UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549










FORM
10-Q










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




For
the quarterly period ended September 30, 2010




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





For
the transition period from ______to______.




BENDA
PHARMACEUTICAL, INC.


(Exact
name of registrant as specified in Charter




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




Taibei
Mingju, 4th
Floor,


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


(Address
of Principal Executive Offices)








+86
(27) 85494916


(Issuer
Telephone number)










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





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No  ̈





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  ̈     Accelerated
Filer  ̈     Non-Accelerated
Filer  ̈     Smaller
Reporting Company x





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


Yes  ̈  No x





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of November 19, 2010: 105,155,355 shares of common stock.





BENDA
PHARMACEUTICAL, INC.




FORM
10-Q




September
30, 2010




INDEX




PART
      I— FINANCIAL INFORMATIONItem
      1.
                Financial
      Statements
                
                3Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition
                
                17Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                22Item
      4T.
                Control
      and Procedures
                
                22PART
      II— OTHER INFORMATIONItem
      1
                Legal
      Proceedings
                
                23Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                
                26Item
      3.
                Defaults
      Upon Senior Securities
                
                26Item
      4.
                (Removed
      and Reserved)
                
                26Item
      5.
                Other
      Information
                
                26Item
      6.
                Exhibits
                
                27SIGNATURE
                
                28


2


PART
I—FINANCIAL INFORMATION
 
 Item
1. Financial Information
 
 Benda
Pharmaceutical, Inc.
 Consolidated
Balance Sheets
 
 September 30,
                          2010
                        
                        
                        December 31,
                          2009(Unaudited)AssetsCurrent
      AssetsCash
      and cash equivalents
                        
                        $
                        1,398,815
                        
                        
                        $
                        191,095Trade
      receivables, net of allowance of doubtful accounts of $5,318,313 and$5,202,311,
      respectively
                        
                        
                        13,975,083
                        
                        
                        
                        12,405,018Advance
      for inventory purchase
                        
                        
                        2,149,960
                        
                        
                        
                        2,110,857Note
      receivables
                        
                        
                        -
                        
                        
                        
                        81,426Inventories
                        
                        
                        4,355,908
                        
                        
                        
                        2,038,987Due
      from related parties, short term
                        
                        
                        305,271
                        
                        
                        
                        30,861Prepaid
      expenses and other current assets
                        
                        
                        1,082,665
                        
                        
                        
                        1,720,237Total
      current assets
                        
                        
                        23,267,702
                        
                        
                        
                        18,578,481Due
      from related parties, long term
                        
                        
                        3,120,477
                        
                        
                        
                        3,032,726Property
      and equipments, net
                        
                        
                        28,645,233
                        
                        
                        
                        28,658,131Investment
                        
                        
                        119,760
                        
                        
                        
                        -Intangible
      assets, net
                        
                        
                        6,307,780
                        
                        
                        
                        6,629,501Restricted
      cash
                        
                        
                        4,762,897
                        
                        
                        
                        4,409,334Other
      assets
                        
                        
                        2,338,697
                        
                        
                        
                        2,285,581Total
      Assets
                        
                        $
                        68,562,546
                        
                        
                        $
                        63,593,754Liabilities
      & Shareholders' EquityCurrent
      LiabilitiesAccounts
      payable
                        
                        $
                        1,672,332
                        
                        
                        $
                        902,079Customer
      deposit
                        
                        
                        1,341,377
                        
                        
                        
                        1,507,147Other
      payable
                        
                        
                        4,453,474
                        
                        
                        
                        4,547,558Accrued
      liabilities
                        
                        
                        7,681,574
                        
                        
                        
                        6,175,538Convertible
      notes
                        
                        
                        7,260,000
                        
                        
                        
                        7,260,000Short-term
      debt
                        
                        
                        14,132,787
                        
                        
                        
                        11,598,066Accrued
      VAT and other taxes
                        
                        
                        709,132
                        
                        
                        
                        795,013Acquisition
      price payable
                        
                        
                        1,455,807
                        
                        
                        
                        1,422,743Wages
      payable
                        
                        
                        432,338
                        
                        
                        
                        1,187,075Due
      to related parties, short term
                        
                        
                        2,857,055
                        
                        
                        
                        2,791,447Redeemable
      common stock, 2,049,560 shares at $3.6 per share
                        
                        
                        7,376,366
                        
                        
                        
                        7,376,366Total
      current liabilities
                        
                        
                        49,372,242
                        
                        
                        
                        45,563,032Government
      grant payable
                        
                        
                        1,831,026
                        
                        
                        
                        1,789,439Due
      to related parties, long-term
                        
                        
                        120,949
                        
                        
                        
                        118,202Deferred
      tax liability
                        
                        
                        754,483
                        
                        
                        
                        778,026Total
      liabilities
                        
                        
                        52,078,700
                        
                        
                        
                        48,248,699Shareholders'
      EquityPreferred
      stock, $0.001 par value; 5,000,000 shares authorized;None
      issued and outstanding
                        
                        
                        -
                        
                        
                        
                        -Common
      stock, $0.001 par value; 150,000,000 shares authorized; 105,155,355 shares
      issued and outstanding
                        
                        
                        105,155
                        
                        
                        
                        105,155Additional
      paid in capital
                        
                        
                        22,108,427
                        
                        
                        
                        22,108,427Accumulated
      deficit
                        
                        
                        (18,346,146
                        )
                        
                        
                        (17,481,559
                        )Statutory
      surplus reserve fund
                        
                        
                        2,642,775
                        
                        
                        
                        2,642,775Accumulative
      other comprehensive income
                        
                        
                        8,218,466
                        
                        
                        
                        6,268,111Shares
      issuable for services
                        
                        
                        503,860
                        
                        
                        
                        503,860Total
      Benda Pharmaceutical, Inc.'s Shareholders' Equity
                        
                        
                        15,232,537
                        
                        
                        
                        14,146,769Noncontrolling
      Interest
                        
                        
                        1,251,309
                        
                        
                        
                        1,198,286Total
      Shareholders' Equity
                        
                        
                        16,483,846
                        
                        
                        
                        15,345,055Total
      Liabilities & Shareholders' Equity
                        
                        $
                        68,562,546
                        
                        
                        $
                        63,593,754
 
 The
accompany notes are an integral part of these consolidated financial
statements.
  3
  Benda
Pharmaceutical, Inc.
 Consolidated
Statements of Operations
 (Unaudited)
  NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,(Restated)
                    
                    
                    
                    
                    
                    (Restated)2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenue
                    
                    $
                    16,857,713
                    
                    
                    $
                    17,345,065
                    
                    
                    $
                    6,697,864
                    
                    
                    $
                    5,904,653Cost
      of goods sold
                    
                    
                    (9,499,325
                    )
                    
                    
                    (9,770,370
                    )
                    
                    
                    (3,734,008
                    )
                    
                    
                    (3,071,291
                    )Gross
      profit
                    
                    
                    7,358,388
                    
                    
                    
                    7,574,695
                    
                    
                    
                    2,963,856
                    
                    
                    
                    2,833,362Selling
      expenses
                    
                    
                    (1,786,412
                    )
                    
                    
                    (1,868,482
                    )
                    
                    
                    (421,395
                    )
                    
                    
                    (852,116
                    )General
      and administrative expenses
                    
                    
                    (2,061,356
                    )
                    
                    
                    (5,230,595
                    )
                    
                    
                    (618,268
                    )
                    
                    
                    (1,208,938
                    )Depreciation
      and amortization expenses
                    
                    
                    (1,268,299
                    )
                    
                    
                    (724,749
                    )
                    
                    
                    (451,329
                    )
                    
                    
                    (278,967
                    )Research
      and development expenses
                    
                    
                    (1,154,203
                    )
                    
                    
                    (283,473
                    )
                    
                    
                    (388,921
                    )
                    
                    
                    (165,390
                    )Total
      operating expenses
                    
                    
                    (6,270,270
                    )
                    
                    
                    (8,107,299
                    )
                    
                    
                    (1,879,913
                    )
                    
                    
                    (2,505,411
                    )Operating
      income / (loss)
                    
                    
                    1,088,118
                    
                    
                    
                    (532,604
                    )
                    
                    
                    1,083,943
                    
                    
                    
                    327,951Interest
      expense
                    
                    
                    (1,187,545
                    )
                    
                    
                    (2,104,510
                    )
                    
                    
                    (458,777
                    )
                    
                    
                    (471,263
                    )Other
      income (expense)
                    
                    
                    (14,813
                    )
                    
                    
                    106,161
                    
                    
                    
                    (3,248
                    )
                    
                    
                    60,385Government
      subsidies
                    
                    
                    -
                    
                    
                    
                    26,386
                    
                    
                    
                    -
                    
                    
                    
                    3Net
      income (loss) before income taxes
                    
                    
                    (114,240
                    )
                    
                    
                    (2,504,567
                    )
                    
                    
                    621,918
                    
                    
                    
                    (82,924
                    )Income
      taxes
                    
                    
                    (654,921
                    )
                    
                    
                    (123,043
                    )
                    
                    
                    (338,326
                    )
                    
                    
                    (65,808
                    )Net
      Income (Loss)
                    
                    
                    (769,161
                    )
                    
                    
                    (2,627,610
                    )
                    
                    
                    283,592
                    
                    
                    
                    (148,732
                    )Less:
      Net income (loss) attributable to the noncontrolling
    Interests
                    
                    
                    95,426
                    
                    
                    
                    (166,068
                    )
                    
                    
                    46,004
                    
                    
                    
                    64,824Net
      income (loss) attributable to Benda Pharmaceutical, Inc.
                    
                    $
                    (864,587
                    )
                    
                    $
                    (2,461,542
                    )
                    
                    $
                    237,588
                    
                    
                    $
                    (213,556
                    )Other
      Comprehensive Income (Loss)Foreign
      currency translation gain
                    
                    
                    1,907,952
                    
                    
                    
                    -
                    
                    
                    
                    1,750,042
                    
                    
                    
                    461,784Comprehensive
      Income (Loss)
                    
                    
                    1,138,791
                    
                    
                    
                    (2,627,610
                    )
                    
                    
                    2,033,634
                    
                    
                    
                    313,052Comprehensive
      income (loss) attributable to the noncontrolling interest
                    
                    
                    53,023
                    
                    
                    
                    (166,068
                    )
                    
                    
                    183,512
                    
                    
                    
                    64,824Comprehensive
      income (loss) attributable to Benda Pharmaceutical, Inc.
                    
                    $
                    1,085,768
                    
                    
                    $
                    (2,461,542
                    )
                    
                    $
                    1,850,122
                    
                    
                    $
                    248,228Net
      earnings (loss) per share - basic and dilutedNet
      earnings (loss) attributable to Benda Pharmaceutical, Inc.
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.02
                    )
                    
                    $
                    0.00
                    
                    
                    $
                    (0.00
                    )Weighted
      average shares outstanding - basic and diluted
                    
                    
                    105,155,355
                    
                    
                    
                    105,155,355
                    
                    
                    
                    105,155,355
                    
                    
                    
                    105,155,355
 
 The
accompany notes are an integral part of these consolidated financial
statements.
  4
  Benda
Pharmaceutical, Inc.
 Consolidated
Statements of Cash Flows
 (Unaudited)
 
 NINE MONTHS ENDED
                      SEPTEMBER 30,2010
                    
                    
                    2009(Restated)Cash
      Flows From Operating ActivitiesNet
      loss
                    
                    $
                    (769,161
                    )
                    
                    $
                    (2,627,610
                    )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Loss
      on disposals of fixed assets
                    
                    
                    4,551
                    
                    
                    
                    -Bad
      debt provision
                    
                    
                    243,929
                    
                    
                    
                    3,080,334Inventory
      written down to net realizable value
                    
                    
                    -
                    
                    
                    
                    196,628Depreciation,
      including amounts in cost of sales
                    
                    
                    1,737,563
                    
                    
                    
                    1,471,304Amortization
      of intangible assets
                    
                    
                    442,467
                    
                    
                    
                    528,501Amortization
      of debt issuance costs
                    
                    
                    -
                    
                    
                    
                    55,485Amortization
      of convertible notes discount
                    
                    
                    -
                    
                    
                    
                    864,049Changes
      in operating assets and liabilities:Trade
      receivables
                    
                    
                    (1,813,993
                    )
                    
                    
                    (2,435,969
                    )Advance
      for inventory purchase
                    
                    
                    (39,103
                    )
                    
                    
                    (2,294,717
                    )Prepaid
      expenses and other current assets
                    
                    
                    637,572
                    
                    
                    
                    (1,015,785
                    )Inventories
                    
                    
                    (2,316,921
                    )
                    
                    
                    (195,850
                    )Accounts
      payable
                    
                    
                    2,276,288
                    
                    
                    
                    2,860,986Customer
      deposit
                    
                    
                    (165,770
                    )
                    
                    
                    -Other
      payable
                    
                    
                    (116,029
                    )
                    
                    
                    -Wages
      payable
                    
                    
                    (754,737
                    )
                    
                    
                    -Accrued
      taxes
                    
                    
                    (109,424
                    )
                    
                    
                    396,142Net
      cash provided by (used in) operating activities
                    
                    
                    (742,768
                    )
                    
                    
                    883,498Cash
      Flows From Investing ActivitiesInvestment
      in joint venture
                    
                    
                    (119,760
                    )
                    
                    
                    -Purchases
      of property and equipment and construction-in-progress
                    
                    
                    (688,892
                    )
                    
                    
                    (455,488
                    )Restricted
      cash
                    
                    
                    (353,563
                    )
                    
                    
                    -Collection
      of notes receivable
                    
                    
                    81,426
                    
                    
                    
                    154,691Net
      cash used in investing activities
                    
                    
                    (1,080,789
                    )
                    
                    
                    (300,797
                    )Cash
      Flows From Financing ActivesProceeds
      and repayments of borrowings under related parties, net
                    
                    
                    (293,806
                    )
                    
                    
                    -Proceeds
      and repayments of borrowings under short term debt
                    
                    
                    2,556,666
                    
                    
                    
                    10,807Net
      cash provided by (used in) financing activities
                    
                    
                    2,262,860
                    
                    
                    
                    10,807Effect
      of exchange rate changes on cash
                    
                    
                    768,417
                    
                    
                    
                    303,761Net
      increase in cash and cash equivalents
                    
                    
                    1,207,720
                    
                    
                    
                    897,269Cash
      and cash equivalents, beginning of period
                    
                    
                    191,095
                    
                    
                    
                    584,266Cash
      and cash equivalents, end of period
                    
                    $
                    1,398,815
                    
                    
                    $
                    1,481,535Supplemental
      Disclosure of Cash Flow InformationCash
      paid for interest
                    
                    $
                    99,312
                    
                    
                    $
                    298,139Cash
      paid for income taxes
                    
                    $
                    344,214
                    
                    
                    $
                    935,208
 
 The
accompany notes are an integral part of these consolidated financial
statements
  5
  Benda
Pharmaceutical, Inc.
 Notes
to Consolidated Financial Statements
  1. Organization
  Benda
Pharmaceutical, Inc. (“Benda”) is a corporation organized under Delaware Law and
headquartered in Hubei Province, the People’s Republic of China
(“PRC”).
 
 Ever
Leader Holdings Limited (“Ever Leader”), a wholly owned subsidiary of Benda, is
a company incorporated under the laws of Hong Kong SAR.
 
 Ever
Leader owns 95% of the issued and outstanding capital of Hubei Tongji Benda Ebei
Pharmaceutical Co. Ltd. (“Benda Ebei”), a Sino-Foreign Equity Joint Venture
company incorporated under the laws of PRC. Mr. Yiqing Wan owns 5% of the issued
and outstanding capital stock of Benda Ebei. Benda Ebei owns: (i) 95% of the
issued and outstanding capital stock of Jiangling Benda Pharmaceutical Co. Ltd.,
(“Jiangling Benda”) a company formed under the laws of PRC; (ii) 95% of the
issued and outstanding capital stock of Yidu Benda Chemical Co. Ltd., (“Yidu
Benda”) a company incorporated under the laws of PRC; and (iii) 75% of the
issued and outstanding capital stock of Beijing Shusai Pharyngitis Research Co.
Ltd., (“Beijing Shusai”) a company incorporated under the laws of PRC. Mr.
Yiqing Wan owns: (i) 5% of the issued and outstanding capital stock of Jingling
Benda; and (ii) 5% of the issued and outstanding capital stock of Yidu Benda.
Mr. Feng Wang owns 25% of the issued and outstanding capital stock of Beijing
Shusai.
 
 On April
5, 2007, Benda Ebei entered into an Equity Transfer Agreements with Shenzhen
Yuanzheng Investment Development Co., Ltd. and Shenzhen Yuanxing Gene City
Development Co., Ltd., the shareholders of Shenzhen SiBiono GeneTech Co., Ltd
(“SiBiono”), to purchase 27.57% and 30% respectively of the shares of SiBiono’s
common stock for total consideration of RMB 60 million due and payable on or
before April 30, 2007. On June 11, 2007, Benda Ebei entered into an Equity
Transfer Agreement with Huimin Zhang and Yaojin Wang, the individual
shareholders of SiBiono, to purchase 1.6% and 0.96% respectively of the shares
of SiBiono’s common stock for total consideration of RMB 2.56 million due
and payable on or before June 30, 2007. Altogether, the total
consideration for 60.13% shares of SiBiono’s common stock was RMB 62.56
million or $8.58 million. As of Sep 30, 2010 an accumulated amount,
approximately RMB 52.83 million or $7.16 million was paid leaving a balance of
RMB 9.73 million or $1.42 million.
 
 Benda,
Ever Leader, Benda Ebei, Jiangling Benda, Yidu Benda, Beijing Shusai and SiBiono
shall be referred to herein collectively as the “Company”. The Company is
engaged principally in the business of identifying, discovering, developing, and
manufacturing conventional medicines, active pharmaceuticals, bulk chemicals (or
pharmaceutical immediates), and Traditional Chinese Medicines (“TCM”) for the
treatment of some of the most widespread common ailments and diseases (e.g.
common cold, diabetes, and cancer).
 
 The
organization and ownership structure of the Company is as follows:
 
 
 
 Going
Concern
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As reflected in the accompanying
consolidated financial statements, the Company has recurring losses and has a
working capital deficiency at September 30, 2010. These conditions raise
substantial doubt as to the Company’s ability to continue as a going
concern.
  6
  While the
Company is attempting to produce sufficient revenues, the Company’s cash
position may not be enough to support the Company’s daily operations. Management
intends to raise additional funds by way of a public or private offering.
Management believes that the actions presently being taking to further implement
its business plan and generate sufficient revenues provide the opportunity for
the Company to continue as a going concern. While the Company believes in the
viability of its strategy to increase revenues and in its ability to raise
additional funds, there can be no assurance to that effect. The ability of the
Company to continue as a going concern is dependent upon the Company’s ability
to further implement its business plan and generate sufficient revenues. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
 
 2. Basis
of Preparation
 
 The
accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States of America and rules of the Securities and Exchange Commission,
and should be read in conjunction with the audited financial statements and
notes thereto contained in the Company’s annual report on Form 10-K for the
year ended December 31, 2009 filed with the SEC on May 18, 2010. In the opinion
of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected herein. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the consolidated financial
statements which would substantially duplicate the disclosure contained in the
audited financial statements as reported in the 2009 annual report on Form 10-K
have been omitted.
 
 These
consolidated financial statements include the accounts of Benda, Ever Leader,
Benda Ebei, Jiangling Benda, Yidu Benda, Beijing Shusai and Sibiono. All
significant inter-company balances and transactions have been eliminated in the
consolidation.
 
 Certain
amounts in the consolidated financial statements for the prior year have been
reclassified to conform to the presentation of the current year.
 
 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.
  3.Earnings per
share
  Basic earnings per share is computed by
dividing net income by weighted average number of shares of common stock
outstanding during each period.  Diluted earnings per share is
computed by dividing net income by the weighted average number of shares of
common stock, common stock equivalents and potentially diluting securities
outstanding during each period.  At September 30, 2010, potential
dilutive securities had an anti-dilutive effect and were not included in the
calculation of diluted earnings per share.
  4. Restatement
 
 On May
12, 2010, the Company discovered that its financial statements for the year
ended December 31, 2008 and 2007, and the quarterly periods within the year 2007
to 2009 should not be relied upon due to multiple errors found in the accounting
treatment of a business combination transaction completed in March 2007
resulting in adjustment of assets and liabilities to fair market value. The
Company also adjusted certain other assets and intangible assets due to errors
in the accounting treatment of these assets resulting in additional expenses for
the prior periods. To correct the above noted errors, the Company has restated
the accompanying Consolidated Statements of Operations and Cash Flows for the
three and nine months period ended September 30, 2009, and the notes to the
consolidated financial statements. The impact to the September 30, 2009 Balance
Sheet is not presented here. The following is a summary items affected by the
corrections described above:
  7
  NINE MONTHS ENDED SEPTEMBER 30, 2009As previously
                          reported
                        
                        
                        Adjustments
                        
                        
                        As RestatedRevenue
                        
                        $
                        17,345,065
                        
                        
                        $
                        -
                        
                        
                        $
                        17,345,065Cost
      of goods sold
                        
                        
                        (9,770,370
                        )
                        
                        
                        -
                        
                        
                        
                        (9,770,370
                        )Gross
      profit
                        
                        
                        7,574,695
                        
                        
                        
                        -
                        
                        
                        
                        7,574,695Selling
      expenses
                        
                        
                        (1,868,482
                        )
                        
                        
                        -
                        
                        
                        
                        (1,868,482
                        )General
      and administrative expensesBad
      debts
                        
                        
                        (3,080,334
                        )
                        
                        
                        -
                        
                        
                        
                        (3,080,334
                        )Depreciation
      and amortization expense
                        
                        
                        (688,730
                        )
                        
                        
                        (36,019
                        )
                        
                        
                        (724,749
                        )bInventory
      wirtten down to net realizable value
                        
                        
                        (196,628
                        )
                        
                        
                        -
                        
                        
                        
                        (196,628
                        )Other
      general and administrative expenses
                        
                        
                        (2,008,979
                        )
                        
                        
                        55,346
                        
                        
                        
                        (1,953,633
                        )aResearch
      and development expenses
                        
                        
                        (283,473
                        )
                        
                        
                        -
                        
                        
                        
                        (283,473
                        )Total
      operating expenses
                        
                        
                        (8,126,626
                        )
                        
                        
                        19,327
                        
                        
                        
                        (8,107,299
                        )Operating
      loss
                        
                        
                        (551,931
                        )
                        
                        
                        19,327
                        
                        
                        
                        (532,604
                        )Other
      income (expenses)Government
      subsidies / grants
                        
                        
                        26,386
                        
                        
                        
                        -
                        
                        
                        
                        26,386Interest
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Interest
      expenses
                        
                        
                        (2,104,510
                        )
                        
                        
                        -
                        
                        
                        
                        (2,104,510
                        )Other
      income
                        
                        
                        106,161
                        
                        
                        
                        -
                        
                        
                        
                        106,161Net
      loss before income taxes
                        
                        
                        (2,523,894
                        )
                        
                        
                        19,327
                        
                        
                        
                        (2,504,567
                        )Income
      taxes
                        
                        
                        (163,803
                        )
                        
                        
                        40,760
                        
                        
                        
                        (123,043
                        )cNet
      loss
                        
                        
                        (2,687,697
                        )
                        
                        
                        60,087
                        
                        
                        
                        (2,627,610
                        )cLess:
      Net loss attributable to the noncontrolling interests
                        
                        
                        (123,599
                        )
                        
                        
                        (42,469
                        )
                        
                        
                        (166,068
                        )cNet
      loss attributable to Benda Pharmaceutical, Inc.
                        
                        $
                        (2,564,098
                        )
                        
                        $
                        102,556
                        
                        
                        $
                        (2,461,542
                        )Other
      Comprehensive LossForeign
      currency translation loss
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Comprehensive
      Loss
                        
                        
                        (2,687,697
                        )
                        
                        
                        60,087
                        
                        
                        
                        (2,627,610
                        )Comprehensive
      loss attributable to the noncontrolling interest
                        
                        
                        (123,599
                        )
                        
                        
                        (42,469
                        )
                        
                        
                        (166,068
                        )cComprehensive
      loss attributable to Benda Pharmaceutical, Inc.
                        
                        $
                        (2,564,098
                        )
                        
                        $
                        (102,556
                        )
                        
                        $
                        (2,461,542
                        )Net
      loss per share - basic and dilutedNet
      loss attributable to Benda Pharmaceutical, Inc.
                        
                        $
                        (0.02
                        )
                        
                        
                        
                        
                        
                        $
                        (0.02
                        )Weighted
      average shares outstanding - basic and diluted
                        
                        
                        105,155,355
                        
                        
                        
                        
                        
                        
                        
                        105,155,355
  8
  Benda
Pharmaceutical, Inc.
 Consolidated
Statements of Cash Flows
 (unaudited)
 
 NINE MONTHS ENDED SEPTEMBER 30, 2009As previously
                      reported
                    
                    
                    Adjustments
                    
                    
                    As RestatedCash
      Flows From Operating ActivitiesNet
      loss
                    
                    $
                    (2,687,697
                    )
                    
                    $
                    60,087
                    
                    
                    $
                    (2,627,610
                    )cAdjustments
      to reconcile net loss to net cash provided by operating
      activities:
                    
                    
                    
                    
                    
                    
                    -Bad
      debt provision
                    
                    
                    3,080,334
                    
                    
                    
                    -
                    
                    
                    
                    3,080,334Inventory
      written down to net realizable value
                    
                    
                    196,628
                    
                    
                    
                    -
                    
                    
                    
                    196,628Depreciation,
      including amounts in cost of sales
                    
                    
                    1,471,304
                    
                    
                    
                    -
                    
                    
                    
                    1,471,304Amortization
      of intangible assets
                    
                    
                    547,919
                    
                    
                    
                    (19,418
                    )
                    
                    
                    528,501
                    bAmortization
      of debt issuance costs
                    
                    
                    55,485
                    
                    
                    
                    -
                    
                    
                    
                    55,485Amortization
      of convertible notes discount
                    
                    
                    864,049
                    
                    
                    
                    -
                    
                    
                    
                    864,049Changes
      in operating assets and liabilities:Trade
      receivables
                    
                    
                    (2,427,968
                    )
                    
                    
                    (8,001
                    )
                    
                    
                    (2,435,969
                    )dAdvance
      for inventory purchase
                    
                    
                    -
                    
                    
                    
                    (2,294,717
                    )
                    
                    
                    (2,294,717
                    )dInventories
                    
                    
                    (195,850
                    )
                    
                    
                    -
                    
                    
                    
                    (195,850
                    )Prepaid
      expenses and other current assets
                    
                    
                    (1,578,837
                    )
                    
                    
                    563,052
                    
                    
                    
                    (1,015,785
                    )dAccounts
      payable
                    
                    
                    2,860,986
                    
                    
                    
                    -
                    
                    
                    
                    2,860,986Accrued
      taxes
                    
                    
                    (991,582
                    )
                    
                    
                    1,387,724
                    
                    
                    
                    396,142
                    dNet
      cash provided by operating activities
                    
                    
                    1,194,771
                    
                    
                    
                    (311,273
                    )
                    
                    
                    883,498Cash
      Flows From Investing Activities
                    
                    
                    
                    
                    
                    
                    -Collection
      of notes receivable
                    
                    
                    
                    
                    
                    
                    154,691
                    
                    
                    
                    154,691
                    dPurchases
      of property and equipment and construction-in-progress
                    
                    
                    (455,488
                    )
                    
                    
                    -
                    
                    
                    
                    (455,488
                    )Net
      cash used in investing activities
                    
                    
                    (455,488
                    )
                    
                    
                    154,691
                    
                    
                    
                    (300,797
                    )Cash
      Flows From Financing ActivesProceeds
      and repayments of borrowings under short term debt
                    
                    
                    69,172
                    
                    
                    
                    (58,365
                    )
                    
                    
                    10,807
                    dNet
      cash used in financing activities
                    
                    
                    69,172
                    
                    
                    
                    (58,365
                    )
                    
                    
                    10,807Effect
      of exchange rate changes on cash
                    
                    
                    579
                    
                    
                    
                    303,182
                    
                    
                    
                    303,761
                    cNet
      increase in cash and cash equivalents
                    
                    
                    809,034
                    
                    
                    
                    88,235
                    
                    
                    
                    897,269Cash
      and cash equivalents, beginning of period
                    
                    
                    569,019
                    
                    
                    
                    15,247
                    
                    
                    
                    584,266
                    cCash
      and cash equivalents, end of period
                    
                    $
                    1,378,053
                    
                    
                    $
                    103,482
                    
                    
                    $
                    1,481,535
 
 a – These
are minor reclassifications between G&A expense items.
 
 b - When
SiBiono was acquired at March 31, 2007, the assets and liabilities of SiBiono
were not fair valued at March 31, 2007. The differences in these items are due
to the difference between the fair value per valuation and book value at March
31, 2007.
 
 c – The
combination of other adjustments above.
 
 d – Due
to minor reclassifications between asset and liability items.
  9
  5. Inventories
 
 The
Company’s inventories were comprised as follows:
 
 September 30,
                      2010
                    
                    
                    December 31,
                      2009Raw materials
                    
                    $
                    2,685,169
                    
                    
                    $
                    489,348Packing
      materials
                    
                    
                    294,151
                    
                    
                    
                    290,601Other
      materials / supplies
                    
                    
                    69,123
                    
                    
                    
                    83,247Finished
      goods
                    
                    
                    1,258,283
                    
                    
                    
                    588,604Work-in-process
                    
                    
                    58,659
                    
                    
                    
                    596,449Total
      inventories at cost
                    
                    
                    4,365,385
                    
                    
                    
                    2,048,249Less:
      Reserves on inventories
                    
                    
                    (9,477
                    )
                    
                    
                    (9,262
                    )Total
      inventories, net
                    
                    $
                    4,355,908
                    
                    
                    $
                    2,038,987
  6. Short-term
debt
 
 The
Company’s short term debt was comprised as follows:
 
 September 30,
                      2010
                    
                    
                    December 31,
                      2009Ebei
      - one year bank loan due in October 2010 but paid off in September 2010,
      bear interest at 9% per annum, secured by Ebei Benda’s
      Machinery.
                    
                    $
                    -
                    
                    
                    $
                    438,900Ebei
      - one year bank loan due in September 2011, bear interest at 9% per annum,
      secured by Ebei Benda’s Machinery.
                    
                    $
                    299,400
                    
                    
                    $
                    -Ebei-
      bank acceptance notes from SHPudong Development Bank with redemption dates
      various from one to six months subsequent to period end, secured by
      buildings, machinery and equipment of Benda Ebei and Jiangling
      Benda.
                    
                    
                    9,112,538
                    
                    
                    
                    8,160,503Ebei
      - Five-month loan from Shenzhen Shourenben Enterprise Consulting (SZ) Co.,
      Ltd. matured in May 2010, bearing monthly interest at 1% and unsecured.
      Loan is currently in default.
                    
                    
                    394,519
                    
                    
                    
                    -Sibiono
      - Three loans from Shourenben Enterprise Consulting (SZ) Co., Ltd. due in
      June 2011, bearing monthly interest at 1.5% and
      unsecured.
                    
                    
                    284,430
                    
                    
                    
                    21,945Sibiono-
      three-year bank loan due in April 2008 bearing annual interest at 6.366%.
      The loan was paid off in August 2010. See (a) below for more
      detail.
                    
                    
                    -
                    
                    
                    
                    2,976,718
                    (a)Sibiono-
      three-month loan from Yichang Shengshitongda Enterprises Ltd. due on
      November 20, 2010 bearing annual interest at 60% and
      unsecured.
                    
                    
                    3,742,500
                    
                    
                    
                    -Jiangling- One-year
      bank loan from Hubei Province Rural Credit due in April 2011, bearing
      annual interest at 7.2% and secured by a third party commercial loan
      guarantee company.
                    
                    
                    299,400
                    
                    
                    
                    -$
                    14,132,787
                    
                    
                    $
                    11,598,066
  10
  (a)  
SiBiono – Bank Loan in default
 
 At
December 31, 2009, Sibiono, had an outstanding bank loan for the amount of
$2,976,718, which was used primarily to fund construction in progress projects
and for general working capital purposes. The loan carries annual interest rate
of 6.366% and matured in April 2008. The loan is personally guaranteed by
Zhaohui Peng, the former Chairman and a shareholder of SiBiono and is
collateralized by Sibiono’s land use rights.
 
 The loan
is in default since the maturity date until August 2010 when the Company
borrowed funds from Yichang Shengshitongda Enterprises, Ltd. and paid off the
loan.
  7. Related
Party Transactions
 
 Due from
related parties at September 30, 2010 and December 31, 2009 were comprised
as follows:
  Relationship
                    
                    September 30,
                      2010
                    
                    
                    December 31,
                      2009CurrentQin
      Yu
                    
                    Vice
      presidentShenzhen
      SiBiono
                    
                    
                    
                    $
                    1,517
                    
                    
                    $
                    2,024Xiaoji
      Zhang
                    
                    Minority
      shareholderShenzhen
      SiBiono
                    
                    
                    
                    
                    5,550
                    
                    
                    
                    5,423Hua
      Xu
                    
                    General
      Manager's SisterShenzhen
      SiBiono
                    
                    
                    
                    
                    23,254
                    
                    
                    
                    22,726Rong
      He
                    
                    ManagerShenzhen
      SiBiono
                    
                    
                    
                    
                    -
                    
                    
                    
                    688Wei
      Xu
                    
                    VP,
      CEO's Spouse & DirectorBenda
      Ebei
                    
                    
                    
                    
                    274,950
                    
                    
                    
                    -$
                    305,271
                    
                    
                    $
                    30,861Non
      currentYiqing
      Wan
                    
                    CEO
      & DirectorEver
      Leader
                    
                    
                    
                    $
                    650,091
                    
                    
                    $
                    646,586Benda
      Ebei
                    
                    
                    
                    
                    565,707
                    
                    
                    
                    520,712Hubei
      Benda Science and Technology Co. Ltd
                    
                    Controlled
      by CEOYidu
      Benda
                    
                    
                    
                    
                    1,640,204
                    
                    
                    
                    1,602,950Ever
      Leader
                    
                    
                    
                    
                    231,464
                    
                    
                    
                    230,216Feng
      Wang
                    
                    Minority
      shareholderBeijing
      Shusai
                    
                    
                    
                    
                    33,011
                    
                    
                    
                    32,262$
                    3,120,477
                    
                    
                    $
                    3,032,726
 
 The
balance owned by the Yiqing Wan, CEO & Director, and the Company under his
control, totaled $ 3,087,466 and $3,000,464 as of September 30, 2010
and December 31, 2009, respectively. This is a violation of Section 402 of the
Sarbanes-Oxley Act of 2002 which prohibits personal loans to
executives.
  11
  Due to
related parties at September 30, 2010 and December 31, 2009 were comprised as
follows:
  Relationship
                      
                      September 30,
                        2010
                      
                      
                      December 31,
                        2009CurrentWei
      Xu
                      
                      VP,
      CEO's Spouse & DirectorShenzhen
      SiBiono
                      
                      
                      
                      $
                      301,596
                      
                      
                      $
                      234,569Everleader
                      
                      
                      
                      
                      1,434,205
                      
                      
                      
                      1,356,172BPMA
                      
                      
                      
                      
                      36,184
                      
                      
                      
                      36,184Hubei
      Benda Science and Technology Co. Ltd
                      
                      Controlled
      by CEOBenda
      Ebei
                      
                      
                      
                      
                      29,191
                      
                      
                      
                      28,528Jiangliang
      Benda
                      
                      
                      
                      
                      795,801
                      
                      
                      
                      793,864Beijing
      Shusai
                      
                      
                      
                      
                      14,439
                      
                      
                      
                      14,111SiBiono
      Zhongjia Gene Tech (SZ) Co., Ltd.
                      
                      Associate
      companyShenzhen
      SiBiono
                      
                      
                      
                      
                      -
                      
                      
                      
                      103,948Yiqing,
      Wan
                      
                      CEO
      & DirectorShenzhen
      SiBiono
                      
                      
                      
                      
                      240,721
                      
                      
                      
                      224,071Pong,
      Tsiaohuei
                      
                      Shareholder
      & ChairmanShenzhen
      SiBiono
                      
                      
                      
                      
                      4,918
                      
                      
                      
                      -$
                      2,857, 055
                      
                      
                      $
                      2,791,447Non
      currentWei
      Xu
                      
                      VP,
      CEO's Spouse & DirectorBenda
      Ebei
                      
                      
                      
                      $
                      24,450
                      
                      
                      $
                      23,894Beijing
      Shusai
                      
                      
                      
                      
                      66,857
                      
                      
                      
                      65,339Yiqing,
      Wan
                      
                      CEO
      & DirectorYidu
      Benda
                      
                      
                      
                      
                      572
                      
                      
                      
                      559Hui
      Xu
                      
                      ManagerBenda
      Ebei
                      
                      
                      
                      
                      29,070
                      
                      
                      
                      28,410$
                      120,949
                      
                      
                      $
                      118,202
 
 Except
for the loans from the shareholder Wei Xu by Everleader which bears interest
rate at 12% per annum, unsecure and matures within six months, the above
advances bear no interest and the above loans due to related parties are
unsecured, non-interest bearing and are not convertible into equity. Proceeds
from the above loans were used primarily for general working capital purposes,
among which the current portion does not have definitive terms and for
those portions which are long-term debts in nature, is expected to be repaid by
the Company in over 12-month period.
  8. Equity
Investment
 
 Sibiono
and North American Gene Diagnostics and Therapeutics Ltd. (HK) entered into a
business agreement to set up Shenzhen Sibiono Zhongjia Gene Technology Ltd.
(Zhongjia) during June 2009. The business license of the new joint entity was
obtained in January 2010 and Sibiono made the capital contribution of
approximately $119,000 (RMB 800,000) in February 2010. The new entity's legal
representative is Mr. Wan, Yiqing. The registered capital is approximately
$292,500 (RMB 2 million). Sibiono's share of the registered capital is 40% (RMB
800,000), the other party’s share is 60% (RMB 1.2 million).
 
 Zhongjia
did not have significant operations during the nine months period ended
September 30, 2010.
  9. Segment
Information
 
 The
Company states the segment information according to the requirement stated in
ASC 280-10-50. The Company produces five different categories of products and
each category of product is produced in different subsidiaries or operation
plants. The details are stated as follows:
  1.
              Benda
      Ebei produces conventional medicines which including 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 production
facilities of each subsidiary, therefore according to the requirement stated ASC
280-10-50, the Company reports the segment information according to the
un-identical products that produced in each subsidiary.
  12
  Selected
financial information for each of these segments for the nine and three
months ended September 30, 2010 and 2009 were as follows:
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,Branded/Generic
      medicine segment
                    
                    2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenue
      from external customers
                    
                    $
                    13,047,872
                    
                    
                    $
                    13,617,252
                    
                    
                    $
                    5,536,515
                    
                    
                    $
                    4,887,566Cost
      of sales
                    
                    
                    (8,317,348
                    )
                    
                    
                    (8,600,569
                    )
                    
                    
                    (3,509,332
                    )
                    
                    
                    (3,051,518
                    )Gross
      profit
                    
                    
                    4,730,524
                    
                    
                    
                    5,016,683
                    
                    
                    
                    2,027,183
                    
                    
                    
                    1,836,047Gross
      margin
                    
                    
                    36
                    %
                    
                    
                    37
                    %
                    
                    
                    37
                    %
                    
                    
                    38
                    %Research
      and development
                    
                    
                    (1,026,023
                    )
                    
                    
                    -
                    
                    
                    
                    (343,914
                    )
                    
                    
                    2,301Selling
      expense
                    
                    
                    (1,028,714
                    )
                    
                    
                    (942,604
                    )
                    
                    
                    (194,692
                    )
                    
                    
                    (529,292
                    )General
      and administrative expense
                    
                    
                    (727,140
                    )
                    
                    
                    (2,683,831
                    )
                    
                    
                    (210,913
                    )
                    
                    
                    (707,287
                    )Segment
      contribution
                    
                    $
                    1,948,647
                    
                    
                    $
                    1,390,248
                    
                    
                    $
                    1,277,664
                    
                    
                    $
                    601,770Contribution
      margin
                    
                    
                    15
                    %
                    
                    
                    10
                    %
                    
                    
                    23
                    %
                    
                    
                    12
                    %Total
      assets, segment
                    
                    $
                    29,460,319
                    
                    
                    $
                    24,091,492
                    
                    
                    $
                    29,460,319
                    
                    
                    $
                    24,091,492
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,Active pharmaceutical ingredients segment
                    
                    2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenue
      from external customers
                    
                    $
                    1,109,268
                    
                    
                    $
                    817,137
                    
                    
                    $
                    98,020
                    
                    
                    $
                    27,075Cost
      of sales
                    
                    
                    (898,934
                    )
                    
                    
                    (901,431
                    )
                    
                    
                    (97,425
                    )
                    
                    
                    66,164Gross
      profit
                    
                    
                    210,334
                    
                    
                    
                    (84,294
                    )
                    
                    
                    595
                    
                    
                    
                    93,238Gross
      margin
                    
                    
                    19
                    %
                    
                    
                    -10
                    %
                    
                    
                    1
                    %
                    
                    
                    344
                    %Research
      and development
                    
                    
                    -
                    
                    
                    
                    (143
                    )
                    
                    
                    -
                    
                    
                    
                    (70
                    )Selling
      expense
                    
                    
                    (27,719
                    )
                    
                    
                    (16,576
                    )
                    
                    
                    (7,431
                    )
                    
                    
                    (1,851
                    )General
      and administrative expense
                    
                    
                    (402,470
                    )
                    
                    
                    (526,094
                    )
                    
                    
                    (143,850
                    )
                    
                    
                    (205,085
                    )Segment
      contribution
                    
                    $
                    (219,855
                    )
                    
                    $
                    (627,107
                    )
                    
                    $
                    (150,686
                    )
                    
                    $
                    (113,768
                    )Contribution
      margin
                    
                    
                    -20
                    %
                    
                    
                    -77
                    %
                    
                    
                    -154
                    %
                    
                    
                    -420
                    %Total
      assets, segment
                    
                    $
                    13,530,958
                    
                    
                    $
                    12,541,258
                    
                    
                    $
                    13,530,958
                    
                    
                    $
                    12,541,258
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,Bulk chemicals segment
                    
                    2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenue
      from external customers
                    
                    $
                    3,273
                    
                    
                    $
                    -
                    
                    
                    $
                    999
                    
                    
                    $
                    -Cost
      of sales
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Gross
      profit
                    
                    
                    3,273
                    
                    
                    
                    -
                    
                    
                    
                    999
                    
                    
                    
                    -Gross
      margin
                    
                    
                    100
                    %
                    
                    
                    0
                    %
                    
                    
                    100
                    %
                    
                    
                    0
                    %Research
      and development
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Selling
      expense
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -General
      and administrative expense
                    
                    
                    (438,336
                    )
                    
                    
                    (313,966
                    )
                    
                    
                    (146,455
                    )
                    
                    
                    (105,518
                    )Segment
      contribution
                    
                    $
                    (435,063
                    )
                    
                    $
                    (313,966
                    )
                    
                    $
                    (145,456
                    )
                    
                    $
                    (105,518
                    )Contribution
      margin
                    
                    
                    0
                    %
                    
                    
                    0
                    %
                    
                    
                    -14560
                    %
                    
                    
                    0
                    %Total
      assets, segment
                    
                    $
                    8,269,131
                    
                    
                    $
                    8,820,946
                    
                    
                    $
                    8,269,131
                    
                    
                    $
                    8,820,946
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,Pharynigitis killer therapy segment
                    
                    2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenue
      from external customers
                    
                    $
                    147
                    
                    
                    $
                    -
                    
                    
                    $
                    147
                    
                    
                    $
                    -Cost
      of sales
                    
                    
                    (8
                    )
                    
                    
                    -
                    
                    
                    
                    (8
                    )
                    
                    
                    -Gross
      profit
                    
                    
                    139
                    
                    
                    
                    -
                    
                    
                    
                    139
                    
                    
                    
                    -Gross
      margin
                    
                    
                    95
                    %
                    
                    
                    0
                    %
                    
                    
                    95
                    %
                    
                    
                    0
                    %Research
      and development
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Selling
      expense
                    
                    
                    -
                    
                    
                    
                    (733
                    )
                    
                    
                    -
                    
                    
                    
                    (733
                    )General
      and administrative expense
                    
                    
                    (15,156
                    )
                    
                    
                    (19,609
                    )
                    
                    
                    (5,077
                    )
                    
                    
                    (5,134
                    )Segment
      contribution
                    
                    $
                    (15,017
                    )
                    
                    $
                    (20,342
                    )
                    
                    $
                    (4,938
                    )
                    
                    $
                    (5,867
                    )Contribution
      margin
                    
                    
                    0
                    %
                    
                    
                    0
                    %
                    
                    
                    0
                    %
                    
                    
                    0
                    %Total
      assets, segment
                    
                    $
                    74,648
                    
                    
                    $
                    92,931
                    
                    
                    $
                    74,648
                    
                    
                    $
                    92,931
  13
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,Gendicine (Ad-p53) segment
                    
                    2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Revenue
      from external customers
                    
                    $
                    2,697,153
                    
                    
                    $
                    2,910,676
                    
                    
                    $
                    1,062,183
                    
                    
                    $
                    990,013Cost
      of sales
                    
                    
                    (283,035
                    )
                    
                    
                    (268,370
                    )
                    
                    
                    (127,243
                    )
                    
                    
                    (85,937
                    )Gross
      profit
                    
                    
                    2,414,118
                    
                    
                    
                    2,642,306
                    
                    
                    
                    934,940
                    
                    
                    
                    904,076Gross
      margin
                    
                    
                    90
                    %
                    
                    
                    91
                    %
                    
                    
                    88
                    %
                    
                    
                    91
                    %Research
      and development
                    
                    
                    (128,180
                    )
                    
                    
                    (283,330
                    )
                    
                    
                    (45,007
                    )
                    
                    
                    (167,621
                    )Selling
      expense
                    
                    
                    (729,979
                    )
                    
                    
                    (908,569
                    )
                    
                    
                    (219,272
                    )
                    
                    
                    (320,238
                    )General
      and administrative expense
                    
                    
                    (926,274
                    )
                    
                    
                    (1,745,240
                    )
                    
                    
                    (329,993
                    )
                    
                    
                    (270,520
                    )Segment
      contribution
                    
                    $
                    629,685
                    
                    
                    $
                    (294,833
                    )
                    
                    $
                    340,668
                    
                    
                    $
                    145,697Contribution
      margin
                    
                    
                    23
                    %
                    
                    
                    0
                    %
                    
                    
                    32
                    %
                    
                    
                    15
                    %Total
      assets, segment
                    
                    $
                    15,751,458
                    
                    
                    $
                    15,193,562
                    
                    
                    $
                    15,751,458
                    
                    
                    $
                    15,193,562
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Total
      revenue from external customers
                    
                    $
                    16,857,713
                    
                    
                    $
                    17,345,065
                    
                    
                    $
                    6,697,864
                    
                    
                    $
                    5,904,653Cost
      of sales
                    
                    
                    (9,499,325
                    )
                    
                    
                    (9,770,370
                    )
                    
                    
                    (3,734,008
                    )
                    
                    
                    (3,071,291
                    )Gross
      profit
                    
                    
                    7,358,388
                    
                    
                    
                    7,574,695
                    
                    
                    
                    2,963,856
                    
                    
                    
                    2,833,362Gross
      margin
                    
                    
                    44
                    %
                    
                    
                    44
                    %
                    
                    
                    44
                    %
                    
                    
                    48
                    %Research
      and development
                    
                    
                    (1,154,203
                    )
                    
                    
                    (283,473
                    )
                    
                    
                    (388,921
                    )
                    
                    
                    (165,390
                    )Selling
      expense
                    
                    
                    (1,786,412
                    )
                    
                    
                    (1,868,482
                    )
                    
                    
                    (421,395
                    )
                    
                    
                    (852,114
                    )General
      and administrative expense
                    
                    
                    (2,509,376
                    )
                    
                    
                    (5,288,740
                    )
                    
                    
                    (836,288
                    )
                    
                    
                    (1,293,544
                    )Segment
      contribution
                    
                    $
                    1,908,397
                    
                    
                    $
                    134,000
                    
                    
                    $
                    1,317,252
                    
                    
                    $
                    522,314Contribution
      margin
                    
                    
                    11
                    %
                    
                    
                    1
                    %
                    
                    
                    20
                    %
                    
                    
                    9
                    %Total
      assets, segment
                    
                    $
                    67,086,204
                    
                    
                    $
                    60,740,188
                    
                    
                    $
                    67,086,204
                    
                    
                    $
                    60,740,188
  14
  The
results of the total consolidated net profit before income taxes for the
reporting periods are as follows:
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER
      30,
                    
                    
                    SEPTEMBER
      30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Total
      segment contribution
                    
                    $
                    1,908,397
                    
                    
                    $
                    134,000
                    
                    
                    $
                    1,317,252
                    
                    
                    $
                    522,314Unallocated
      amounts:Government
      subsidies / grants
                    
                    
                    -
                    
                    
                    
                    26,386
                    
                    
                    
                    -
                    
                    
                    
                    4Other
      income/(expenses)
                    
                    
                    (726,769
                    )
                    
                    
                    (230,771
                    )
                    
                    
                    (395,808
                    )
                    
                    
                    (108,601
                    )Other
      corporate expenses
                    
                    
                    (1,295,868
                    )
                    
                    
                    (2,434,182
                    )
                    
                    
                    (299,526
                    )
                    
                    
                    (496,641
                    )Total
      net loss before noncontrolling interest and income taxes
                    
                    $
                    (114,240
                    )
                    
                    $
                    (2,504,567
                    )
                    
                    $
                    621,918
                    
                    
                    $
                    (82,924
                    )
 
 The other
corporate expenses per the above table for the nine and three months ended
September 30, 2010 and 2009 composed of the following events:
 
 NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Wages
      and salaries
                    
                    $
                    195,000
                    
                    
                    $
                    283,817
                    
                    
                    $
                    65,000
                    
                    
                    $
                    88,802Audit
      and accounting
                    
                    
                    62,997
                    
                    
                    
                    74,995
                    
                    
                    
                    27,091
                    
                    
                    
                    24,999Consulting
      fee
                    
                    
                    14,517
                    
                    
                    
                    9,336
                    
                    
                    
                    4,775
                    
                    
                    
                    3,120Investor
      relation, transfer agent and filing fees
                    
                    
                    -
                    
                    
                    
                    2,720
                    
                    
                    
                    -
                    
                    
                    
                    -Director
      renumeration
                    
                    
                    67,500
                    
                    
                    
                    67,500
                    
                    
                    
                    22,500
                    
                    
                    
                    22,500Legal
      fee
                    
                    
                    479,846
                    
                    
                    
                    158,134
                    
                    
                    
                    113,844
                    
                    
                    
                    53,567Taxes
      and levies
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Interest
      expense
                    
                    
                    475,589
                    
                    
                    
                    1,767,578
                    
                    
                    
                    66,217
                    
                    
                    
                    302,277Miscellaneous
                    
                    
                    419
                    
                    
                    
                    70,102
                    
                    
                    
                    99
                    
                    
                    
                    1,376Total
                    
                    $
                    1,295,868
                    
                    
                    $
                    2,434,182
                    
                    
                    $
                    299,526
                    
                    
                    $
                    496,641
 
 For the
details of information of this particular, it should be read in conjunction
with the management discussion and analysis section.
 
 The
following table shows the reconciliation between the segments assets and the
total assets for the nine and three months ended September 30, 2010 and
2009:
  NINE MONTHS ENDED
                    
                    
                    THREE MONTHS ENDEDSEPTEMBER 30,
                    
                    
                    SEPTEMBER 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Total
      assets, segment
                    
                    $
                    67,086,204
                    
                    
                    $
                    60,740,188
                    
                    
                    $
                    67,086,204
                    
                    
                    $
                    60,740,188Total
      assets of corporate:Cash
      and cash equivalent
                    
                    
                    11,662
                    
                    
                    
                    12,168
                    
                    
                    
                    11,662
                    
                    
                    
                    12,168Prepaid
      expense and deposit
                    
                    
                    232
                    
                    
                    
                    -
                    
                    
                    
                    232
                    
                    
                    
                    -Due
      from related parties
                    
                    
                    638,650
                    
                    
                    
                    660,067
                    
                    
                    
                    638,650
                    
                    
                    
                    660,067Construction-in-progress
      capitalized interest
                    
                    
                    825,798
                    
                    
                    
                    -
                    
                    
                    
                    825,798
                    
                    
                    
                    -Total
      assets
                    
                    $
                    68,562,546
                    
                    
                    $
                    61,412,423
                    
                    
                    $
                    68,562,546
                    
                    
                    $
                    61,412,423
  15
  The
following table shows how the non-controlling interest for the
nine months ended September 30, 2010 and 2009 was derived:
 
 Nine Months Ended September 30, 2010Benda
                          
                          
                          Jiangling
                          
                          
                          Yidu
                          
                          
                          Beijing
                          
                          
                          ShenzhenEbei
                          
                          
                          Benda
                          
                          
                          Benda
                          
                          
                          Shusai
                          
                          
                          SiBiono
                          
                          TotalSegment
      operating profit / (loss)
                          
                          $
                          1,948,647
                          
                          
                          
                          (219,855
                          )
                          
                          
                          (435,063
                          )
                          
                          
                          (15,017
                          )
                          
                          
                          629,685
                          
                          $
                          1,908,397Interest
      income/ (expenses)
                          
                          
                          (304,197
                          )
                          
                          
                          (24,781
                          )
                          
                          
                          1
                          
                          
                          
                          -
                          
                          
                          
                          (382,979
                          )
                          
                          (711,956
                          )Other
      income / (expenses)
                          
                          
                          (73,037
                          )
                          
                          
                          (4,531
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (9,972
                          )
                          
                          (87,540
                          )Income
      taxes
                          
                          
                          (695,820
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (3
                          )
                          
                          
                          40,902
                          
                          
                          (654,921
                          )Income
      / (loss) before non-controlling interest
                          
                          $
                          875,593
                          
                          
                          
                          (249,167
                          )
                          
                          
                          (435,062
                          )
                          
                          
                          (15,020
                          )
                          
                          
                          277,636
                          
                          $
                          453,980Non-controlling
      interest percentage
                          
                          
                          5.00
                          %
                          
                          
                          5.00
                          %
                          
                          
                          5.00
                          %
                          
                          
                          25.00
                          %
                          
                          
                          39.87
                          %Non-controlling
      interest
                          
                          $
                          22,699
                          
                          
                          
                          (12,458
                          )
                          
                          
                          (21,753
                          )
                          
                          
                          (3,755
                          )
                          
                          
                          110,693
                          
                          $
                          95,426
 
 Nine Months Ended September 30, 2009Benda
                    
                    
                    Jiangling
                    
                    
                    Yidu
                    
                    
                    Beijing
                    
                    
                    ShenzhenEbei
                    
                    
                    Benda
                    
                    
                    Benda
                    
                    
                    Shusai
                    
                    
                    SiBiono
                    
                    TotalSegment
      operating profit / (loss)
                    
                    $
                    1,390,248
                    
                    
                    
                    (627,107
                    )
                    
                    
                    (313,966
                    )
                    
                    
                    (20,342
                    )
                    
                    
                    (294,833
                    )
                    $
                    134,000Interest
      income/ (expenses)
                    
                    
                    (186,293
                    )
                    
                    
                    (253
                    )
                    
                    
                    4
                    
                    
                    
                    -
                    
                    
                    
                    (150,390
                    )
                    
                    (336,932
                    )Other
      income / (expenses)
                    
                    
                    149,299
                    
                    
                    
                    (175
                    )
                    
                    
                    2,968
                    
                    
                    
                    -
                    
                    
                    
                    118,697
                    
                    
                    270,789Government
      subsidy
                    
                    
                    -
                    
                    
                    
                    26,386
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    26,386Income
      taxes
                    
                    
                    (163,803
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    40,760
                    
                    
                    (123,043
                    )Income
      / (loss) before non-controlling interest
                    
                    $
                    1,189,451
                    
                    
                    
                    (601,149
                    )
                    
                    
                    (310,994
                    )
                    
                    
                    (20,342
                    )
                    
                    
                    (285,766
                    )
                    $
                    (28,800
                    )Non-controlling
      interest percentage
                    
                    
                    5.00
                    %
                    
                    
                    5.00
                    %
                    
                    
                    5.00
                    %
                    
                    
                    25.00
                    %
                    
                    
                    39.87
                    %Non-controlling
      interest
                    
                    $
                    (1,440
                    )
                    
                    
                    (30,057
                    )
                    
                    
                    (15,550
                    )
                    
                    
                    (5,086
                    )
                    
                    
                    (113,935
                    )
                    $
                    (166,068
                    )
  16


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




The
following discussion and analysis should be read in conjunction with the
information contained in the unaudited condensed consolidated financial
statements of the Company and the related notes thereto, appearing elsewhere
herein, and in conjunction with the Management’s Discussion and Analysis of
Financial Condition and Results of Operations set forth in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009, filed with the
Securities and Exchange Commission (“SEC”).




Forward
Looking Information




This Quarterly Report on Form 10-Q
(the “Report”) contains certain “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Exchange Act of 1934, as amended, that are based on management’s exercise of
business judgment as well as assumptions made by, and information currently
available to, management.  When used in this document, the words
“may”,   "will”, “anticipate”,
“believe”, “estimate”, “expect”, “intend”, and words of similar import, are
intended to identify any forward-looking statements.  You should not
place undue reliance on these forward-looking statements.  These
statements reflect our current view of future events and are subject to certain
risks and uncertainties, as noted in the Company’s Report on Form 10-K, filed
with the SEC, and as noted below.  Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
our actual results could differ materially from those anticipated in these
forward-looking statements.  We undertake no obligation, and do not
intend, to update, revise or otherwise publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof, or to reflect the occurrence of any unanticipated
events.  Although we believe that our expectations are based on
reasonable assumptions, we can give no assurance that our expectations will
materialize.





Critical
Accounting Policies





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





Revenue
Recognition





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





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. Sales are presented net of value added tax (VAT). No
return allowance is made as products returns are insignificant based on
historical experience.





Results
of Operations





The Nine
Months and Three Months Ended September 30, 2010 and 2009.


17


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.





Revenue
decreased by $0.49 million (or 2.81%) to $16.86 million for the
nine months ended September 30, 2010 from $17.35 million for the
nine months ended September 30, 2009 and increased by $0.80 million
(or 13.43%) to $6.70 million for the three months ended September 30, 2010 from
$5.90 million for the three months ended September 30, 2009. Decrease in
revenue principally attributed to the following factors:





1.
            One
      of Benda’s subsidiaries, Benda Ebei’s revenue decreased $0.57 million (or
      4.19%) to $13.05 million for the nine months ended
      September 30, 2010 from $13.62 million for the nine months ended
      September 30, 2009 and increased by $0.65 million (or 13.29%) to
      $5.54 million for the three months ended September 30, 2010 from
      $4.89 million for the three months ended September 30, 2009. It was
      mainly due to maintenance activity during the three months ended September
      30, 2010, no such activity in the same period during
  2009.






2.
            One
      of Benda’s subsidiaries, Jiangling Benda, achieved $1.11 million and
      $0.82 million for the nine months ended September 30, 2010 and 2009,
      and $0.098 million and $0.027 million for the three months ended September
      30, 2010 and 2009, respectively.





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





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





3.
            One
      of Benda’s subsidiaries, Yidu Benda ceased operations due to the plant
      closing in mid January 2007 to upgrade its waste water treatment system to
      comply with new environmental standards enforced by PRC local
      government.





Yidu
Benda completed its upgrading of the waste water system and passed the
government’s verification and testing of equipment 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. Management cannot estimate the exact timing for obtaining
the final approval on the actual production process. Furthermore, management is
searching for new products to be produced in Yidu Benda with higher profit
margins.





4.
            One
      of Benda’s subsidiaries, Beijing Shusai was 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. Management cannot estimate that such situation could be
      resolved in the coming future.





5.
            One
      of Benda’s subsidiaries, SiBiono, net revenue decreased $0.21 million
      (or 7.34%) to $2.70 million for the nine months ended September 30,
      2010 from $2.91 million the nine months ended September 30, 2009
      and increased by $0.07 million (or 7.29%) to $1.06 million for the
      three months ended September 30, 2010 from $0.99 million for the three
      months ended September 30, 2009. The decrease in net revenue is mainly due
      to the fact that SiBiono previously underwent a process of re-engineering
      of the production department during the year of
  2010.


18


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





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


19


Cost
of Goods Sold


Cost of
goods sold decreased $0.27 million (or 2.77%) to $9.50 million for the
nine months ended September 30, 2010 from $9.77 million for the
nine months ended September 30, 2009 and increased by $0.66
million (or 21.58%) to $3.73 million for the three months ended September 30,
2010 from $3.07 million for the three months ended September 30, 2009,
primarily due to the decrease in sales volume and increase in raw material costs
in Benda Ebei.





Gross
Profit


Gross
profit decreased $0.22 million (or 2.86%) to $7.36million for the
nine months ended September 30, 2010 from $7.57 million for the
nine months ended September 30, 2009 and increased by $0.13
million (or 4.61%) to $2.96 million for the three months ended September 30,
2010 from $2.83 million for the three months ended September 30, 2009, which was
mainly due to the decrease in sales volume of Gendicine which has a high gross
profit margin.





Selling
Expenses:


Selling
expenses decreased $0.08 million (or 4.39%) to $1.79 million for the
nine months ended September 30, 2010 from $1.87 million the
nine months ended September 30, 2010 and decreased by $0.43 million
(or 50.55%) to $0.42 million for the three months ended September 30, 2010 from
$0.85 million for the three months ended September 30, 2009, primarily due to
the increased promotion efforts made by the management.





General
and Administrative Expenses:


General
and administrative decreased $3.17 million (or 60.59%) to $2.06 million for the
nine months ended September 30, 2010 from $5.23 million for the
nine months ended September 30, 2009 and decreased by $0.59
million (or 48.86%) to $0.62 million for the three months ended September 30,
2010 from $1.21 million for the three months ended September 30, 2009,
primarily due to less bad debt expense incurred in 2010.





Operating
Income / (Loss):


The
Company had an operating income of $1.09 million for the nine months
ended September 30, 2010 and $1.08 million for the three months ended September
30, 2010, while the operating loss from comparative period was
$0.53 million for the nine months ended September 30, 2009 and an
operating income of $0.33 million for the three months ended September
30, 2009.





Interest
Expense:


Interest
expense was $1.19 million and $2.10 million for the nine months ended
September 30, 2010 and 2009 respectively, while interest expense was $0.46
million and $0.47 million for the three months ended September 30, 2010 and
2009 respectively. The decrease is mainly due to the amortization of debt
discount related to the convertible note during the first quarter of 2009 while
there was no such expense in the same period of 2010.





Income
Taxes:


Benda is
subject to Delaware, United State of America tax, but no provision for income
taxes was made for the nine months ended September 30, 2010 and 2009 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 was made for the nine months ended
September 30, 2010 and 2009 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.





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. Cross-municipal investments entities refer to
entities that are incorporated in one municipal region but have investments in
another municipal region.


20


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 expire in 2010.





However,
starting and effective from January 1, 2008, the full income tax rate changed
from 33% to 25% according to the new PRC taxation regulations. Therefore these
subsidiaries are 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
                  %





Benda
Ebei recorded $695,820 income tax for the nine months ended September 30,
2010 and $352,033 income tax for the three months ended September 30,
2010.





LIQUIDITY
AND CAPITAL RESOURCES





Net cash
used by the operating activities was $0.74 million for the nine months
ended September 30, 2010, while for the nine months ended September 30,
2009 was positive $0.88 million.





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




For the
nine months ended September 30, 2009, an amount about $6.20 million
non-cash operating activities was reconciled back to the net loss and which
mainly included amortization of debt discount and debt issue cost, bad debt
provision, amortization of intangible assets, and depreciation.





However,
for the nine months ended September 30, 2010, about $2.43 million of
non-cash operating activities was reconciled back to the net loss and summarized
as follows: $1.74 million incurred on depreciation; $0.24 million incurred on
bad debt provision; and $0.44 million incurred on amortization of
intangible assets.





b)
            Trade
      receivables




The net
amount of trade receivable was increased by $1.81 million for the
nine months ended September 30, 2010. Management acknowledges that the net
balance of the trade receivable, as of September 30, 2010, was a significant
asset to the company. However, management believes that the above situation is
temporarily due to the following reasons:





1)
            Customers
      who have sales relationships with our company are all relatively big
      business wholesale enterprises and they have all passed the examination of
      GMP Certificate so that  collectability from those is out of
      question;


21


2)
            Management
      realized that it did affect the cash flow situation of the company;
      therefore the company will put more efforts to reduce the balance of trade
      receivables.





For the
nine months ended September 30, 2010 and 2009, the amount spent in
investing activities were $1.08 million and $0.30 million respectively. The
investing activities were relatively small for the reporting
periods.





Financing
cash inflow was $2.26 million for the nine months ended September 30, 2010,
while the financing cash outflow was $0.01 million for the nine months
ended September 30, 2009.




Off-Balance
Sheet Arrangements





We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, and results of
operations, liquidity or capital expenditures.





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





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





Item
4T.  Evaluation of Disclosure Controls and Procedures





a)  
Evaluation of Disclosure
Controls. Our Chief Executive Officer and Chief Accounting Officer
evaluated the effectiveness of our disclosure controls and procedures as of the
end of our first fiscal quarter 2010 pursuant to Rule 13a-15(b) of the
Securities and Exchange Act.  Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file under the Exchange Act is accumulated and communicated to our management,
as appropriate to allow timely decisions regarding required disclosure. Based on
his evaluation, our Chief Executive Officer and Chief Accounting Officer
concluded that our disclosure controls and procedures were not effective as of
September 30, 2010 due the following factors:




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




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




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




Management
is currently evaluating remediation plans for the above control
deficiencies.





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





(b)
  Changes in internal
control over financial reporting. There have been no changes in our
internal control over financial reporting that occurred during the first fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. Our management team will
continue to evaluate our internal control over financial reporting in 2010 as we
implement our Sarbanes Oxley Act testing.


22


PART
II - OTHER INFORMATION




Item
1. Legal Proceedings.




1.
            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.





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





2.
            SiBiono patents - on January 29,
      2008, SiBiono entrusted Grandall Legal Group Shenzhen Law Firm to issue a
      legal letter to Zhaohui Peng, one of the shareholders of Sibiono and the
      inventor of Gendicine, demanding that he transfer all the title of patents
      to SiBiono.




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:




23


Countries
      /
                  
                  
                  Application
                  
                  Publication
                  
                  Approved
      Patent
                  
                  Name of
      Patent
                  
                  Name
      of
                  
                  PatentItem
                  
                  Patent
      name
                  
                  Date
                  
                  
                  Number
      (1)
                  
                  Number
      (2)
                  
                  Number
      (3)
                  
                  Inventor
      (6)
                  
                  Applicant
      (6)
                  
                  Assignees1
                  
                  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 a human 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)
                  
                  5
                  
                  WO2004/078987A1
                  
                  Not
      Approved
                  
                  Peng
      / Zhang
                  
                  Peng
      / Zhang
                  
                  N/ADate
                  
                  
                  2004/3/8
                  
                  2004/9/16
                  
                  N/A3
                  
                  Recombinant
      gene medicine of adenovirus vector and and 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)
                  
                  8
                  
                  WO2004/104204A1
                  
                  Not
      Approved
                  
                  Peng
      / Zhang
                  
                  Peng
      / Zhang
                  
                  N/ADate
                  
                  
                  2004/5/9
                  
                  2004/12/2
                  
                  N/A4
                  
                  The
      application of recombinant adenoviral p53 as 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)
                  
                  1
                  
                  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)
                  
                  7
                  
                  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 VGEF gene, 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.


24


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





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




3.
            Excalibur Limited Partnership and
      Excalibur Limited Partnership II (the "Plaintiffs") filed a motion for
      summary judgment in lieu of a complaint pursuant to CPLR § 3213 (the
      "Motion") with the Supreme Court of the State of New York (the "Court"),
      alleging that the Company has been delinquent on the payment of an
      aggregate sum of $600,000 and accrued interest and costs arising from the
      Convertible Promissory Notes that were issued to the Plaintiffs in April
      2007 in connection with a $7,560,000 private placement. Pursuant to the
      motion, the Plaintiffs requested that the Court (1) enter summary judgment
      in favor of Excalibur Limited Partnership (“Excalibur Limited”) in the
      amount of $390,000 plus all accrued interest and costs, and, (2) enter
      summary judgment in favor of Excalibur Small Cap Opportunities LP
      (“Excalibur Small Cap”) in the amount of $210,000 and accrued interest and
      costs.  On July 29, 2009, the Court entered a judgment against the
      Company in favor of the Plaintiffs in the amount of $674,251.65 in
      connection with the Convertible Promissory Notes issued to the Plaintiffs
      in April 2007 in a private
placement.





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





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





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





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


25


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





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




None.





Item
3. Defaults Upon Senior Securities.





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





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





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





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





Item
4.  (Removed and Reserved)




Item
5. Other Information.




On
September 26, 2010, Jun Tang submitted a letter of resignation notifying us that
he resigned from the position of Director of the Company, effective September
26, 2010. We accepted Mr. Tang’s resignation on Thursday, October 28,
2010.  Mr. Tang’s resignation was due to personal reasons, and not the
result of any disagreement with the Company or any officers or directors of the
Company.  Our Board of Directors has not yet appointed another
individual to fill the position of Director.


26


Item
6. Exhibits




(a)
              
              Exhibits31.1
              
              Certifications
      pursuant to Section 302 of Sarbanes Oxley Act of 200232.1
              
              Certifications
      pursuant to Section 906 of Sarbanes Oxley Act of
  2002


27


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:
      November 22, 2010
              By:
              /s/ Yiqing WanYiqing
      WanPresident,
      Chief Executive Officer,
                Chief
      Financial and Accounting OfficerChairman
      of Board of
Directors


28