                  
                  
                  2,867,004Long
                      term debt payable (current portion) (Note 14)
                  
                  
                  2,222,963
                  
                  
                  1,787,239Accounts
                      payable and accrued liabilities (Note 15)
                  
                  
                  5,671,108
                  
                  
                  4,665,984Commercial
                      notes payable (Note 11)
                  
                  
                  8,729,370
                  
                  
                  5,118,758Taxes
                      payable
                  
                  
                  1,167,738
                  
                  
                  1,279,385Acquisition
                      price payable (Note 10)
                  
                  
                  1,419,310
                  
                  
                  1,333,246Wages
                      payable
                  
                  
                  885,787
                  
                  
                  664,785Due
                      to related parties (Note 18)
                  
                  
                  566,618
                  
                  
                  -Total
                      current liabilities
                  
                  
                  24,904,534
                  
                  
                  18,590,891Long
                      term debt payable (long term portion) (Note 14)
                  
                  
                  -
                  
                  
                  425,001Long-term
                      convertible promissory notes (Note 24)
                  
                  
                  4,757,319
                  
                  
                  2,875,075Due
                      to related parties (Long-term) (Note 18)
                  
                  
                  2,018,664
                  
                  
                  3,193,618Total
                      liabilities
                  
                  
                  31,680,517
                  
                  
                  25,084,585Minority
                      interest
                  
                  
                  5,763,836
                  
                  
                  5,502,755Redeemable
                      common stock, 2,049,560 shares at $3.6 per share (Note 19)
                  
                  
                  7,376,366
                  
                  
                  7,376,366Shareholders'
                      EquityPreferred
                      stock, $0.001 par value; 5,000,000 shares authorized;None
                      issued and outstanding (Note 25)
                  
                  
                  -
                  
                  
                  -Common
                      stock, $0.001 par value; 150,000,000 shares authorized;100,803,509
                      shares issued and outstanding as of 6/30/2008;100,170,071
                      shares issued and outstanding as of 12/31/2007 (Note 25)
                  
                  
                  100,803
                  
                  
                  100,170Additional
                      paid in capital (Note 25)
                  
                  
                  21,853,508
                  
                  
                  21,547,929Retained
                      earnings (unrestricted)
                  
                  
                  (3,722,125
                  )
                  
                  100,452Statutory
                      surplus reserve fund (Note 17)
                  
                  
                  2,310,681
                  
                  
                  2,310,681Accumulative
                      other comprehensive income
                  
                  
                  6,256,931
                  
                  
                  3,390,774Shares
                      issuable for acquisition and services
                  
                  
                  503,860
                  
                  
                  503,860Total
                      Shareholders' Equity
                  
                  
                  27,303,658
                  
                  
                  27,953,866Total
                      Liabilities & Shareholders' Equity
                  
                  $
                  72,124,377
                  
                  $
                  65,917,572




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


4




**Benda
                Pharmaceutical, Inc.**
              **Consolidated
                Statements of Operations**
              **(Amounts
                expressed in U.S. Dollars)**




**SIX
                  MONTHS ENDED JUNE 30**
              
              **THREE
                  MONTHS ENDED JUNE 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007****(Unaudited)**
              
              **(Unaudited)**
              
              **(Unaudited)**
              
              **(Unaudited)**Revenue
              
              $
              13,225,623
              
              $
              8,236,852
              
              
              7,278,253
              
              $
              5,207,817Cost
                  of goods sold
              
              
              (8,396,854
              )
              
              (4,336,114
              )
              
              (4,579,608
              )
              
              (2,488,902
              )Gross
                  profit
              
              
              4,828,769
              
              
              3,900,738
              
              
              2,698,645
              
              
              2,718,915Selling
                  expenses
              
              
              (1,431,212
              )
              
              (344,886
              )
              
              (994,841
              )
              
              (256,703
              )General
                  and administrative expensesAmortization
                  of intangible assets
              
              
              (97,948
              )
              
              (55,219
              )
              
              (46,373
              )
              
              (28,935
              )Amortization
                  of debt issue costs (Note 24)
              
              
              (131,757
              )
              
              (67,269
              )
              
              (65,878
              )
              
              (58,526
              )Depreciation
              
              
              (243,495
              )
              
              (214,256
              )
              
              (120,275
              )
              
              (137,680
              )Bad
                  debts
              
              
              (773,893
              )
              
              (776,859
              )
              
              (302,596
              )
              
              (847,845
              )Write-down
                  of Inventory to Net Realizable Value (Recovery)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Director
                  remuneration
              
              
              (140,468
              )
              
              (33,945
              )
              
              (29,595
              )
              
              (33,945
              )Penalty
                  to investors (Note 20)
              
              
              (1,113,405
              )
              
              (120,000
              )
              
              (391,200
              )
              
              -Brokerage
                  fee
              
              
              -
              
              
              (239,963
              )
              
              -
              
              
              (239,963
              )Cash
                  bonus
              
              
              -
              
              
              (173,400
              )
              
              -
              
              
              (173,400
              )Consulting
                  and professional fees (Note 19)
              
              
              -
              
              
              (7,882,416
              )
              
              -
              
              
              (7,882,416
              )Other
                  general and administrative expenses (Note 21)
              
              
              (2,020,274
              )
              
              (974,139
              )
              
              (922,405
              )
              
              (649,426
              )Total
                  general and administrative expenses
              
              
              (4,521,240
              )
              
              (10,537,466
              )
              
              (1,878,322
              )
              
              (10,052,136
              )Gains
                  / (losses) on disposals of fixed assets
              
              
              -
              
              
              -
              
              
              -
              
              
              12,025Research
                  and development expenses
              
              
              (169,781
              )
              
              (97,119
              )
              
              (147,717
              )
              
              (97,119
              )Total
                  operating expenses
              
              
              (6,122,233
              )
              
              (10,979,471
              )
              
              (3,020,880
              )
              
              (10,393,933
              )Operating
                  income / (loss)
              
              
              (1,293,464
              )
              
              (7,078,733
              )
              
              (322,235
              )
              
              (7,675,018
              )Interest
                  income / (expenses) (Note 24)
              
              
              (2,340,580
              )
              
              (1,066,406
              )
              
              (1,128,298
              )
              
              (1,048,821
              )Other
                  income (expenses)
              
              
              248,058
              
              
              90,158
              
              
              (53,635
              )
              
              89,221Government
                  subsidies / grants (Note 22)
              
              
              -
              
              
              273,115
              
              
              -
              
              
              273,115Income
                  / (loss) before minority interest and income taxes
              
              
              (3,385,986
              )
              
              (7,781,866
              )
              
              (1,504,168
              )
              
              (8,361,503
              )Income
                  taxes (Note 23)
              
              
              (524,808
              )
              
              -
              
              
              (391,611
              )
              
              -Minority
                  interest (Note 28)
              
              
              88,216
              
              
              (466,616
              )
              
              110,614
              
              
              (419,710
              )Net
                  income / (loss)
              
              $
              (3,822,578
              )
              $
              (8,248,482
              )
              
              (1,785,165
              )
              $
              (8,781,213
              )Earnings
                  / (loss) per share - basic
              
              $
              (0.04
              )
              $
              (0.09
              )
              
              (0.02
              )
              $
              (0.09
              )Weighted
                  average shares outstanding - basic
              
              
              100,558,191
              
              
              96,625,164
              
              
              100,803,509
              
              
              96,964,606Earnings
                  / (loss) per share - diluted
              
              $
              (0.04
              )
              $
              (0.09
              )
              
              (0.02
              )
              $
              (0.09
              )Weighted
                  average shares outstanding - diluted (Note 26)
              
              
              100,558,191
              
              
              96,625,164
              
              
              100,803,509
              
              
              96,964,606





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


5




**Benda
                Pharmaceutical, Inc.**
              **Consolidated
                Statements of Cash Flows**
              **(Amounts
                expressed in U.S. Dollars)**


**SIX
                  MONTHS ENDED JUNE 30****2008**
              
              **2007****(Unaudited)**
              
              **(Unaudited)****Cash
                  Flows From Operating Activities**Net
                  income / (loss)
              
              $
              (3,822,578
              )
              $
              (8,248,482
              )Adjustments
                  to reconcile net income / (loss) to net cash provided by operating
                  activities:Consulting
                  and professional fees (Note 19)
              
              
              -
              
              
              7,882,416Bad
                  Debt provision
              
              
              773,893
              
              
              776,859Minority
                  interest
              
              
              (88,216
              )
              
              466,616Loss
                  on disposals of fixed assets
              
              
              -
              
              
              14,931Depreciation
              
              
              902,672
              
              
              300,579Amortization
                  of intangible assets
              
              
              373,615
              
              
              168,869Amortization
                  of debt issue costs (Note 24)
              
              
              131,757
              
              
              67,269Interest
                  expense (amortization of debt discount) (Note 24)
              
              
              1,882,244
              
              
              960,985Penalty
                  to investors settled by issuance of common stock
              
              
              230,312
              
              
              -Directors
                  remuneration settled by issuance of common stock
              
              
              75,900
              
              
              -Changes
                  in operating assets and liabilities:Trade
                  receivables
              
              
              (1,855,382
              )
              
              (451,147
              )Other
                  receivables
              
              
              229,758
              
              
              (164,133
              )Prepaid
                  expenses and deposits
              
              
              (406,623
              )
              
              (374,486
              )Inventories
              
              
              (1,298,277
              )
              
              (611,943
              )Accounts
                  payable and accrued liabilities
              
              
              1,226,126
              
              
              (377,837
              )Others
                  payable
              
              
              -
              
              
              (18,329
              )Taxes
                  payable
              
              
              (111,647
              )
              
              (143,156
              )**Net
                  cash provided by operating activities**
              
              
              (1,756,446
              )
              
              249,010**Cash
                  Flows From Investing Activities**Acquisition
                  cost paid
              
              
              -
              
              
              (1,532,159
              )Purchases
                  of property and equipment and construction-in-progress
              
              
              (213,176
              )
              
              (2,065,117
              )Purchases
                  of intangible assets
              
              
              -
              
              
              (1,972,500
              )Loans
                  to related parties, net
              
              
              -
              
              
              (646,127
              )**Net
                  cash used in investing activities**
              
              
              (213,176
              )
              
              (6,215,903
              )**Cash
                  Flows From Financing Actives**Proceeds
                  from issuance of convertible promissory note (Note 24)
              
              
              -
              
              
              7,030,800Proceeds
                  and repayments of borrowings under short-term loan
                  receivable
              
              
              (145,947
              )
              
              -Proceeds
                  and repayments of borrowings under related parties, net
              
              
              (734,205
              )
              
              (63,327
              )Proceeds
                  and repayments of borrowings under government debts payable,
                  net
              
              
              314,677
              
              
              (273,115
              )Proceeds
                  and repayments of borrowings under commercial bank notes, net (Note
                  11)
              
              
              1,846,510
              
              
              -Proceeds
                  and repayments of borrowings under bank loans, net
              
              
              (80,217
              )
              
              (451,574
              )**Net
                  cash provided by (used in) financing activities**
              
              
              1,200,818
              
              
              6,242,784Effect
                  of exchange rate changes on cash
              
              
              538,495
              
              
              34,575**Net
                  increase in cash and cash equivalents**
              
              
              (230,309
              )
              
              310,466**Cash
                  and cash equivalents, beginning of period**
              
              
              1,266,240
              
              
              1,676,119**Cash
                  and cash equivalents, end of period**
              
              $
              1,035,931
              
              $
              1,986,585**Supplemental
                  Disclosure of Cash Flow Information****Cash
                  paid for interest**
              
              $
              346,682
              
              $
              123,584**Cash
                  paid for income taxes**
              
              $
              636,375
              
              $
              -


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




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





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





On
      April
      5, 2007, Benda Ebei entered into an Equity Transfer Agreements with Shenzhen
      Yuanzheng Investment Development Co., Ltd. and Shenzhen Yuanxing Gene City
      Development Co., Ltd., the 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 Rmb 60 million (or $8.56
      million) due and payable on or before April 30, 2007. On June 11, 2007, Benda
      Ebei entered into an Equity Transfer Agreements with Huimin Zhang and Yaojin
      Wang, the individual shareholders of SiBiono, and to purchase 1.6% and 0.96%
      respectively of the shares of SiBiono’s common stock for total consideration of
      Rmb 2.56 million (or $0.37 million) due and payable on or before June 30, 2007.
      Altogether, the total consideration for 60.13% shares of SiBiono’s common stock
      was Rmb 62.56 million or $8.93 million. As of June 30, 2008, an accumulated
      amount, approximately Rmb 52.83 million or $7.51 million was paid and leaving
      a
      balance approximately $1.42 million (please refer to Note 10 for the
      details).





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





As
      of
      June 30, 2008, the organization and ownership structure of the Group is as
      follows:


7









**2.**
            **Significant
                Accounting Policies**





**Cash
      and Cash Equivalents**


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





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


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





As
      of
      June 30, 2008 and 2007, the Company provided a $1,800,863 and $1,410,338
      respectively for the allowance of doubtful accounts against trade receivables,
      other receivables and prepaid and deposits (please refer to Note 5 for details).
      Management's estimate of the appropriate allowance on those accounts receivable
      for the reporting periods was based on the aged nature of these accounts. In
      making its judgment, management assessed its customers' ability to continue
      to
      pay their outstanding invoices and the collectibility of those accounts on
      a
      timely basis, and whether their financial position might deteriorate
      significantly in the future, which would result in their inability to pay their
      debts to the Company.





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




As
      of
      June 30, 2008 and 2007, the Company provided a reserve against its
      work-in-progress amounting to $3,994,628 and $3,736,945, respectively. The
      reserve was raised due to the fact that most of the original liquid, a liquid
      element o produce Gendicine, was produced in the year of 2004 and this
      particular liquid can only be stored for approximately five years, therefore
      a
      reserve was provide against the work-in-progress (see Note 7). However, no
      reserve for obsolete, slow-moving or non-salable inventory was required for
      the
      reporting periods.




**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


8





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




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




**Impairment
      of Long-Lived Assets**


The
      Group
      evaluates potential impairment of long-lived assets, in accordance with
      Statement of Financial Accounting Standards (“SFAS”) No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets* ,
      which
      requires the Group to (a) recognize an impairment loss only if the carrying
      amount of a long-lived asset is not recoverable from its undiscounted cash
      flows
      and (b) measure an impairment loss as the difference between the carrying amount
      and fair value of the asset. The Group believes that long-lived assets in the
      accompanying consolidated balance sheets are appropriately valued as of June
      30,
      2008 and 2007.




**Intangible
      Assets**


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




**Revenue
      Recognition**


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


1.       Persuasive evidence of an arrangement
      exists;


2.       Delivery has occurred or services have
      been rendered;


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


4.       Collectibility is reasonably
      assured.





The
      majority of the Group's revenue results from sales contracts
      with distributors and revenue is recorded upon the shipment of goods.
      Management conducts credit background checks for new customers as a means
      to reduce the subjectivity of assuring collectibility. Based on these
      factors, the Group believes that it can apply the provisions of SAB 104
      with minimal subjectivity.





**Research
      and Development**


Research
      and development costs are expensed as incurred and consist primarily of salaries
      and related expenses of personnel engaged in research and development
      activities. The Company spent $169,781 and $97,119 on direct research and
      development (“R&D”) efforts for the six months ended June 30, 2008 and 2007,
      respectively.





**Income
      Taxes**


The
      Group
      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
      Group
      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 Group's cash as of June 30, 2008 and 2007 is
      maintained at various financial institutions in the PRC which do not provide
      insurance for amounts on deposit.





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




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




The
      following table shows the individual customer’s revenue and account receivable
      balance which was higher than 5% of total revenue and total account receivables
      for the six months and three months ended June 30, 2008 and
      2007:


9


SIX
                  MONTH ENDED JUNE 30,
              
              THREE
                  MONTH ENDED JUNE 30,2008
              
              2007
              
              2008
              
              2007(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Revenue
              
              $
              13,225,623
              
              
              %
              
              $
              8,236,852
              
              
              
              
              $
              7,278,253
              
              
              %
              
              $
              5,207,817
              
              
              %Individual
                  customer's revenue1
                  Zhuhai Gongbei Pharmaceutical Co, Ltd.
              
              
              2,926,293
              
              
              22%
              
              
              1,844,222
              
              
              22%
              
              
              1,399,001
              
              
              11%
              
              
              1,159,932
              
              
              14%2
                  Hubei Hengchuan Health Products Co.,Ltd.
              
              
              1,643,089
              
              
              12%
              
              
              -
              
              
              0%
              
              
              672,941
              
              
              5%
              
              
              -
              
              
              0%3
                  Shenzhen Huihua Pharmaceutical Co. Ltd.
              
              
              1,390,396
              
              
              11%
              
              
              1,224,640
              
              
              15%
              
              
              515,221
              
              
              4%
              
              
              689,112
              
              
              8%4
                  Shenyang Pharmaceutical Co. Ltd.
              
              
              1,273,621
              
              
              10%
              
              
              1,123,050
              
              
              14%
              
              
              561,439
              
              
              4%
              
              
              678,314
              
              
              8%5
                  Jiangxi Huiren Pharmaceutical Co. Ltd.
              
              
              955,865
              
              
              7%
              
              
              1,347,151
              
              
              16%
              
              
              603,023
              
              
              5%
              
              
              1,094,578
              
              
              13%Account
                  receivable, gross
              
              $
              12,765,302
              
              
              0%
              
              $
              7,847,719
              
              
              %
              
              $
              12,765,302
              
              
              0%
              
              $
              7,847,719
              
              
              %Individual
                  customer's account receivable gross balance1
                  Zhuhai Gongbei Pharmaceutical Co, Ltd.
              
              
              2,267,039
              
              
              18%
              
              
              1,523,060
              
              
              19%
              
              
              2,267,039
              
              
              18%
              
              
              1,523,060
              
              
              19%2
                  Hubei Hengchuan Health Products Co.,Ltd.
              
              
              1,162,570
              
              
              9%
              
              
              -
              
              
              0%
              
              
              1,162,570
              
              
              9%
              
              
              -
              
              
              0%3
                  Shenzhen Huihua Pharmaceutical Co. Ltd.
              
              
              986,123
              
              
              8%
              
              
              603,351
              
              
              8%
              
              
              986,123
              
              
              8%
              
              
              603,351
              
              
              8%4
                  Shenyang Pharmaceutical Co. Ltd.
              
              
              969,643
              
              
              8%
              
              
              660,668
              
              
              8%
              
              
              969,643
              
              
              8%
              
              
              660,668
              
              
              8%5
                  Jiangxi Huiren Pharmaceutical Co. Ltd.
              
              
              844,413
              
              
              7%
              
              
              1,721,524
              
              
              22%
              
              
              844,413
              
              
              7%
              
              
              1,721,524
              
              
              22%


**Basic
      and Diluted Earnings Per Share**


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




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




The
      exchange rates in effect as of June 30, 2008 and 2007 were stated as follows:
      (for RMB 1.00):




June
                  30,
              
              June
                  30,2008
              
              2007Fixed
                  rate
              
              $
              0.1459
              
              $
              0.1315Average
                  rate
              
              $
              0.1418
              
              $
              0.1301




For
      the
      six months ended June 30, 2008 and 2007, the foreign exchange loss was $2,156
      and $13,467, respectively; for the three months ended June 30, 2008,the foreign
      exchange gain was $1,040, for the three months ended June 30 2007, the foreign
      exchange loss was $23,327.





**Fair
      Value of Financial Instruments**


The
      Group'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
        June
        2008, the Financial Accounting Standards Board (“FASB”) issued FSP No. EITF
        03-6-1, Determining Whether Instruments Granted in Share-Based Payment
        Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1
        concludes that unvested share-based payment awards that contain rights to
        receive non-forfeitable dividends or dividend equivalents are participating
        securities, and thus, should be included in the two-class method of computing
        earnings per share (“EPS”). FSP EITF 03-6-1 is effective for fiscal years
        beginning after December 15, 2008, and interim periods within those years.
        Early
        application of EITF 03-6-1 is prohibited. It also requires that all prior-period
        EPS data be adjusted retrospectively. We have not yet determined the effect,
        if
        any, of the adoption of this statement on our financial condition or results
        of
        operations.
 
 In
        April
        2008, the FASB issued Staff Position FAS 142-3, Determination of the Useful
        Life
        of Intangible Assets (“FSP FAS 142-3”) which amends the factors an entity should
        consider in developing renewal or extension assumptions used to determine
        the
        useful life of a recognized intangible asset under FAS No. 142, Goodwill
        and
        Other Intangible Assets (“FAS No. 142”). FSP FAS 142-3 applies to intangible
        assets that are acquired individually or with a group of assets and intangible
        assets acquired in both business combinations and asset acquisitions. It
        removes
        a provision under FAS No. 142, requiring an entity to consider whether a
        contractual renewal or extension clause can be accomplished without substantial
        cost or material modifications of the existing terms and conditions associated
        with the asset. Instead, FSP FAS 142-3 requires that an entity consider its
        own
        experience in renewing similar arrangements. An entity would consider market
        participant assumptions regarding renewal if no such relevant experience
        exists.
        FSP FAS 142-3 is effective for year ends beginning after December 15, 2008
        with
        early adoption prohibited. We have not yet determined the effect, if any,
        of the
        adoption of this statement on our financial condition or results of
        operations.
 
 In
        March
        2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and
        Hedging Activities”. The new standard is intended to improve financial reporting
        about derivative instruments and hedging activities by requiring enhanced
        disclosures to enable investors to better understand their effects on an
        entity’s financial position, financial performance, and cash flows. It is
        effective for financial statements issued for fiscal years and interim periods
        beginning after November 15, 2008, with early application encouraged. The
        Company is currently evaluating the impact of adopting SFAS 161 on its
        consolidated financial statements.




10




On December 4, 2007, the Financial Accounting Standards
      Board
      (FASB) issued SFAS No. 160,*Noncontrolling interest in Consolidated Financial Statements*(SFAS
      No. 160). SFAS No. 160 requires all entities to report noncontrolling (minority)
      interests in subsidiaries as equity in the consolidated financial statements.
      The statement establishes a single method of accounting for changes in a
      parent’s ownership interest in a subsidiary that do not result in
      deconsolidation and expands disclosures in the consolidated financial
      statements. SFAS No. 160 is effective for fiscal years beginning after December
      15, 2008 and interim periods within those fiscal years. We have not yet
      determined the impact of the adoption of SFAS No. 160 on our consolidated
      financial statements and footnote disclosures.


On
      December 4, 2007, the FASB issued SFAS No.141R, *Business Combinations (* SFAS
      No.
      141R). SFAS No. 141R requires the acquiring entity in a business combination
      to
      recognize all the assets acquired and liabilities assumed, establishes the
      acquisition date fair value as the measurement objective for all assets acquired
      and liabilities assumed, and requires the acquirer to expand disclosures about
      the nature and financial effect of the business combination. SFAS No. 141R
      is
      effective for business combinations for which the acquisition date is on or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. We have not yet determined the impact of the adoption of
      SFAS
      No. 141R on our consolidated financial statements and footnote
      disclosures.





**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
      Group’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.




In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
      ("SFAS 157"). SFAS 157 defines fair value, establishes a framework and
      gives guidance regarding the methods used for measuring fair value, and expands
      disclosures about fair value measurements. In February 2008, the FASB issued
      FASB Staff Position 157-1, "Application of FASB Statement No. 157 to FASB
      Statement No. 13 and Other Accounting Pronouncements That Address Fair
      Value Measurements for Purposes of Lease Classification or Measurement under
      Statement 13" ("FSP 157-1") and FASB Staff Position 157-2, "Effective Date
      of
      FASB Statement No. 157" ("FSP 157-2"). FSP 157-1 amends SFAS 157 to
      remove certain leasing transactions from its scope. FSP 157-2 delays the
      effective date of SFAS 157 for all non-financial assets and non-financial
      liabilities, except for items that are recognized or disclosed at fair value
      in
      the financial statements on a recurring basis (at least annually), until fiscal
      years beginning after November 15, 2008. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 15,
      2007, and interim periods within those fiscal years. The Company adopted SFAS
      157 effective January 1, 2008 for all financial assets and liabilities as
      required. The adoption of SFAS 157 was not material to the
      Company's financial statements or results of operations.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities — Including an Amendment of FASB
      Statement No. 115,” (“SFAS 159”) which is effective for fiscal years
      beginning after November 15, 2007. SFAS 159 is an elective standard which
      permits an entity to choose to measure many financial instruments and certain
      other items at fair value at specified election dates. Subsequent unrealized
      gains and losses on items for which the fair value option has been elected
      will
      be reported in earnings. The Company has not elected the fair value option
      for
      any assets or liabilities under SFAS 159.





**3.**
            **Basis
                of Preparation**





The
      unaudited consolidated financial statements of Benda and its subsidiaries have
      been prepared in accordance with U.S. generally accepted accounting principles
      for interim financial information and pursuant to the requirements for reporting
      on Form 10-Q. Accordingly, they do not include all the information and footnotes
      required by accounting principles generally accepted in the United States of
      America for annual financial statements. However, the information included
      in
      these interim financial statements reflects all adjustments (consisting solely
      of normal recurring adjustments) which are, in the opinion of management,
      necessary for the fair presentation of the consolidated financial position
      and
      the consolidated results of operations. Results shown for interim periods are
      not necessarily indicative of the results to be obtained for a full year. The
      consolidated balance sheet information as of December 31, 2007 was derived
      from
      the audited consolidated financial statements included in the Company's Annual
      Report on Form 10-KSB. These interim financial statements should be read in
      conjunction with that report. Certain prior-year amounts have been reclassified
      to conform to the current-year presentation. These reclassifications had no
      effect on the results of operations or shareholder’s equity as previously
      reported.




**4.**
              **Use
                  of Estimates**


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





**5.**
            **Trade
                Receivables, Other Receivables, Prepaid and Deposits and Short-term
                Loan
                Receivable**




(1)  Allowance for doubtful
      debts




As
      mentioned in Note 4 that the company estimates of the appropriate allowance
      on
      those accounts receivable for the reporting periods was based on the aged nature
      of these accounts. The table below shows the allowance for doubtful debts of
      the
      Group’s trade receivables, other receivables and prepaid and deposit as of June
      30, 2008 and December 31, 2007:


11


June
                  30,
              
              December
                  31,2008
              
              2007(Unaudited)Trade
                  receivables, gross
              
              $
              12,765,302
              
              $
              10,909,921Allowance
                  for doubtful debts
              
              
              (1,277,336
              )
              
              (437,688
              )Trade
                  receivables, net
              
              $
              11,487,966
              
              $
              10,472,233June
                  30,
              
              
              December
                  31,2008
              
              
              2007(Unaudited)Other
                  receivables, gross
              
              $
              385,213
              
              $
              614,971Allowance
                  for doubtful debts
              
              
              (39,043
              )
              
              (161,376
              )Other
                  receivables, net
              
              $
              346,170
              
              $
              453,595June
                  30,
              
              
              December
                  31,2008
              
              
              2007(Unaudited)Prepaid
                  and deposits, gross
              
              $
              1,684,505
              
              $
              1,277,882Allowance
                  for doubtful debts
              
              
              (484,484
              )
              
              (344,583
              )Prepaid
                  and deposits, net
              
              $
              1,200,021
              
              $
              933,299




The
      change of the allowance for doubtful debts between the reporting periods, as
      of
      June 30, 2008 and 2007, is displayed as follows:




SIX
                  MONTHS ENDED JUNE 302008
              
              2007(Unaudited)
              
              (Unaudited)Balance
                  at beginning of period
              
              $
              (943,647
              )
              $
              (467,015
              )Provision/Reversal
                  during the period
              
              
              (773,893
              )
              
              (776,859
              )Addition
                  in lieu of acquisition of SiBiono
              
              
              
              
              
              (116,935
              )Foreign
                  exchange difference
              
              
              (83,323
              )
              
              (49,529
              )Balance
                  at end of period
              
              $
              (1,800,863
              )
              $
              (1,410,338
              )





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





For
      the
      six months ended June 30, 2008, the management assessed certain balances aged
      over 120 days and reviewed customer by customer and specified which did not
      have
      collectability issue; then a 100% provision was made against all remaining
      balances outstanding over 120 days.





For
      the
      six months ended June 30, 2008, the net trade receivable turnover day was 138
      days which was slightly above the company’s general principle for the allowance
      which was mainly due to the fact of the big earthquake in the second quarter
      of
      2008, it did affect the collection of trade receivables to certain extend.
      On
      the whole, the allowance made during the reporting period still fall in the
      normal situation.





(2)  Short-term
      loan receivable




The
      short-term receivable is due on June 30, 2009 and bears annual interest rate
      at
      prime rate (currently, as of August 8, 2008, the prime rate is 7.47%) published
      by People’s Bank of China.





**6.**
            **Refundable
                Purchase Price Paid**







On,
      December 7, 2006, Benda Ebei paid $1.2 million to SECO (Shenzhen) Biotech Co.,
      Ltd. (“SECO”) pursuant to a purchase agreement signed between SECO and Benda
      Ebei on December 3, 2006 to acquire a technology know-how and drug
      specifications / technical parameters in producing a Gastropathy drug owned
      by
      SECO. As at June 30, 2008, the deal has not been closed as the product
      certificate still not received from FDA of the United States of America and
      the
      amount paid is refundable per agreement if such approval is not obtained. As
      the
      date when the certificate can be received from FDA of the United States of
      America cannot be determined, the amount paid is reclassified as non-current
      assets as of June 30, 2008.




12




**7.**
            **Inventories**




The
      Group’s inventories a t
      June
      30, 2008 and December 31, 2007 were comprised as follows:


June
                  30,
              
              December
                  31,2008
              
              2007(Unaudited)Raw
                  materials
              
              $
              1,550,434
              
              $
              1,078,438Packing
                  materials
              
              
              201,999
              
              
              155,101Other
                  materials / supplies
              
              
              89,117
              
              
              93,206Finished
                  goods
              
              
              835,970
              
              
              415,627Work-in-progress
              
              
              4,567,732
              
              
              4,631,990Total
                  inventories at cost
              
              
              7,245,253
              
              
              6,374,362Less:
                  Reserves on work-in-progress
              
              
              (3,994,628
              )
              
              (4,422,014
              )Total
                  inventories, net
              
              $
              3,250,625
              
              $
              1,952,348


A
      reserve
      for obsolete, slow-moving or non-salable inventory was made on work-in-progress
      at the amount of $3,994,628 and $4,422,014 as of June 30, 2008 and December
      31,
      2007, respectively.





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





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







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





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





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


13


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





After
      the
      acquisition with the effective date April 1, 2007, the same accounting treatment
      was adopted for the treatment of the provision of reserve on work-in-progress.
      As of June 30, 2008, the provision of reserve on work in progress was
      $3,994,628..





**8.**
            **Property
                and Equipment******




The
      Group’s property and equipment as
      of
      June 30, 2008 and December 31, 2007 were comprised as follows:


ForeignDecember
                    31,
                
                Addition
                
                Currency
                
                June
                    30, 20082007
                
                
                
                TranslationDifference(Unaudited)Buildings
                
                $
                8,858,126
                
                
                2,730
                
                
                728,664
                
                $
                9,589,520Machinery
                    and equipment
                
                
                15,260,167
                
                
                70,960
                
                
                1,263,686
                
                
                16,594,813Office
                    equipment
                
                
                28,762
                
                
                6,397
                
                
                6,323
                
                
                41,482Motor
                    Vehicles
                
                
                206,252
                
                
                25,560
                
                
                17,790
                
                
                249,602Cost
                
                
                24,353,307
                
                
                105,647
                
                
                2,016,463
                
                
                26,475,417Less:
                    Accumulated DepreciationBuildings
                
                $
                (981,116
                )
                
                (215,497
                )
                
                (83,517
                )
                $
                (1,280,130
                )Machinery
                    and equipment
                
                
                (2,423,002
                )
                
                (671,988
                )
                
                (224,242
                )
                
                (3,319,232
                )Office
                    equipment
                
                
                (4,281
                )
                
                (1,142
                )
                
                1,824
                
                
                (3,599
                )Motor
                    Vehicles
                
                
                (46,447
                )
                
                (14,045
                )
                
                (4,037
                )
                
                (64,529
                )Accumulated
                    Depreciation
                
                
                (3,454,846
                )
                
                (902,672
                )
                
                (309,972
                )
                
                (4,667,490
                )Construction
                    in progress
                
                $
                6,224,573
                
                
                107,529
                
                
                404,924
                
                $
                6,737,026Total
                    property and equipment, net
                
                $
                27,123,035
                
                
                (689,496
                )
                
                2,111,415
                
                $
                28,544,953




As
      mentioned in Note 11, Benda Ebei entered into a commercial bank note issuance
      agreement with the Shanghai Pudong Development Bank (“Pudong Bank’) on August
      14, 2007 and a supplementary agreement on January 21, 2008. Under the agreement
      this credit facility is secured by the buildings, machinery and equipment of
      Benda Ebei and Jiangling Benda.




As
      of
      June 30, 2008, the net book value of secured property and equipment was
      approximately Rmb138.59 million or $20.2 million.




The
      depreciation expense for the six months ended June 30, 2008 was calculated
      as
      follows:




`
            
            
            
            Original
                CostDecember
                31,
            
            June
                30,
            
            
            
            Salvage
            
            Estimate
            
            Depreciation
            
            Deprecation2007
            
            2008
            
            Average
            
            Value
            
            Useful
                Lives
            
            Calculated
            
            Reported
            
            DifferenceBuilding
            
            $
            8,858,126
            
            
            9,589,520
            
            
            9,223,823
            
            
            5%
            
            
            25
            
            
            175,253
            
            
            215,497
            
            
            (40,244
            )Property
                and equipment
            
            
            15,260,167
            
            
            16,594,813
            
            
            15,927,490
            
            
            5%
            
            
            13
            
            
            605,245
            
            
            671,988
            
            
            (66,743
            )Office
                equipment
            
            
            28,762
            
            
            41,482
            
            
            35,122
            
            
            5%
            
            
            5
            
            
            3,337
            
            
            1,142
            
            
            2,195Motor
                vehicle
            
            
            206,252
            
            
            249,602
            
            
            227,927
            
            
            5%
            
            
            5
            
            
            21,653
            
            
            14,045
            
            
            7,608Total
                property and equipments
            
            $
            24,353,307
            
            
            26,475,417
            
            
            25,414,362
            
            
            
            
            
            
            
            
            805,488
            
            
            902,672
            
            
            (97,184
            )










The
      weighted average useful lives are used as the base for the calculation of
      depreciation as the estimated useful lives for buildings and property and
      equipments are varies from 20 to 30 years and 10 to 15 years, respectively.




The
      total
      depreciation expense for the six
      months and the three months ended June 30 ,
      2008
      and 2007 are broken down as follows:




SIX
                  MONTHS ENDED JUNE 30
              
              THREE
                  MONTHS ENDED JUNE 302008
              
              2007
              
              2008
              
              2007Restated
              
              
              
              Restated(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Cost
                  of sales
              
              $
              659,177
              
              $
              86,323
              
              $
              329,162
              
              $
              63,038Operating
                  expenses
              
              
              243,495
              
              
              214,256
              
              
              120,275
              
              
              137,680Balance
                  at end of period
              
              $
              902,672
              
              $
              300,579
              
              $
              449,437
              
              $
              200,718**9.
                  Intangible Assets**


14





**9.**
            **Intangible
                Assets******




The
      Group’s intangible assets as
      of
      June 30, 2008 and December 31, 2007 were comprised as follows:


ForeignDecember
                  31,
              
              Addition
              
              Currency
              
              June
                  30, 20082007
              
              
              
              TranslationDifference(Unaudited)Land-use
                  rights
              
              $
              2,875,796
              
              
              -
              
              
              222,755
              
              $
              3,098,551Drugs
                  permits and licenses
              
              
              2,564,996
              
              
              -
              
              
              198,681
              
              
              2,763,677Technology
                  formulas
              
              
              1,220,164
              
              
              -
              
              
              78,765
              
              
              1,298,929Patent
              
              
              1,685,919
              
              
              -
              
              
              108,830
              
              
              1,794,749Cost
              
              
              8,346,875
              
              
              -
              
              
              609,031
              
              
              8,955,906Land-use
                  rights
              
              $
              (201,030
              )
              
              (36,896
              )
              
              (16,009
              )
              $
              (253,935
              )Drugs
                  permits and licenses
              
              
              (1,291,425
              )
              
              (132,176
              )
              
              (94,959
              )
              
              (1,518,560
              )Technology
                  formulas
              
              
              (154,863
              )
              
              (63,118
              )
              
              (11,825
              )
              
              (229,806
              )Patent
              
              
              (205,047
              )
              
              (141,425
              )
              
              (17,328
              )
              
              (363,800
              )Accumulated
                  amortization
              
              
              (1,852,364
              )
              
              (373,615
              )
              
              (140,121
              )
              
              (2,366,101
              )Total
                  intangible assets, net
              
              $
              6,494,510
              
              
              (373,615
              )
              
              468,910
              
              $
              6,589,805




The
      amortization expense for the six months ended June 30, 2008 was calculated
      as
      follows:


December
                      31,
                  
                  June
                      30,
                  
                  
                  
                  Estimated
                  
                  Amortization
                      Amortization2007
                  
                  2008
                  
                  Average
                  
                  Useful
                      lives
                  
                  Calculated
                  
                  Reported
                  
                  DifferenceLand-use
                      rights
                  
                  $
                  2,875,796
                  
                  
                  3,098,551
                  
                  
                  2,987,174
                  
                  
                  40
                  
                  $
                  37,340
                  
                  
                  36,896
                  
                  
                  444Drugs
                      permits and licenses
                  
                  
                  2,564,996
                  
                  
                  2,763,677
                  
                  
                  2,664,337
                  
                  
                  10
                  
                  
                  133,217
                  
                  
                  132,176
                  
                  
                  1,041Technology
                      formulas
                  
                  
                  1,220,164
                  
                  
                  1,298,929
                  
                  
                  1,259,547
                  
                  
                  10
                  
                  
                  62,977
                  
                  
                  63,118
                  
                  
                  (141
                  )Patent
                  
                  
                  1,685,919
                  
                  
                  1,794,749
                  
                  
                  1,794,749
                  
                  
                  6
                  
                  
                  149,562
                  
                  
                  141,425
                  
                  
                  8,137Total
                      Intangible assets
                  
                  $
                  8,346,875
                  
                  
                  8,955,906
                  
                  
                  8,705,806
                  
                  
                  
                  
                  $
                  383,096
                  
                  
                  373,615
                  
                  
                  9,481




The
      above
      table shows the calculation of amortization expenses for the six months ended
      June 30, 2008. The difference between the amortization calculated and
      amortization reported was due to the changes of foreign exchange
      translation.




From
      the
      above calculation table, the patent, $1.68 million, was acquired in during
      the
      acquisition of SiBiono. It is amortized over the remaining useful lives, 6
      years, whereas the original useful lives are 10 years.




The
      total
      amortization expense for the six
      months and the three months ended June 30, 2008 ,
      and
      2007 are broken down as follows:


SIX
                  MONTHS ENDED JUNE 30
              
              THREE
                  MONTHS ENDED JUNE 302008
              
              2007
              
              2008
              
              2007Restated
              
              
              
              Restated(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Cost
                  of sales
              
              $
              275,667
              
              $
              113,650
              
              $
              143,127
              
              $
              89,467Operating
                  expenses
              
              
              97,948
              
              
              55,219
              
              
              46,373
              
              
              28,935Balance
                  at end of period
              
              $
              373,615
              
              $
              168,869
              
              $
              189,500
              
              $
              118,402


**10.**
            **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. If there is an overall decline in the value of the
      acquired assets, then earlier booked goodwill is deemed “impaired” and must be
      written down. 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,
      2008, there was an amount approximately $7.9 million was recorded as goodwill.
      Since SiBiono was turned to be profitable
      from the year of 2007, no impairment would be provided.




15




As
      of
      June 30, 2008, the total purchase price was Rmb62.56 million (or $8.93 million).
      Out of which, Rmb53.95 million (or $7.9 million) was recognized as goodwill
      and
      the remaining Rmb8.61 million (or $1.03 million) was allocated to identifiable
      assets and assumed liabilities of SiBiono as following:


Condensed
                        Balance Sheet of SiBiono, as of March 31, 2007
                    
                    In
                        ' 000**Current
                        Assets**Cash
                        and cash equivalents
                    
                    
                    
                    
                    $
                    590Receivables,
                        prepaid expenses and deposits
                    
                    
                    
                    
                    
                    969Inventories
                    
                    
                    
                    
                    
                    688**Total
                        current assets**
                    
                    **2,246****Non-current
                        Assets**Property
                        and equipments, net
                    
                    
                    
                    
                    
                    6,789Intangible
                        assets, net
                    
                    
                    
                    
                    
                    1,939**Total
                        non-current assets**
                    
                    **8,728****Total
                        Assets**
                    $
                    **10,975****Current
                        Liabilities**Trade
                        payables and miscellaneous payables
                    
                    
                    
                    
                    $
                    1,175Current
                        portion of long term loans payable
                    
                    
                    
                    
                    
                    1,813Current
                        portion of long term government debts payable
                    
                    
                    
                    
                    
                    2,710**Total
                        current liabilities**
                    
                    **5,699****Non-current
                        Liabilities**Long
                        term loans payable
                    
                    
                    
                    
                    
                    1,360Long
                        term government debts payable
                    
                    
                    
                    
                    
                    1,723Due
                        to related parties (long term)
                    
                    
                    
                    
                    
                    338**Total
                        non-current liabilities**
                    
                    **3,420****Total
                        liabilities**
                    $
                    **9,119****Net
                        assets**
                    $
                    **1,855**%
                        of equity interest acquired
                    
                    60.13
                    %**Net
                        assets acquired**
                    $
                    **1,116**
                    
                    
                    Note
                        aNote
                        a.




Note
      a.  From
      the
      above table, the net assets of SiBiono as of March 31, 2007 was Rmb8.61 million,
      and when translating into US currency upon the time acquired, such net assets
      amount was translated into $1.12 million (whereas the average exchange rate
      prevailing on that date was $0.12592) .
      However, when we subtract the total acquisition price against the goodwill,
      the
      net assets would be $1.03 million. The slightly difference was occurred, $0.09
      million and which was solely due to the foreign currency
      translation.





As
      of
      June 30, 2008, out of the total acquisition cost Rmb62.56 million (or $8.93
      million), the following payments were made:





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





In
      the
      year of 2007, an additional amount Rmb20.28 million was paid. The remaining
      balance was reported as “acquisition cost payable” on the balance sheet. As of
      June 30, 2008, the total amount paid was Rmb52.83 million (or $7.51 million)
      and
      the outstanding balance was Rmb9.73 million (or $1.42 million).





The
      Group
      has already obtained the oral consent from the selling shareholders of SiBiono
      that the remaining balance could be settled within the year 2008.


16





**11.**
            **Restricted
                Cash, Bank Indebtedness and Commercial Notes
                Payable**




The
      Group’s restricted cash at June 30, 2008 and December 31, 2007 was comprised as
      follows:




June
                  30,
              
              December
                  31,2008
              
              2007(Unaudited)Deposits
                  for issuance of commercial notes
              
              $
              4,379,356
              
              $
              2,615,254Funds
                  from government technolgy agencies
              
              
              1,296,941
              
              
              1,342,370Total
                  restricted cash
              
              $
              5,676,297
              
              $
              3,957,624





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




a)
            Duration
                of the agreement is three years;




b)
            It
                is non-interest bearing;




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




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




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


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





On
      January 21, 2008, Benda Ebei entered into a supplementary agreement with
      Shanghai Pudong Development Bank, to supplement the commercial bank note
      issuance agreement dated on August 14, 2007 (see Note 8). According to this
      supplementary agreement, the credit facility is further secured by the
      buildings, machinery and equipment of Jiangling Benda.





As
      of June
      30,
      2008, Benda Ebei and Jiangling Benda deposited an amount $4,379,356 in Shanghai
      Pudong Development Bank as deposit for the issuance of commercial bank notes.
      Such deposits will be released when the commercial bank notes are cleared.
      As of
      June 30, 2008, the balance of the commercial bank notes payable was $8,729,370.
      Thus the net commercial bank notes payable was $4,350,014 as of June 30,
      2008.




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




a)
            Among
                the cash and cash equivalents balances of SiBiono were composed of
                two
                parts; (i) unrestricted cash, which were generated from either operations,
                or loans from bank and financial institutions, or invested capital;
                (ii)
                restricted cash, which were obtained from the various government
                technology agencies as long term debt payable (see note 13 for the
                related
                details).




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




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




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




Due
      to
      the above reasons, SiBiono relocated the balances of restricted cash from the
      cash and cash equivalents balances with an amount $1,296,941 as of June 30,
      2008. However, since the balances of the restricted cash were larger than the
      balance of cash and cash equivalents balances, bank indebtedness were resulted
      with an amount $1,272,103 as of June 30, 2008.




17




**12.**
            **Other
                assets**




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





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





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





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


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


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


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





Following
      this arbitration decision, Benda Ebei recognized the liability as total
      acquisition cost payable of Rmb12.48 million, plus the penalty and related
      legal
      and arbitration expenses, totaling approximately Rmb12.80 million or $1.87
      million (Note 15). Accordingly Benda Eebi recognized the right to purchase
      the
      6.24% equity shares in SiBiono and recorded as other assets at Rmb 12.48 million
      or $1.82 million.





**13.**
            **Bank
                Loan****s
                Payable**




The
      Group’s bank loans as
      of
      June 30, 2008 and December 31, 2007 were comprised as follows:




June
                   30,
              
              December
                  31,2008
              
              2007(Unaudited)Bank
                  loans due within one year
              
              $
              2,969,537
              
              $
              2,867,004Bank
                  loans due after one year
              
              
              -
              
              
              -Total
                  bank loans
              
              $
              2,969,537
              
              $
              2,867,004




As
      of
      June 30, 2008 and December 31, 2007, Sibiono, had one outstanding bank loan
      with
      an amount $2,969,537 and $2,867,004, respectively, which was used primarily
      to
      fund construction in progress projects and for general working capital purposes.
      This loan carries annual interest rate of 6.34% and matures on April 29, 2008.
      As of June 30, 2008, this loan has matured and SiBiono reached an oral agreement
      with the bank to extend the loan on a monthly basis. This loan is personal
      guaranteed by Zhaohui Peng, the former Chairman and a shareholder of SiBiono.





Total
      interest expense paid
      related to the Group’s outstanding bank loans was $92,698 and $48,925 for the
      six months ended June 30, 2008 and 2007, respectively.




18




**14.**
            **Long
                Term Debt Payable**




As
      of June
      30,
      2008, long term debt payable was raised due to the fact that various technology
      funds were obtained from various government technology agencies to support
      its
      gene therapy research and development activities during the past years and
      recorded as long term debt payable.




The
      long
      term debt payable as of June 30, 2008, and December 31, 2007 were comprised
      as
      follows:




June
                  30,
              
              December
                  31,2008
              
              2007(Unaudited)Long-term
                  debt payable due within one year
              
              $
              2,222,963
              
              $
              1,787,239Long-term
                  debt payable due after one year
              
              
              -
              
              
              425,001Total
                  long-term debt payable
              
              $
              2,222,963
              
              $
              2,212,240




Even
      though there were $2,222,963 long term debt payable due within one year as
      of
      June 30, 2008, because of its non-repayable feature, the obligations will be
      discharged once the examination by the various government technology agencies
      is
      conducted and most of the examination will be carried out and completed.




During
      the six months ended June 30, 2008, there was no long term debt payable
      discharged and recorded as government subsidies (see Note 22 for the related
      details).




**15.**
            **Accounts
                Payable and Accrued
                Liabilities**




The
      Group’s accounts
      payable and accrued liabilities as of June 30, 2008 and December 31, 2007were
      comprised as follows:


June
                  30,
              
              December
                  31,2008
              
              2007(Unaudited)Trade
                  payable
              
              $
              559,204
              
              $
              305,443Deposits
                  paid by customer
              
              
              6,469
              
              
              160,818Acquistion
                  cost payable following the arbitration (Note 12)
              
              
              1,867,505
              
              
              1,754,263Accrued
                  liabilities
              
              
              2,949,400
              
              
              2,162,455Miscellaneous
                  payables
              
              
              288,532
              
              
              283,005Total
                  account payables and accurred liabilities
              
              $
              5,671,108
              
              $
              4,665,984





**16.**
            **Welfare
                and Employment Liabilities**




As
      stipulated by the relevant laws and regulations for enterprises operating in
      the
      PRC, the Group’s PRC entities are required to maintain a welfare plan for all of
      its employees who are residents of the PRC. Based on the wages payable and
      according to the labor law of the PRC, the Group accrued 14% on a monthly basis,
      for employees’ welfare, labor union fees, and education and training programs,
      respectively. As of June 30, 2008 and December 31, 2007, the Group accrued
      approximately $450,713 and $345,000 for the employees’ welfare respectively.





**17.**
            **Statutory
                Reserves**




As
      stipulated by the relevant laws and regulations for enterprises operating in
      the
      PRC, the Group is required to make annual appropriations to a statutory surplus
      reserve fund for each of its PRC subsidiaries. Specifically, the Group is
      required to allocate 15% its profits after taxes at the fiscal year end, as
      determined in accordance with the PRC accounting standards applicable to the
      Group’s PRC subsidiaries, to a statutory surplus reserve until such reserve
      reaches 50% of the registered capital of the Group’s PRC subsidiaries. As of
      June 30, 2008 and December 31, 2007, the registered capital of the Group’s PRC
      subsidiaries was $20,026,617.


19





**18.**
            **Related
                Party Transactions**




Due
      from related
      parties as of June 30, 2008 and December 31, 2007 were comprised as
      follows:




June
                  30,
              
              December
                  31,2008
              
              2007(Unaudited)Yiqing
                  WanDue
                  to Ever Leader Holdings Co. Ltd.
              
              $
              646,532
              
              $
              646,429Due
                  to Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              
              215,057
              
              
              72,949Due
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              4,862
              
              
              3,608Hubei
                  Benda Science and Technology Co. LtdDue
                  to Yidu Benda Chemicals Co. Ltd.
              
              
              1,599,083
              
              
              1,502,118Due
                  to Ever Leader Holdings Co. Ltd.
              
              
              230,197
              
              
              230,160Feng
                  WangDue
                  to Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              31,211
              
              
              29,318Qin
                  YuDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              1,460
              
              
              -Hua
                  ShenDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              13,394
              
              
              137,097Pong
                  TsaiohueiDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              -
              
              
              3,257Xiaozhi
                  ZhangDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              5,411
              
              
              5,083Xiaojing
                  WangDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              289
              
              
              -Hsieh,
                  ChangDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              8,027
              
              
              -Rong
                  HeDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              365
              
              
              -Total
                  due from related parties
              
              $
              2,755,888
              
              $
              2,630,019
  Due
        to
        related parties as of June 30, 2008 and December 31, 2007 were comprised
        as
        follows:


June
                  30,
              
              December
                  31,2008
              
              2007(Unaudited)Hubei
                  Benda Science and Technology Co. LtdDue
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              $
              28,459
              
              $
              49,056Due
                  from Jiangliang Benda Pharamaceutical Co. Ltd.
              
              
              806,985
              
              
              1,872,374Due
                  from Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              14,300
              
              
              6,846Wei
                  XuDue
                  from Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              6,435
              
              
              -Due
                  from Everleader Holding Ltd.
              
              
              379,375Hua
                  XuDue
                  from Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              25,395
              
              
              -Due
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              
              1,073,079
              
              
              1,009,792Due
                  from Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              65,460
              
              
              61,491Yiqing,
                  WanDue
                  from Yidu Benda Chemicals Co. Ltd.
              
              
              873
              
              
              -Due
                  from Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              146,575
              
              
              137,687Hui
                  XuDue
                  from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.
              
              
              28,341
              
              
              26,622Due
                  from Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              1,168
              
              
              3,153Hua
                  ShenDue
                  from Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              363
              
              
              26,597Pong
                  TsaiohueiDue
                  from Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              8,474
              
              
              -Total
                  due to related parties$
              2,585,282
              
              $
              3,193,618


Except
      for the loans from the shareholder Wei Xu by Everleader which bears interest
      rate at 12% per annum, unsecure and matures on December 3, 2008, the above
      advances bear no interest and the above loans due to related parties are
      unsecured, non-interest bearing and are not convertible into equity. Proceeds
      from the above loans were used primarily for general working capital purposes
      and are also long-term debts in nature which are due on December 31, 2012.


20




**19.**
            **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 RMB 60,000,000 due
      and payable on or before April 30, 2007.





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





In
      connection with the above Equity Transfer Agreements, Benda entered into a
      Financial Consultancy Agreement with Super Pioneer International Limited (“Super
      Pioneer”) and Technical Consultancy Agreements with Wang and Zhang for financial
      and technical consultancy services to be rendered. Pursuant to the Financial
      and
      Technical Consultancy Agreements (the “Agreements”), Benda agreed to issue an
      aggregate of 2,189,560 shares of its common stock to Super Pioneer (2.1 million
      shares, out of which 1.9 million shares is redeemable), Wang (33,585 shares,
      redeemable) and Zhang (55,975 share, redeemable) within three months from the
      date of the Agreements. Super Pioneer, Wang and Zang also agreed to refrain
      from
      selling shares of Benda’s common stock for a period of twelve months from the
      date of the issuance of the shares (the “Lock-up Period”). Within three months
      from expiration of the Lock-up Period, in the event that the public trading
      price of Benda’s common stock has not reach $3.60 per share and Benda’s common
      stock has not been listed on either the NASDAQ or AMEX stock exchanges, Super
      Pioneer, Wang, and Zang will have the option to require Benda to redeem an
      aggregate 2,049,560 shares of Benda’s common stock owned by Super Pioneer, Wang,
      and Zhang at a price of $3.60 per share.





In
      accordance 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 Benda to repurchase 2,049,560 of these shares at a
      redemption price of $3.60 per share at the option of the holders (if certain
      events outside of control of the Group do not occur), these 2,049,560 shares
      have been classified as redeemable common stock, at their redemption price
      of
      $3.60 per share or totaling $7,376,366, outside of permanent equity at June
      30,
      2008.





**20.**
            **Penalty
                to investors**





In
      accordance with FASB staff position No. EITF00-19-2 the Group recorded
      $1,113,405 in Registration Delay Expense, for the six month ended June 30,
      2008.
      Out of the total penalty, $230,312 was settled by issuance of 523,438 shares
      of
      common stock.





**21.**
            **Other
                general and administrative
                expenses**





For
      the
      six months and three months ended June 30, 2008 and 2007, the amount of other
      general and administrative expenses mainly composed of the following
      events:


SIX
                  MONTHS ENDED JUNE 30
              
              THREE
                  MONTHS ENDED JUNE 302008
              
              2007
              
              2008
              
              2007(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Audit
                  and accounting
              
              $
              201,829
              
              $
              207,938
              
              $
              72,495
              
              $
              204,438Legal
                  fees
              
              
              114,704
              
              
              80,677
              
              
              106,651
              
              
              18,361Office
                  expenses
              
              
              292,530
              
              
              142,079
              
              
              153,559
              
              
              74,880Salaries
                  and wages
              
              
              514,993
              
              
              224,600
              
              
              165,723
              
              
              93,238Consulting
                  fee
              
              
              434,773
              
              
              38,991
              
              
              201,859
              
              
              38,991Rent
                  & Utilities
              
              
              55,830
              
              
              28,774
              
              
              20,290
              
              
              24,284Investor
                  relation, Transfer agent and filing fees
              
              
              28,123
              
              
              65,853
              
              
              9,277
              
              
              29,923Travel
                  and transportation
              
              
              160,334
              
              
              83,757
              
              
              89,771
              
              
              71,712Repair
                  and maintanence
              
              
              119,099
              
              
              5,699
              
              
              42,445
              
              
              2,227Miscellaneous
              
              
              98,059
              
              
              95,771
              
              
              60,335
              
              
              91,372Total
                  other general & administrative
              
              $
              2,020,274
              
              $
              974,139
              
              $
              922,405
              
              $
              649,426





**22.**
            **Government
                Subsidies / Grants**




As
      mentioned in the Note 14, long term debt payable, various technology funds
      were
      obtained from various government technology agencies to support its gene therapy
      research and development activities during the past years and recorded as long
      term debt payable. According to the technology fund agreements, the various
      government technology agencies will examine the results of research and
      development according to the status of the projects. Once the examination 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 six months ended June 30, 2008, there were no government
      subsidies / grants recognized as revenue.


21





**23.**
            **Income
                Taxes**




Benda
      is
      subject to Delaware, United State of America tax, but no provision for income
      taxes were made for the six months ended June 30, 2008 and 2007 as Benda did
      not
      have reportable taxable income for the period.





Ever
      Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax, but
      no
      provisions for income taxes were made for the six months ended June 30, 2008
      and
      2007 as Ever Leader did not have reportable taxable income for the periods.





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





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





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





However,
      starting and effective from January 1, 2008, the full income tax rate would
      be
      changed from 33% to 25% according to the new PRC taxation regulations. Therefore
      these subsidiaries will be subject to the regular full income tax rate at 25%
      after the tax holidays expire in 2010.





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





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





Year
            Tax
                rate2008
            18%2009
            20%2010
            22%2011
            24%2012
                and thereafter
            25%





For
      the
      six months ended June 30, 2008, only Ebei Benda had taxable income and incurred
      income tax of Rmb 3.70 million or $0.52 million. There was no income tax of
      the
      Group for the six months ended June 30, 2007.





**24.**
            **Long
                Term Convertible Promissory
                Note**





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





Additionally,
      the enhanced note disclosure includes a detailed discussion of the accounting
      for the debt discount resulting from the relative fair value of the warrants
      issued in conjunction with the convertible promissory notes (calculated in
      accordance with APB 14) and the debt discount resulting from the beneficial
      conversion feature / conversion discount associated with the convertible
      promissory notes (calculated in accordance with EITF 98-5 and EITF 00-27) as
      follows:





In
      March
      and April of 2007, the Group entered into Investment Agreements (“Agreements”)
      with certain accredited and institutional investors (“Investors”) pursuant to
      which the Investors purchased from the Group a total of 252 Units (“Units”),
      resulting in aggregate gross proceeds to the Group $7,560,000, with each Unit
      consisting of: (i) a Convertible Promissory Note (“Note”) in the principal
      amount of $30,000 and convertible into 54,087 shares of the Group's common
      stock; and (ii) a Common Stock Warrant (“Warrant”) to acquire 54,087 shares
      of the Group’s common stock at an exercise price of $0.555 per share and
      expiring on November 14, 2011. The Notes are immediately convertible at the
      option of each Investor, bear interest at a rate of 4% per annum, and mature
      on
      March 28, 2009. As of March 31, 2007, an amount $5,520,000 was received; while
      as of June 30, 2008, the aggregate $7,560,000 principal balance of the notes
      remained outstanding and for the six months ended June 30, 2008, the Group
      recorded $150,786 of interest expense related to the Notes.


22




The
      Group
      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.





Additionally,
      the difference between the effective conversion price of the Notes into shares
      of the Group’s common stock, and the fair value of the Group’s common stock on
      the date of issuance of the Notes, resulted in a beneficial conversion feature
      of $2,385,089 (capped at the $7,560,000 of gross proceeds raised less the
      previously calculated $5,174,911 debt discount associated with Warrants issued
      in conjunction with the Notes) and was calculated in accordance with 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 six months ended June 30, 2008, the Group recorded $1,882,244 in interest
      expense related to the amortization of the debt discount associated with the
      Warrants and the debt discount associated with the beneficial conversion
      feature.





The
      Group
      also incurred $529,200 in placement agent commissions related to the issuance
      of
      the Notes and Warrants. This amount was recorded by the Group as debt issue
      costs and is being amortized over expected term of the Notes. For the six months
      ended June 30, 2008, the Group recorded $131,757 in amortization expense related
      to debt issue costs.





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





In
      the
      accounting for the Long Term Convertible Promissory Note, the Group’s analysis
      of the Performance Threshold had no effect because of the cap of the debt
      discounted and beneficial conversion feature as calculated in accordance with
      EITF 98-5.





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





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





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





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





In
      accordance with FASB staff position No. EITF00-19-2, during the six months
      ended
      June 30, 2008 the Group recorded $1,113,405 for Registration Delay Expense
      or
      penalty to investors. EITF 00-19-2 requires the Group to record the expense
      when
      it is probable that the liability has been incurred and the amount can be
      reasonably estimated.


23





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




As
      of
      June 30, 2008 and December 31, 2007, the Group had an aggregate of:





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




(b)  As
      of
      December 31, 2007, 100,170,071 shares of common stock were issued and
      outstanding, par value $0.001 each; During the six months ended June 30, 2008:;
      (i) 523,438 shares were issued to PIPE investors as penalty for registration
      delay expenses (see Note 20); and (ii) 110,000 shares were issued to the
      independent directors in lieu of their remuneration. Thus, the share of common
      stock issued and outstanding was 100,803,509 as of June 30, 2008.




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


December
                  31,
              
              Events
                  occurred during
              
              June
                  30,2007
              
              the
                  reporting period
              
              2008Events
              
              
              
              
              
              (Unaudited)To
                  record the changes of par value from $0.01 to $0.001of
                  the outstanding common stock as of 11/17/2005
              
              $
              584,481
              
              
              -
              
              $
              584,481To
                  adjust the par value of outstanding common stock as of
                  3/31/2006
              
              
              (5,354
              )
              
              -
              
              
              (5,354
              )Waiver
                  of shareholder loan on 9/5/2006
              
              
              2,298,434
              
              
              -
              
              
              2,298,434To
                  eliminate the common stock and additional paid-in capital of the
                  former
                  shellcompany
                  "Applied Spectrum Technologies, Inc." on 11/15/2006
              
              
              16,215,770
              
              
              -
              
              
              16,215,770To
                  eliminate the accumulated deficit of the former shell
                  company"Applied
                  Spectrum Technologies, Inc." on 11/15/2006
              
              
              (16,209,962
              )
              
              -
              
              
              (16,209,962
              )Issuance
                  of common stock, 25,961,760 shares at $0.4622 per share, on
                  11/15/2006
              
              
              11,974,038
              
              
              -
              
              
              11,974,038Issuance
                  of common stock, 64,942,369 shares at $0.001 per share on
                  11/15/2006
              
              
              (64,942
              )
              
              -
              
              
              (64,942
              )To
                  relocate the original common stock of Ever Leader on
                  11/15/2006
              
              
              1,285
              
              
              -
              
              
              1,285To
                  record the placement agent commission and transaction related
                  feeof
                  reverse merger on 11/15/2006
              
              
              (1,694,326
              )
              
              -
              
              
              (1,694,326
              )Issuance
                  of common stock 706,195 at $0.4622 per share
              
              
              325,697.00
              
              
              -
              
              
              325,697Debt
                  discount on beneficial conversion feature on convertible promissory
                  notes
              
              
              2,385,089.00
              
              
              -
              
              
              2,385,089Debt
                  discount on warrants issued with convertible promissory
                  notes
              
              
              5,174,911.00
              
              
              -
              
              
              5,174,911Placement
                  agent exercised 849,007 warrants at strike price through cashless
                  arrangement
              
              
              470,347.00
              
              
              -
              
              
              470,347Issuance
                  of common stock to PIPE investors as penalty for late submission
                  of
                  10KSB
              
              
              92,461.00
              
              
              -
              
              
              92,461Issuance
                  of common stock to directors in lieu of their remuneration
              
              
              -
              
              
              75,790
              
              
              75,790Issuance
                  of common stock to PIPE investors as penalty for registeration
                  delay
                  expenses
              
              
              -
              
              
              229,789
              
              
              229,789Additional
                  paid-in capital, balance for the period ended
              
              $
              21,547,929
              
              
              305,579
              
              $
              21,853,508





(d)  As
      of
      December 31, 2007, 27,708,929 Warrants, each convertible into one (1) share
      of
      the Group’s Common Stock, issued and outstanding. During the six months ended
      June 30, 2008, 1,597,075 warrants were issuable to CRT Capital Group, LLC and
      956,245 warrants were issuable to EastGate Financial, Inc. in lieu of their
      consultancy service. Thus the remaining balance as June 30, 2008 was
      30,262,249




(e)  .None
      options issued and outstanding.







**26.**
            **Weighted
                average shares outstanding -
                diluted**




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




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


24




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


SIX
                    MONTHS ENDED JUNE 30
                
                THREE
                    MONTHS ENDED JUNE 302008
                
                2007
                
                2008
                
                2007(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)Numerator:Net
                    income (loss)
                
                $
                (3,822,578
                )
                $
                (8,248,482
                )
                $
                (1,785,165
                )
                $
                (8,781,213)
                )Denominator:Basic
                    weighted-average shares outstanding
                
                
                100,558,191
                
                
                96,625,164
                
                
                100,803,509
                
                
                96,964,606Effect
                    of dilutive stock options & warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -Diluted
                    weighted-average shares outstanding
                
                
                100,558,191
                
                
                96,625,164
                
                
                100,803,509
                
                
                96,964,606Net
                    income (loss) per share:Basic
                
                $
                (0.04
                )
                $
                (0.09
                )
                $
                (0.02
                )
                $
                (0.09
                )Diluted
                
                $
                (0.04
                )
                $
                (0.09
                )
                $
                (0.02
                )
                $
                (0.09
                )





**27.**
            **Commitments
                and Contingencie****s**




As
      of
      June 30, 2008, there was an operating lease commitment and the amounts are
      stated as follows;




June
                    30,2008(Unaudited)Rental
                    and Property Management FeeWithin
                    one year
                
                $
                98,745One
                    to two year
                
                
                78,448Total
                    commitments payable
                
                $
                177,192





**28.**
            **Segment
                Information**






The
      company states the segment information according to the requirement stated
      in
      paragraph 37 of SFAS 131. The company produces five different categories of
      products and each category of product is produced in different subsidiaries
      or
      operation plants. The details are stated as follows:




1.
            Benda
                Ebei produces branded and generic
                medicines;


2.
            Jiangling
                Benda produces active pharmaceutical ingredients,
                APIs;


3.
            Yidu
                Benda produces bulk chemicals;


4.
            Beijing
                Shusai produces pharyngitis killer therapy; and


5.
            SiBiono
                produces gene therapy medicines, Gendicine.





Since
      each subsidiary produces the corresponding products by using the same production
      facilities of each subsidiary, therefore according
      to the requirement stated in paragraph of SFAS 131, the Group reports the
      segment information according to the un-identical products that produced in
      each
      subsidiary.


25




Selected
      financial information for each of these segments for the six months and three
      months ended June 30, 2008 and 2007 were as follows:


SIX
                          MONTHS ENDED JUNE 30
                      
                      THREE
                          MONTHS ENDED JUNE 302008
                      
                      2007
                      
                      2008
                      
                      2007(Unaudited)
                      
                      (Unaudited)
                      
                      (Unaudited)
                      
                      (Unaudited)*Branded/Generic
                          medicine segment*
                      
                      2008
                      
                      2007
                      
                      2008
                      
                      2007Revenue
                          from external customers
                      
                      $
                      11,466,193
                      
                      $
                      6,030,722
                      
                      $
                      5,945,084
                      
                      $
                      3,691,259Cost
                          of sales
                      
                      
                      (7,613,680
                      )
                      
                      (3,772,866
                      )
                      
                      (3,832,526
                      )
                      
                      (2,316,634
                      )Gross
                          profit
                      
                      
                      3,852,513
                      
                      
                      2,257,856
                      
                      
                      2,112,558
                      
                      
                      1,374,625Gross
                          margin
                      
                      
                      34
                      %
                      
                      37
                      %
                      
                      36
                      %
                      
                      37
                      %Research
                          and development
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Selling
                          expense
                      
                      
                      (773,483
                      )
                      
                      (93,434
                      )
                      
                      (558,832
                      )
                      
                      (37,631
                      )General
                          and administrative expense
                      
                      
                      (520,480
                      )
                      
                      (737,088
                      )
                      
                      (78,647
                      )
                      
                      (602,941
                      )Segment
                          contribution
                      
                      $
                      2,558,550
                      
                      $
                      1,427,334
                      
                      $
                      1,475,079
                      
                      $
                      734,053Contribution
                          margin
                      
                      
                      22
                      %
                      
                      24
                      %
                      
                      25
                      %
                      
                      20
                      %Total
                          assets, segment
                      
                      $
                      38,243,467
                      
                      $
                      24,684,456
                      
                      $
                      38,243,467
                      
                      $
                      24,684,456
  *Active
                            pharmaceutical ingredients segment*
                      
                      2008
                      
                      2007
                      
                      2008
                      
                      2007Revenue
                          from external customers
                      
                      $
                      580,332
                      
                      $
                      -
                      
                      $
                      579,984
                      
                      $
                      -Cost
                          of sales
                      
                      
                      (638,529
                      )
                      
                      (5,837
                      )
                      
                      (638,529
                      )
                      
                      (32
                      )Gross
                          profit
                      
                      
                      (58,197
                      )
                      
                      (5,837
                      
                      
                      (58,545
                      )
                      
                      (32
                      )Gross
                          margin
                      
                      
                      -10
                      %
                      
                      -
                      
                      
                      -10
                      %
                      
                      -Research
                          and development
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Selling
                          expense
                      
                      
                      (357
                      )
                      
                      -
                      
                      
                      (357
                      )
                      
                      3,011General
                          and administrative expense
                      
                      
                      (1,026,566
                      )
                      
                      (15,774
                      )
                      
                      (782,997
                      )
                      
                      (44,541
                      )Segment
                          contribution
                      
                      $
                      (1,085,120
                      )
                      $
                      (21,611
                      )
                      $
                      (841,899
                      )
                      $
                      (41,562Contribution
                          margin
                      
                      
                      -187
                      %
                      
                      -
                      
                      
                      -145
                      %
                      
                      -Total
                          assets, segment
                      
                      $
                      8,436,445
                      
                      $
                      4,891,813
                      
                      $
                      8,436,445
                      
                      $
                      4,891,813
 *Bulk
                          chemicals segment*
                      
                      2008
                      
                      2007
                      
                      2008
                      
                      2007Revenue
                          from external customers
                      
                      $
                      -
                      
                      $
                      698,519
                      
                      $
                      -
                      
                      $
                      14,054Cost
                          of sales
                      
                      
                      -
                      
                      
                      (386,956
                      )
                      
                      -
                      
                      
                      (2,088
                      )Gross
                          profit
                      
                      
                      -
                      
                      
                      311,563
                      
                      
                      -
                      
                      
                      11,966Gross
                          margin
                      
                      
                      -
                      
                      
                      45
                      %
                      
                      -
                      
                      
                      85
                      %Research
                          and development
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Selling
                          expense
                      
                      
                      -
                      
                      
                      (26,553
                      )
                      
                      -
                      
                      
                      (144
                      )General
                          and administrative expense
                      
                      
                      (305,968
                      )
                      
                      (760,246
                      )
                      
                      (7,991
                      )
                      
                      (669,682
                      )Segment
                          contribution
                      
                      $
                      (305,968
                      )
                      $
                      (475,236
                      )
                      $
                      (7,991
                      )
                      $
                      (657,860
                      )Contribution
                          margin
                      
                      
                      
                      
                      
                      -68
                      %
                      
                      -
                      
                      
                      -4681
                      %Total
                          assets, segment
                      
                      $
                      7,694,510
                      
                      $
                      8,424,467
                      
                      $
                      7,694,510
                      
                      $
                      8,424,467
  *Pharynigitis
                          killer therapy segment*
                      
                      2008
                      
                      2007
                      
                      2008
                      
                      2007Revenue
                          from external customers
                      
                      $
                      2,128
                      
                      $
                      23,053
                      
                      $
                      31
                      
                      $
                      17,946Cost
                          of sales
                      
                      
                      (117
                      )
                      
                      (1,187
                      )
                      
                      (2
                      )
                      
                      (880
                      )Gross
                          profit
                      
                      
                      2,011
                      
                      
                      21,866
                      
                      
                      29
                      
                      
                      17,066Gross
                          margin
                      
                      
                      95
                      %
                      
                      95
                      %
                      
                      94
                      %
                      
                      95
                      %Research
                          and development
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Selling
                          expense
                      
                      
                      (2,654
                      )
                      
                      (22,527
                      )
                      
                      (1,955
                      )
                      
                      (19,567
                      )General
                          and administrative expense
                      
                      
                      (20,227
                      )
                      
                      (51,603
                      )
                      
                      (7,910
                      )
                      
                      (27,522
                      )Segment
                          contribution
                      
                      $
                      (20,870
                      )
                      $
                      (52,264
                      )
                      $
                      (9,836
                      )
                      $
                      (30,023
                      )Contribution
                          margin
                      
                      
                      -981
                      %
                      
                      -227
                      %
                      
                      -31729
                      %
                      
                      -167
                      %Total
                          assets, segment
                      
                      $
                      108,332
                      
                      $
                      117,492
                      
                      $
                      108,332
                      
                      $
                      117,492
  *Gendicine
                          (Ad-p53) segment*
                      
                      2008
                      
                      2007
                      
                      2008
                      
                      2007Revenue
                          from external customers
                      
                      $
                      1,176,970
                      
                      $
                      1,484,558
                      
                      $
                      753,154
                      
                      $
                      1,484,558Cost
                          of sales
                      
                      
                      (110,651
                      )
                      
                      (169,268
                      )
                      
                      (74,674
                      )
                      
                      (169,268
                      )Gross
                          profit
                      
                      
                      1,066,319
                      
                      
                      1,315,290
                      
                      
                      678,480
                      
                      
                      1,315,290Gross
                          margin
                      
                      
                      91
                      %
                      
                      89
                      %
                      
                      90
                      %
                      
                      89
                      %Research
                          and development
                      
                      
                      (169,781
                      )
                      
                      (97,119
                      )
                      
                      (147,717
                      )
                      
                      (97,119
                      )Selling
                          expense
                      
                      
                      (654,718
                      )
                      
                      (202,372
                      )
                      
                      (433,697
                      )
                      
                      (202,372
                      )General
                          and administrative expense
                      
                      
                      (485,340
                      )
                      
                      (332,420
                      )
                      
                      (175,183
                      )
                      
                      (332,420
                      )Segment
                          contribution
                      
                      $
                      (243,520
                      )
                      $
                      683,379
                      
                      $
                      (78,117
                      )
                      $
                      683,379Contribution
                          margin
                      
                      
                      -21
                      %
                      
                      -
                      
                      
                      -10
                      %
                      
                      46
                      %Total
                          assets, segment
                      
                      $
                      14,048,551
                      
                      $
                      11,891,466
                      
                      $
                      14,048,551
                      
                      $
                      11,891,466
  TOTAL
                      
                      TOTAL2008
                      
                      2007
                      
                      2008
                      
                      2007Total
                          revenue from external customers
                      
                      $
                      13,225,623
                      
                      $
                      8,236,852
                      
                      $
                      7,278,253
                      
                      $
                      5,207,817Cost
                          of sales
                      
                      
                      (8,362,977
                      )
                      
                      (4,336,114
                      )
                      
                      (4,545,731
                      )
                      
                      (2,488,902
                      )Gross
                          profit
                      
                      
                      4,862,646
                      
                      
                      3,900,738
                      
                      
                      2,732,522
                      
                      
                      2,718,915Gross
                          margin
                      
                      
                      37
                      %
                      
                      47
                      %
                      
                      38
                      %
                      
                      52
                      %Research
                          and development
                      
                      
                      (169,781
                      )
                      
                      (97,119
                      )
                      
                      (147,717
                      )
                      
                      (97,119
                      )Selling
                          expense
                      
                      
                      (1,431,212
                      )
                      
                      (344,886
                      )
                      
                      (994,841
                      )
                      
                      (256,703
                      )General
                          and administrative expense
                      
                      
                      (2,358,581
                      )
                      
                      (1,897,131
                      )
                      
                      (1,052,728
                      )
                      
                      (1,677,106
                      )Segment
                          contribution
                      
                      $
                      903,072
                      
                      $
                      1,561,602
                      
                      $
                      537,236
                      
                      $
                      687,987Contribution
                          margin
                      
                      
                      7
                      %
                      
                      19
                      %
                      
                      7
                      %
                      
                      13
                      %Total
                          assets, segment
                      
                      $
                      68,531,305
                      
                      $
                      50,009,694
                      
                      $
                      68,531,305
                      
                      $
                      50,009,694  26


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


SIX
                  MONTHS ENDED JUNE 30
              
              THREE
                  MONTHS ENDED JUNE 302008
              
              2007
              
              2008
              
              2007(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Total
                  segment contribution
              
              $
              903,072
              
              $
              1,561,602
              
              $
              537,236
              
              $
              687,987Unallocated
                  amounts:Loss
                  on disposal of fixed assets
              
              
              
              
              
              (14,931
              )
              
              -
              
              
              (14,931
              )Other
                  income
              
              
              248,058
              
              
              105,089
              
              
              (53,635
              )
              
              104,152Government
                  subsidy
              
              
              -
              
              
              273,115
              
              
              -
              
              
              273,115Other
                  corporate expenses
              
              
              (4,537,116
              )
              
              (9,706,741
              )
              
              (1,987,769
              )
              
              (9,411,826
              )Total
                  income / (loss) before minority interest and income taxes
              
              $
              (3,385,986
              )
              $
              (7,781,866
              )
              $
              (1,504,168
              )
              $
              (8,361,503
              )




The
      other
      corporate expenses for the six months and three months ended June 30, 2008
      and
      2007 composed of the following events:




SIX
                    MONTHSENDED
                    JUNE 30
                
                THREE
                    MONTHSENDED
                    JUNE 302008
                
                2007
                
                2008
                
                2007(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)Penalty
                    to investor
                
                $
                1,113,405
                
                $
                120,000
                
                $
                391,200
                
                $
                -Wages
                    and salaries
                
                
                192,675
                
                
                1,199
                
                
                40,910
                
                
                -58,801Audit
                    and accounting
                
                
                106,063
                
                
                198,710
                
                
                60,757
                
                
                195,210Amortization
                    of debt issue cost
                
                
                131,757
                
                
                67,269
                
                
                65,878
                
                
                58,526Consulting
                    fee
                
                
                371,960
                
                
                7,882,416
                
                
                191,460
                
                
                7,882,416Investor
                    relation, transfer agent and filing fees
                
                
                28,123
                
                
                65,853
                
                
                9,277
                
                
                29,923Director
                    renumeration
                
                
                140,468
                
                
                33,945
                
                
                29,595
                
                
                33,945Legal
                    fee
                
                
                76,675
                
                
                39,379
                
                
                45,051
                
                
                4,284Cash
                    bonus
                
                
                -
                
                
                173,400
                
                
                -
                
                
                173,400Travel
                    and transportation
                
                
                4,844
                
                
                9,669
                
                
                2
                
                
                9,669Office
                    expense
                
                
                1,120
                
                
                2,297
                
                
                -
                
                
                -Interest
                    expense
                
                
                2,340,580
                
                
                1,066,406
                
                
                1,128,298
                
                
                1,048,821Miscellaneous
                
                
                29,446
                
                
                46,198
                
                
                25,341
                
                
                34,433Total
                
                $
                4,537,116
                
                $
                9,706,741
                
                $
                1,987,769
                
                $
                9,411,826





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




The
      following table shows the reconciliation between the segments assets and the
      total assets as of June 30, 2008 and 2007:


June
                  30,
              
              June
                  30,2008
              
              2007(Unaudited)
              
              (Unaudited)Total
                  assets, segment
              
              $
              68,531,305
              
              $
              50,009,694Total
                  assets of corporate:Cash
                  and cash equivalent
              
              
              14,823
              
              
              648,313Bank
                  indebtedness
              
              
              1,296,941
              
              
              -Prepaid
                  expesnes and deposit
              
              
              8,391
              
              
              2,716Refundable
                  purchase price paid
              
              
              1,200,000
              
              
              1,195,032Due
                  from related parties
              
              
              876,729
              
              
              -Debit
                  issue costs:placement
                  agent commission
              
              
              196,188
              
              
              461,931Accumulative
                  other comprehensive income
              
              
              -
              
              
              (45,922
              )Total
                  assets
              
              $
              72,124,377
              
              $
              52,271,764
  The
        following table shows how the minority interest for the six
        months ended June 30, 2008 and 2007 was
        derived:




**Six
                  Months Ended June 30, 2008**Benda
              
              Jiangling
              
              Yidu
              
              BeijingEbei
              
              Benda
              
              Benda
              
              Shusai
              
              SiBiono
              
              Total**Segment
                  operating profit / (loss)**
              
              $
              2,558,550
              
              
              (1,085,120
              )
              
              (305,968
              )
              
              (20,870
              )
              
              (243,520
              )
              $
              903,072Interest
                  income/ (expenses)
              
              
              (207,747
              )
              
              1,059
              
              
              3
              
              
              (8
              )
              
              (94,762
              )
              
              (301,455
              )Other
                  income / (expenses)
              
              
              (5,901
              )
              
              (207
              )
              
              1,964
              
              
              6,748
              
              
              245,454
              
              
              248,058Income
                  taxes
              
              
              (524,808
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (524,808
              )**Income
                  / (loss) before minority interest**
              
              $
              1,820,094
              
              
              (1,084,268
              )
              
              (304,001
              )
              
              (14,130
              )
              
              (92,828
              )
              $
              324,867MI
                  percentage
              
              
              5.00
              %
              
              9.75
              %
              
              9.75
              %
              
              28.75
              %
              
              42.88
              %MI
                  interest
              
              $
              91,005
              
              
              (105,716
              )
              
              (29,640
              )
              
              (4,062
              )
              
              (39,801
              )
              $
              (88,216
              )**Six
                  Months Ended June 30, 2007**Benda
              
              
              Jiangling
              
              
              Yidu
              
              
              BeijingEbei
              
              
              Benda
              
              
              Benda
              
              
              Shusai
              
              
              SiBiono
              
              
              Total**Segment
                  operating profit / (loss)**
              
              $
              1,427,334
              
              
              (21,611
              )
              
              (475,236
              )
              
              (52,264
              )
              
              683,379
              
              $
              1,561,602Loss
                  on disposal of assets
              
              
              -
              
              
              (9,833
              )
              
              (5,098
              )
              
              -
              
              
              -
              
              
              (14,931
              )Interest
                  income/ (expenses)
              
              
              8,626
              
              
              168
              
              
              (2,607
              )
              
              (22
              )
              
              (48,548
              )
              
              (42,383
              )Government
                  subsidy
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              273,115
              
              
              273,115Other
                  income / (expenses)
              
              
              (2,743
              )
              
              (19,776
              )
              
              1,751
              
              
              -
              
              
              125,857
              
              
              105,089**Income
                  / (loss) before minority interest**
              
              $
              1,433,217
              
              
              (51,052
              )
              
              (481,190
              )
              
              (52,286
              )
              
              1,033,803
              
              $
              1,882,492MI
                  percentage
              
              
              5.00
              %
              
              9.75
              %
              
              9.75
              %
              
              28.75
              %
              
              42.88
              %MI
                  interest
              
              $
              71,661
              
              
              (4,978
              )
              
              (46,916
              )
              
              (15,032
              )
              
              443,259
              
              $
              466,616


27




**29.**
                  **Subsequent
                      Events**
  (a)
                  SiBiono
                      patents - on January 29, 2007, SiBiono entrusted Grandall Legal
                      Group
                      Shenzhen Law Firm to issue a legal letter to Zhaohui Peng,
                      one of the
                      shareholders of Sibiono and the inventor of Gendicine, requesting
                      him to
                      transfer all the title of patents to SiBiono.
  On
            June
            18, 1999, during the formation of SiBiono, Zhaohui Peng transferred the
            rights
            to the patent “A new method for manufacturing recombinant adenovirus” and
            related research results to SiBiono as a payment for the registered capital.
            In
            return, Zhaohui Peng was granted 32.03% of the common stock of SiBiono.
  From
            1999
            to 2007, SiBiono successfully obtained various technology funds from
            various
            government technology agencies to support the further research and development
            activities of Gendicine. Due to this significant funding obtained by
            SiBiono,
            Sibiono developed five additional patents which are summarized as
            follows:
  **Countries**
                    **Application**
                    **Publication**
                    **Approved
                        Patent**
                    **Name
                        of
                        Patent**
                    **Name
                        of**
                    **Patent****Item**
                    **Patent
                        name**
                    **/
                        Date**
                    **Number
                        (1)**
                    **Number
                        (2)**
                    **Number
                        (3)**
                    **Inventor
                        (6)**
                    **Applicant
                        (6)**
                    **Assignees**1
                    A
                        new method for manufacturing recombinant adenovirusA
                    China
                    98123346.5
                    CN1228474A
                    ZL98123346.5
                    Peng
                    Peng
                    SiBionoDate
                    1998/12/14
                    1999/9/15
                    2002/7/32
                    A
                        recombinant constructed by a virus vector and ahuman
                        tumor suppressor gene and its useA
                    China
                    02115228.4
                    CN1401778A
                    ZL02115228.4
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    Peng
                        / ZhangDate
                    2002/5/8
                    2003/3/12
                    2004/11/24B
                    PCT
                        (4)
                    65
                    WO2004/078987A1
                    Not
                        Approved
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    N/ADate
                    2004/3/8
                    2004/9/16
                    N/A3
                    Recombinant
                        gene medicine of adenovirus vector andand
                        gene p54 for treating proloferative diseasesA
                    China
                    03125129.3
                    CN1471977A
                    ZL03125129.3
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    Peng
                        / ZhangDate
                    2003/5/10
                    2004/2/4
                    2007/7/25B
                    PCT
                        (4)
                    58
                    WO2004/104204A1
                    Not
                        Approved
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    N/ADate
                    2004/5/9
                    2004/12/2
                    N/A4
                    The
                        application of recombinant adenoviral p53as
                        cancer vaccine (tentative title)A
                    China
                    200510002779.1
                    CN1679641A
                    ZL200510002779.1
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    Peng
                        / ZhangDate
                    2005/1/26
                    2005/10/12
                    2007/8/29B
                    PCT
                        (4)
                    11
                    WO2006/079244A1
                    Not
                        Approved
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    N/ADate
                    2005/1/26
                    2006/8/3
                    N/AC
                    US
                        (5)
                    11/075035
                    2005/0281785A1
                    Not
                        Approved
                    Peng
                        / Zhang
                    Unidentified
                        Yet
                    N/ADate
                    2005/3/7
                    2005/12/22
                    N/A5
                    Human
                        Embryonic Kidney (HEK) sub-clone cell lineA
                    China
                    03126889.7
                    CN1513985A
                    Not
                        Approved
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    N/ADate
                    2003/6/13
                    2004/7/21
                    N/AB
                    PCT
                        (4)
                    57
                    WO2004/111239
                    Not
                        Approved
                    Peng
                        / Zhang
                    Peng
                        / Zhang
                    N/ADate
                    2004/5/9
                    2004/12/23
                    N/A6
                    The
                        complex of polypeptide liposome and human VGEFgene,
                        and its use and human VGEF gene, and its useA
                    China
                    02134321.7
                    CN1389269A
                    Not
                        Approved
                    Peng
                        / Zhang / Zhu
                    Peng
                      / Zhang / Zhu
                    N/ADate
                    2002/7/4
                    2003/1/8
                    N/A
 Note:
 (1)  Application
            number is obtained when application is submitted;
 (2)  Publication
            number is obtained after the first phase examination;
 (3)  Approved
            patent number is obtained after the final examination;
 (4)  PCT
            is
            referred to an International Patent Organization in Paris;
 (5)  US
            is
            referred to the application is made in United States of America
            alone;
 (6)  Peng
            is
            referred to Zhaohui Peng; Zhang is referred to Xiaozhi Zhang; Zhu is
            referred to
            Jinya Zhu.
 
  As
            indicated in the above table, Item 1, the patent “A new method for manufacturing
            recombinant adenovirus” had been assigned to SiBiono; however, the other
            approved patents (item 2 through item 4) in PRC still have not been assigned
            to
            SiBiono. The Group believes that all the above mentioned patents should
            be
            rightfully transferred to SiBiono, a subsidiary of the Group. Accordingly,
            the
            above mentioned legal letter was issued on this ground.
 
 The
            Group
            and Zhaohui Peng are currently in negotiations regarding the patent transfers.
            However, if Zhaozhui Peng refuses to transfer all the patents’s title to
            SiBiono, the Group will take a legal action against him.
 
 (b)
                  As
                      mentioned in Note 12, following this arbitration decision,
                      Benda Ebei has
                      the obligation to pay the total acquisition cost payable of
                      Rmb 12.48
                      million, plus the penalty and related legal and arbitration
                      expenses,
                      totaling approximately Rmb 12.80 million (or $1.87 million).
 
 On
            May
            22, 2008, Benda Ebei applied to Shenzhen People Court to terminate above
            mentioned arbitration. The termination is based on the ground that Xiaozhi
            Zhang
            does not own all 6.24% of SiBiono’s common stock. In fact, he only owns 3.28% of
            SiBiono’s stock. The application has been accepted by Shenzhen People Court and
            is waiting for its further investigation.
  28


**Item
        2.**  **Management’s
        Discussion and Analysis or Plan of Operation**
 
 **Critical
        Accounting Policies**


Accounting
      policies discussed in this section are those that we consider to be most
      critical to an understanding of our financial statements because they inherently
      involve significant judgment and uncertainties.  For all of these
      estimates, we caution that future events rarely develop exactly as forecast,
      and
      the best estimates routinely require adjustment. Also see note 4, Summary of
      Significant Accounting Policies.





**Revenue
      Recognition**





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


1.       Persuasive evidence of an arrangement
      exists;


2.       Delivery has occurred or services have
      been rendered;


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


4.       Collectibility is reasonably
      assured.


The
      majority of the Company's revenue results from sales contracts with  distributors
      and revenue is recorded upon the shipment of goods. Management  conducts
      credit background checks for new customers as a means to reduce the  subjectivity
      of assuring collectibility. Based on these factors, the Company  believes
      that it can apply the provisions of SAB 104 with minimal
      subjectivity.




Estimates
      Affecting Accounts Receivable and Inventories





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





As
      of
      June 30, 2008 and 2007, the Company provided a $1,800,863 and $1,410,338
      respectively for the allowance of doubtful accounts against trade receivables,
      other receivables and prepaid and deposits. Management's estimate of the
      appropriate allowance on those accounts receivable for the reporting periods
      was
      based on the aged nature of these accounts. In making its judgment, management
      assessed its customers' ability to continue to pay their outstanding invoices
      and the collectibility of those accounts on a timely basis, and whether their
      financial position might deteriorate significantly in the future, which would
      result in their inability to pay their debts to the Company.





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





For
      the
      six months ended June 30, 2008 and 2007, the Company provided for a reserve
      against its work-in-progress amounting to $3,994,628 and 3,736,945,
      respectively.





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





29





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











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





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





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





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





After
      the
      acquisition with the effective date April 1, 2007, the same accounting treatment
      was adopted for the treatment of the provision of reserve on work-in-progress.
      As of June 30, 2008, the provision of reserve on work-in-progress was
      $3,994,628.





However,
      no reserve for obsolete, slow-moving or non-salable inventory was required
      for
      the reporting periods. Management determination of this allowance was based
      on
      potential impairments to the current carrying value of the inventories due
      to
      potential obsolescence of aged inventories. In making its estimate, management
      considered the probable demand for our products in the future and historical
      trends in the turnover of our inventories.





While
      the
      Company currently believes that there is little likelihood that actual results
      will differ materially from these current estimates.


**Operational
        Results**
 
 Six
        months ended June 30, 2008 Compared to Six months ended June 30,
        2007
 
 The
        following table provides key components of our operational results for the
        six
        months ended June 30, 2008 and 2007 for Benda Pharmaceutical, Inc.





30




**June
                  30**
              
              **June
                  30****2008**
              
              **2007****(Unaudited)**
              
              **(Unaudited)**Revenue
              
              $
              13,225,623
              
              $
              8,236,852Cost
                  of goods sold
              
              
              (8,396,854
              )
              
              (4,336,114
              )Gross
                  profit
              
              
              4,828,769
              
              
              3,900,738Selling
                  expenses
              
              
              (1,431,212
              )
              
              (344,886
              )General
                  and administravive expenses
              
              
              (4,521,240
              )
              
              (10,537,466
              )Gains
                  / (losses) on disposals of fixed assets
              
              
              -
              
              
              -Research
                  and development expenses
              
              
              (169,781
              )
              
              (97,119
              )Total
                  operating expenses
              
              
              (6,122,233
              )
              
              (10,979,471
              )Operating
                  income / (loss)
              
              
              (1,293,464
              )
              
              (7,078,733
              )Interest
                  expenses
              
              
              (2,340,580
              )
              
              (1,066,406
              )Other
                  income (expenses)
              
              
              248,058
              
              
              90,158Government
                  subsidies / grants
              
              
              -
              
              
              273,115Income
                  / (loss) before minority interest and income taxes
              
              
              (3,385,986
              )
              
              (7,781,866
              )Income
                  taxes
              
              
              (524,808
              )
              
              -Minority
                  interest
              
              
              88,216
              
              
              (466,616
              )Net
                  Income / (loss)
              
              $
              (3,822,578
              )
              $
              (8,248,482
              )Earnings
                  / (loss) per share - basic
              
              $
              (0.04
              )
              $
              (0.09
              )Weighted
                  average shares outstanding - basic
              
              
              100,558,191
              
              
              96,625,164Earnings
                  / (loss) per share - diluted
              
              $
              (0.04
              )
              $
              (0.09
              )Weighted
                  average shares outstanding - diluted
              
              
              100,558,191
              
              
              96,625,164




*Net
      Revenue:*


The
      Company has five core operating segments: Benda Ebei, Jiangling Benda, Yidu
      Benda, Beijing Shusai and SiBiono. Benda Ebei manufactures branded/generic
      medicines; Jiangling Benda manufactures active pharmaceutical ingredients (API);
      Yidu Benda manufactures bulk chemicals; Beijing Shusai operates and distributes
      Pharyngitis Killer Therapy; and SiBiono is a gene therapy company dedicated
      to
      the development, manufacturing and commercialization of gene therapy product,
      Gedicine.





Net
      revenue increased by $4.98 million (or 60.57%) to $13.23 million for the six
      months ended June 30, 2008, from $8.24 million for the six months ended June
      30,
      2007. Increase in revenue is principally attributed by the following factors:





1.
            One
                of the Benda’s subsidiary, Benda Ebei’s net revenue increased $5.44
                million (or 90.13%) to $11.47 million for the six months ended June
                30,
                2008 from $6.03 million for the six months ended June 30, 2007. It
                was
                mainly due to the increase sales of the existing major products and
                the
                introduction of new products and they are shown in the table
                below:




**Six
                  months ended June 30,**
              
              **Variance**
              
              **Variance**Products
                  (Million)
              
              **2008**
              
              **2007**
              
              **+
                  / (-)**
              
              **+
                  / (-) %**Ribavirin
                  injection
              
              $
              0.22
              
              $
              0.08
              
              $
              0.14
              
              
              163
              %Gentamycin
                  80 thousand unit Injection
              
              
              0.20
              
              
              0.03
              
              
              0.17
              
              
              637
              %Vatimin
                  C,B1, B6, B12
              
              
              0.53
              
              
              0.25
              
              
              0.29
              
              
              115
              %Suzheng-B
                  Injection
              
              
              1.39
              
              
              1.27
              
              
              0.12
              
              
              10
              %Jixuening
                  Injection
              
              
              0.99
              
              
              0.88
              
              
              0.12
              
              
              13
              %Shusai-A
                  Injection
              
              
              1.38
              
              
              0.54
              
              
              0.84
              
              
              156
              %Xujing
              
              
              1.34
              
              
              1.23
              
              
              0.10
              
              
              8
              %Yidingshu
                  Injection
              
              
              1.64
              
              
              1.48
              
              
              0.16
              
              
              11
              %Huitening
                  Injection
              
              
              0.83
              
              
              0.69
              
              
              0.14
              
              
              20
              %Anagin
              
              
              0.13
              
              
              -
              
              
              0.13
              
              
              100
              %Lincomycin
                  Injection
              
              
              0.49
              
              
              -
              
              
              0.49
              
              
              100
              %Kanamycin
                  Injection
              
              
              0.26
              
              
              -
              
              
              0.26
              
              
              100
              %Troxerutin
                  Injection
              
              $
              0.09
              
              $
              -
              
              $
              0.09
              
              
              100
              %




31




2.
            One
                of the Benda’s subsidiary, Jiangling Benda which resumed its production in
                October 2007 and achieved $0.58 million for six month ended June
                30, 2008.





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





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





3.
            One
                of the Benda’s subsidiary, Yidu Benda’s net revenue dropped $0.7 million
                (or 100%) to zero for the six month ended June 30, 2008 from $0.7
                million
                for the six month ended June 30, 2007 due to the fact that the plant
                was
                temporarily closed since mid January to upgrade its waster water
                treatment
                system to comply with new environmental standards enforced by PRC
                local
                government.





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





4.
            One
                of the Benda’s subsidiary, Beijing Shusai which incorporated on July 15,
                2006. China’s State Food and Drug Administration (SFDA) recently
                experienced an overhaul in its policies and regulatory systems in
                an
                effort to fight against corruption in Chinese pharmaceutical industry.
                Beijing Shusai’s operation has been adversely affected by this recent
                policy changes which prohibits some state-owned hospitals from forming
                alliances with private companies. The management could not estimate
                that
                such situation could be resolved in the coming future.





5.
            One
                of the Benda’s subsidiary, SiBiono, acquired and effective since April 1,
                2007, net revenue decreased $0.3 million (or 20.72%) to $1.18 million
                for
                the six months ended June 30, 2008 from $1.48 million for the six
                months
                ended June 30, 2007. The reason for the slightly dropped in net revenue
                is
                mainly due to the fact that SiBiono was underwent a process of
                re-engineering of the production department during the reporting
                period.
                With such re-engineering, the management believes that there would
                be
                rapid growth in the following quarters.





*Cost
      of Goods Sold*


Cost
      of
      goods sold increased $4.05 million (or 92.87%) to 8.39 million for the six
      month
      ended June 30, 2008 from $4.34 million for the six month ended June 30, 2007,
      primarily due to the corresponding increase in net revenue.





*Gross
      Profit*


Gross
      profit increased $0.93 million (or 24.66%) to $4.83 million for the six month
      ended June 30, 2008 from $3.9 million for the six month ended June 30, 2007,
      which was mainly due to the increase the sales volume of Benda Ebei as the
      net
      revenue of it increased sharply.





*Selling
      Expenses:*


Selling
      expenses increased $1.09 million (or 314.98%) to $1.43 million for the six
      month
      ended June 30, 2008 from $0.34 million for the six month ended June 30, 2007,
      primarily due to the promotional fees for Gendicine in SiBiono and the
      introductory new products in Benda Ebei.





*General
      and Administrative Expenses:*


General
      and administrative expenses decreased $6.02 million (or 58.57%) to $4.52 million
      for the six month ended June 30, 2008 from $10.54 million for the six month
      ended June 30, 2007. The difference was mainly due to the fact that: (1) a
      consulting and professional fee, $7.88 million was incurred as for the SiBiono’s
      acquisition which happened in the six month ended June 30, 2007 (please refer
      to
      Note 19 of Consolidated Financial Statements); (2) a penalty, $1.11 million,
      to
      investors as for registration delay expenses incurred in the six month ended
      June 30, 2008; while the penalty to investors was only about $0.12 million
      in
      the six month ended June 30, 2007.





*Operating
      Income/ (Loss):*


The
      Company experienced an operating loss of $1.29 million for the six month ended
      June 30, 2008 while the operating loss from comparative period for 2007 was
      $7.08 million which was mainly due to significant decrease in G&A expenses.




*Interest
      Expenses:*


Interest
      expenses increased to $2.34 million for the six month ended June 30, 2008 from
      $1.07 million for the three month ended June 30, 2007 primarily because of
      the
      financing cost associated with the issuance of convertible promissory note.
      In
      which $150,786 was incurred for the interest of the notes and $1,882,244 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. (Please refer to Note 24 of the Notes to Consolidation
      Financial Statements for details).





32




*Income
      Taxes:*


Benda
      is
      subject to Delaware, United State of America tax, but no provision for income
      taxes were made for the three months ended March 31, 2008 and 2007 as Benda
      did
      not have reportable taxable income for the period.





Ever
      Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax, but
      no
      provisions for income taxes were made for the three months ended March 31,
      2008
      and 2007 as Ever Leader did not have reportable taxable income for the periods.





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





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





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





However,
      starting and effective from January 1, 2008, the full income tax rate would
      be
      changed from 33% to 25% according to the new PRC taxation regulations. Therefore
      these subsidiaries will be subject to the regular full income tax rate at 25%
      after the tax holidays expire in 2010.





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





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





Year
            Tax
                rate2008
            18%2009
            20%2010
            22%2011
            24%2012
                and thereafter
            25%





For
      the
      six month ended June 30, 2008, only Ebei Benda had taxable income and incurred
      income tax of Rmb 3.7 million or $0.52 million. There was no income tax of
      the
      Group for the six month ended June 30, 2007.





LIQUIDITY
      AND CAPITAL RESOURCES





Net
      cash
      provided by the operating activities was negative $1.64 million for the three
      months ended March 31, 2008 while for the three months ended March 31, 2007
      was
      negative $215K.





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


For
      the
      six month ended June 30, 2007, an amount about $10.64 million non-cash operating
      activities was reconciled back to the net income and which mainly included
      consulting and professional fee related to SiBiono’s acquisition, bad debt
      provision, amortization of intangible assets, depreciation, minority interest
      and amortization of debt discount and debt issue cost.





However,
      for the six month ended June 30, 2008, about $4.3 million of non-cash operating
      activities was reconciled back to the net income and summarized as
      follows:


1.
            $1.88
                million that incurred as interest expenses related to the amortization
                of
                discount on long-term debt and issuance cost associated with the
                warrants
                and the beneficial conversion features (please refer to Note 24 of
                the
                Notes to Consolidated Financial Statements for
                details);


2.
            $230K
                that incurred as the penalty payment made in form of shares issuance
                to
                PIPE investors due to the late effective of the registered statement;
                and


3.
            Other
                factors: $774K incurred on bad debt provision; $903K incurred on
                depreciation; $374K incurred on amortization of intangible assets;
                and
                $132K incurred on amortization of debt issue cost.





33





b)
            Trade
                receivables


The
      net
      changes of trade receivable was increased by $1.85 million as of six month
      ended
      June 30, 2008 resulting from the increment in net revenue in the first half
      of
      2008. The management also noticed that the net balance of the trade receivable,
      as of June 30, 2008, was a significant asset to the company. However, the
      management believes that the above situation is temporarily due to the following
      reasons:





*Trade
      receivables*


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


b)
            Due
                to the fact that there was a big natural disaster, earthquake that
                happened in the second quarter, it did affect the collection of trade
                receivables to certain extend; and


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





*Inventories*


During
      the reporting period six month ended June 30, 2008, the net changes of
      inventories was about $1.3 million which was due to the increase of the purchase
      of raw materials in SiBiono and Benda Ebei which was incurred under the normal
      course of production.





For
      the
      six month ended June 30, 2007, an amount approximately $6.22 million was spent
      in the investing activities which were mainly used in the purchase of property
      and equipment and the payment of construction-in-progress. However, since most
      of the settlements were made in the year of 2007, thus the investing activities
      were relatively small in the six month ended June 30, 2008, only about $213K.





Financing
      cash inflow was $ 6.24
      million for the reporting period six month ended June 30, 2007. The major event
      of it was a net amount $7.03 million was received from the issuance of
      convertible promissory notes. For the reporting period six month ended June
      30,
      2008, the financing cash inflow was $1.35 million. The major of it was a net
      amount $1.85 million was received from the commercial bank notes. (Please refer
      to the Note 11 of the Notes to Consolidated Financial Statements for the
      details)




**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk**





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





**Item
      4T.  Evaluation of Disclosure Controls and Procedures**





Pursuant
      to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
      the Company carried out an evaluation, with the participation of the Company’s
      management, including the Company’s Chief Executive Officer (“CEO”) and Chief
      Accounting Officer (“CAO”) (the Company’s principal financial and accounting
      officer), of the effectiveness of the Company’s disclosure controls and
      procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
      end of the period covered by this report. Based upon that evaluation, the
      Company’s CEO and CAO concluded that the Company’s disclosure controls and
      procedures are effective to ensure that information required to be disclosed
      by
      the Company in the reports that the Company files or submits under the Exchange
      Act, is recorded, processed, summarized and reported, within the time periods
      specified in the SEC’s rules and forms, and that such information is accumulated
      and communicated to the Company’s management, including the Company’s CEO and
      CAO, as appropriate, to allow timely decisions regarding required
      disclosure.





***Management’s
      Report on Internal Controls over Financial
      Reporting***





Internal
      control over financial reporting is a process to provide reasonable assurance
      regarding the reliability of consolidated financial reporting and the
      preparation of financial statements for external purposes in accordance with
      U.S. generally accepted accounting principles.  There has been no change in
      the Company’s internal control over financial reporting during the quarter ended
      June 30, 2008 that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.





34





The
      Company’s management, including the Company’s CEO and CAO, does not expect that
      the Company’s disclosure controls and procedures or the Company’s internal
      controls will prevent all errors and all fraud. A control system, no matter
      how
      well conceived and operated, can provide only reasonable, not absolute,
      assurance that the objectives of the control system are met. Further, the design
      of a control system must reflect the fact that there are resource constraints,
      and the benefits of controls must be considered relative to their costs. Because
      of the inherent limitations in all control systems, no evaluation of the
      controls can provide absolute assurance that all control issues and instances
      of
      fraud, if any, within the Company have been detected.


Management
      conducted an evaluation of the effectiveness of our internal control over
      financial reporting based on the framework in *Internal
      Control - Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on this evaluation, management concluded that the company’s internal control
      over financial reporting was effective as of June 30, 2008.





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





35




**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




Arbitration





On
      November 23, 2006, Benda Ebei entered into an Equity Transfer Agreement with
      Xiaozhi Zhang (“Zhang”), to purchase approximately 6.24% of SiBiono’s common
      stock for a total consideration of Rmb12.48 million (Rmb6.24 million in cash
      and
      shares of our common stock equal to Rmb6.24 million) (or $1.71 million) which
      was due and payable on or before June 30, 2007.





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





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





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





1.
            Benda
                Ebei should pay for the consideration of Rmb 6.24 million, equal
                to 50% of
                the total consideration set forth in the Equity Transfer Agreement.
                For
                the other 50% of the total consideration which was supposed to be
                settled
                in the form of issuing common stock, since Zhang did not make an
                arbitration request on how to execute the arrangement, the Arbitration
                Commission did not make an award on this particular
                part.2.
            Benda
                Ebei should pay for the penalty of Rmb
                46,800;


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





Intellectual
      Property





On
      January 29, 2008, SiBiono entrusted Grandall Legal Group Shenzhen Law Firm
      to
      issue a legal letter to Zhaohui Peng, one of the shareholders of Sibiono and
      the
      inventor of Gendicine, requesting him to transfer all the title of patents
      to
      SiBiono.





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




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




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





The
      Group
      and Zhaohui Peng are currently in negotiations regarding the patent transfers.
      However, if Zhaozhui Peng refuses to transfer all the patents’s title to
      SiBiono, the Group will take a legal action against him.





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




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




On
      January 3, 2008, 110,000 shares were issued to the independent directors in
      lieu
      of their remuneration.





On
      May 1,
      2008, 523,438 shares were issued to PIPE investors as penalty for registration
      delay expenses.





36








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




None




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




None.




**Item
      5. Other Information.**




None




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




(a)           Exhibits




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




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




(b)           Reports
      of Form 8-K




On
      May 1,
      2008, the Company filed a Form 8-K with the SEC disclosing a change in
      directors .





On
      June
      19, 2008, the Company filed a Form 8-K with the SEC disclosing a change in
      directors.





On
      June
      26, 2008, the Company filed a Form 8-K with the SEC disclosing a restatement
      of
      the Company’s audited financial statements for the year ended December 31, 2007
      and the unaudited financial statements for the quarter ended March 31,
      2008.




37




**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 14, 2008
            
            By:*/s/
                Yiqing Wan*Yiqing
                WanPresident,
                Chief Executive OfficerChairman
                of Board of Directors




38