**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB/A**


**(Mark
      One)**




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




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




**or**




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




**For
      the transition period from ______to______.**




**Commission
      file number 0-16397**




**BENDA
      PHARMACEUTICAL, INC.**


(Exact
      name of registrant as specified in its charter)





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




**Room
                13, Floor 25, Sunny New World Tower,**
              **No.
                231 Xin Hua Road, Jianghan District,**
              **Wuhan,
                Hubei, PRC. Post Code: 430015**(Address
                of principal executive offices)
            (Zip
                Code)




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


(Registrant’s
      telephone number, including area code)




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




Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
      period that the issuer was required to file such reports), and (2) has been
      subject to such filing requirements for the past 90 days. Yes xNo o




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




Yes o
      No x




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














**BENDA
      PHARMACEUTICAL, INC.**


**FINANCIAL
      STATEMENTS**




**INDEX**




**PART
      I— FINANCIAL INFORMATION**




Item
                1.
            Financial
                Statements
            3Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition
            5Item
                3.
            Controls
                and Procedures
            12




**PART
      II— OTHER INFORMATION**




Item
                1.
            Legal
                Proceedings
            13Item
                2.
            Changes
                in Securities
            14Item
                3.
            Defaults
                Upon Senior Securities
            14Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            14Item
                5.
            Other
                Information
            15Item
                6.
            Exhibits
                and Reports on Form 8-K
            15**SIGNATURE**
            16


-2-





**Item
      1. Financial Information**




BASIS
      OF
      PRESENTATION





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


-3-


**BENDA
      PHARMACEUTICAL, INC.**


**(an
      exploration stage company)**




**FINANCIAL
      STATEMENTS**




**AS
      OF SEPTEMBER 30, 2007**





**CONTENTS**





PAGE
            F1
            CONDENSED
                BALANCE SHEETS AS OF SEPTEMBER 30, 2007 (UNAUDITED) AND AS OF DECEMBER
                31,
                2006 (AUDITED).PAGE
            F2
            CONDENSED
                STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                2007 AND
                2006 (UNAUDITED).PAGE
            F3
            CONDENSED
                STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                2007 AND
                2006 (UNAUDITED).PAGES
            F4
                - F28
            NOTES
                TO CONDENSED FINANCIAL STATEMENTS
                (UNAUDITED).


-4-


**Benda
      Pharmaceutical, Inc.**


**Consolidated
      Balance Sheets**


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


**September 30**
              
              **December 31****2007**
              
              **2006****(Restated)**
              
              **(Restated)****Assets**
              
              
              **(Unaudited)**Current
                  AssetsCash
                  and cash equivalents
              
              $
              1,351,892
              
              $
              1,676,119Trade
                  receivables, net (Note 5)
              
              
              7,449,634
              
              
              6,193,585Other
                  receivables (Note 5)
              
              
              640,470
              
              
              99,733Refundable
                  purchase price paid (Note 6)
              
              
              1,200,000
              
              
              5,367,801Inventories
                  (Note 7)
              
              
              2,205,498
              
              
              701,339Prepaid
                  expenses and deposits (Note 5)
              
              
              581,003
              
              
              372,548Total
                  current assets
              
              
              13,428,497
              
              
              14,411,125Due
                  from related parties (Note 17)
              
              
              2,592,031
              
              
              1,976,815Long-term
                  loan receivable (Note 17)
              
              
              133,022
              
              
              -Property
                  and equipments, net (Note 8)
              
              
              26,333,187
              
              
              14,096,649Intangible
                  assets, net (Note 9)
              
              
              5,619,892
              
              
              1,569,238Goodwill
                  (Note 10)
              
              
              7,175,913
              
              
              -Restricted
                  cash (Note 11)
              
              
              3,060,365
              
              
              -Debt
                  issue costs (Note 20)
              
              
              394,547
              
              
              -Total
                  Assets
              
              $
              58,737,454
              
              $
              32,053,827**Liabilities
                  & Shareholders' Equity**Current
                  LiabilitiesBank
                  indebtedness (Note 11)
              
              $
              1,218,240
              
              $
              -Bank
                  loans payable (current portion) (Note 12)
              
              
              2,918,768
              
              
              256,492Long
                  term debt payable (current portion) (Note 13)
              
              
              2,357,986
              
              
              -Accounts
                  payable and accrued liabilities (Note 14)
              
              
              2,027,868
              
              
              1,823,030Commercial
                  notes payable
              
              
              3,166,159
              
              
              -Taxes
                  payable
              
              
              816,079
              
              
              226,931SiBiono
                  acquisition price payable (Note 10)
              
              
              1,471,369
              
              
              -Wages
                  payable
              
              
              520,043
              
              
              145,904Deferred
                  revenues
              
              
              2,694
              
              
              1,732Total
                  current liabilities
              
              
              14,499,206
              
              
              2,454,089Long
                  term debt payable (long term portion) (Note 13)
              
              
              412,368
              
              
              -Long-term
                  convertible promissory notes (Note 22)
              
              
              1,923,611
              
              
              -Due
                  to related parties (Long-term) (Note 17)
              
              
              3,159,468
              
              
              3,034,365Total
                  liabilities
              
              
              19,994,653
              
              
              5,488,454Minority
                  interest
              
              
              4,629,489
              
              
              2,178,922Redeemable
                  common stock, 2,049,560 shares at $3.6 per share (Note 18)
              
              
              7,376,366
              
              
              -Shareholders
                  ' EquityPreferred
                  stock, $0.001 par value; 5,000,000 shares authorized;None
                  issued and outstanding
              
              
              -
              
              
              -Common
                  stock, $0.001 par value; 150,000,000 shares authorized;99,766,360
                  shares issued and outstanding as of 9/30/2007;96,258,411
                  shares issued and outstanding as of 12/31/2006
              
              
              99,766
              
              
              96,258Additional
                  paid in capital (Note 23)
              
              
              21,324,277
              
              
              13,099,424Retained
                  earnings (unrestricted)
              
              
              634,882
              
              
              7,904,434Statutory
                  surplus reserve fund (Note 16)
              
              
              1,869,523
              
              
              1,869,523Accumulative
                  other comprehensive income
              
              
              2,304,638
              
              
              1,090,408Shares
                  issuable for acquisition and services
              
              
              503,860
              
              
              326,403Total
                  Shareholders ' Equity
              
              
              26,736,946
              
              
              24,386,451Total
                  Liabilities & Shareholders ' Equity
              
              $
              58,737,454
              
              $
              32,053,827




The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-1
  **Benda
        Pharmaceutical, Inc.**
 **Consolidated
        Statements of Operations (UNAUDITED)**
 **(Amounts
        expressed in U.S. Dollars)**


**NINE
                        MONTHS ENDED**
                    
                    **THREE
                        MONTHS ENDED****SEPTEMBER
                        30,**
                    
                    **SEPTEMBER
                        30,****2007**
                    
                    **2006**
                    
                    **2007**
                    
                    **2006****(Restated)**
                    
                    **(Restated)**
                    
                    **(Restated)**
                    
                    **(Restated)****(Unaudited)**
                    
                    **(Unaudited)**
                    
                    **(Unaudited)**
                    
                    **(Unaudited)**Revenue
                    
                    $
                    15,796,295
                    
                    $
                    12,365,423
                    
                    $
                    7,559,443
                    
                    $
                    4,726,795Cost
                        of goods sold
                    
                    
                    (8,154,541
                    )
                    
                    (7,030,968
                    )
                    
                    (3,818,427
                    )
                    
                    (2,813,748
                    )Gross
                        profit
                    
                    
                    7,641,754
                    
                    
                    5,334,455
                    
                    
                    3,741,016
                    
                    
                    1,913,047Selling
                        expenses
                    
                    
                    (675,013
                    )
                    
                    (421,646
                    )
                    
                    (330,127
                    )
                    
                    (142,127
                    )General
                        and administrative expensesAmortization
                        of intangible assets
                    
                    
                    (89,107
                    )
                    
                    (76,390
                    )
                    
                    (33,888
                    )
                    
                    (20,321
                    )Amortization
                        of debt issue costs
                    
                    
                    (134,653
                    )
                    
                    -
                    
                    
                    (67,384
                    )
                    
                    -Depreciation
                    
                    
                    (175,270
                    )
                    
                    (50,553
                    )
                    
                    38,986
                    
                    
                    (21,180
                    )Bad
                        debts
                    
                    
                    (502,273
                    )
                    
                    (417,823
                    )
                    
                    274,586
                    
                    
                    553,683Director
                        remuneration
                    
                    
                    (58,959
                    )
                    
                    -
                    
                    
                    (25,014
                    )
                    
                    -Penalty
                        to investors
                    
                    
                    (540,000
                    )
                    
                    -
                    
                    
                    (420,000
                    )
                    
                    -Finder
                        fee
                    
                    
                    (291,124
                    )
                    
                    -
                    
                    
                    (51,161
                    )
                    
                    -Cash
                        bonus
                    
                    
                    (173,400
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -Consulting
                        and professional fees (Note 18)
                    
                    
                    (8,222,184
                    )
                    
                    -
                    
                    
                    (339,768
                    )
                    
                    -Other
                        general and administrative expenses (Note 19)
                    
                    
                    (1,801,814
                    )
                    
                    (391,632
                    )
                    
                    (827,675
                    )
                    
                    (115,271
                    )Total
                        general and administrative expenses
                    
                    
                    (11,988,784
                    )
                    
                    (936,398
                    )
                    
                    (1,451,318
                    )
                    
                    396,911Gains
                        / (losses) on disposals of fixed assets
                    
                    
                    (8,398
                    )
                    
                    (248,209
                    )
                    
                    6,533
                    
                    
                    (715
                    )Research
                        and development expenses
                    
                    
                    (310,084
                    )
                    
                    (33,138
                    )
                    
                    (212,965
                    )
                    
                    (26,907
                    )Total
                        operating expenses
                    
                    
                    (12,982,279
                    )
                    
                    (1,639,391
                    )
                    
                    (1,987,877
                    )
                    
                    227,162Operating
                        income / (loss)
                    
                    
                    (5,340,525
                    )
                    
                    3,695,064
                    
                    
                    1,753,139
                    
                    
                    2,140,209Interest
                        expense
                    
                    
                    (2,207,878
                    )
                    
                    (118,674
                    )
                    
                    (1,141,472
                    )
                    
                    (39,437
                    )Other
                        income (expenses)
                    
                    
                    113,364
                    
                    
                    (1,434
                    )
                    
                    8,275
                    
                    
                    (2,538
                    )Government
                        subsidies / grants (Note 20)
                    
                    
                    1,690,974
                    
                    
                    -
                    
                    
                    1,417,859
                    
                    
                    -Income
                        / (loss) before minority interest and income taxes
                    
                    
                    (5,744,065
                    )
                    
                    3,574,956
                    
                    
                    2,037,801
                    
                    
                    2,098,234Income
                        taxes (Note 21)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Minority
                        interest
                    
                    
                    (1,525,487
                    )
                    
                    (240,126
                    )
                    
                    (1,058,871
                    )
                    
                    (150,237
                    )Net
                        income / (loss)
                    
                    $
                    (7,269,552
                    )
                    $
                    3,334,830
                    
                    $
                    978,930
                    
                    $
                    1,947,997Earnings
                        / (loss) per share - basic
                    
                    $
                    (0.08
                    )
                    $
                    0.05
                    
                    $
                    0.01
                    
                    $
                    0.03Weighted
                        average shares outstanding - basic
                    
                    
                    96,872,524
                    
                    
                    70,259,331
                    
                    
                    97,359,178
                    
                    
                    70,296,573Earnings
                        / (loss) per share - diluted
                    
                    $
                    (0.06
                    )
                    $
                    0.05
                    
                    $
                    0.01
                    
                    $
                    0.03Weighted
                        average shares outstanding - diluted
                    
                    
                    125,103,425
                    
                    
                    70,259,331
                    
                    
                    131,377,347
                    
                    
                    70,296,573




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


F-2


**Benda
      Pharmaceutical, Inc.**


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


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




**NINE MONTHS ENDED SEPTEMBER 30,****2007**
              
              **2006****(Restated)**
              
              **(Restated)****(Unaudited)**
              
              **(Unaudited)****Cash
                  Flows From Operating Activities**Net
                  income / (loss)
              
              $
              (7,269,552
              )
              $
              3,334,830Adjustments
                  to reconcile net income / (loss) to net cash provided byoperating
                  activities:Redeemable
                  common stock issuable for services (Note 18)
              
              
              8,222,184
              
              
              -Bad
                  Debt provision
              
              
              502,273
              
              
              417,823Minority
                  interest
              
              
              1,525,487
              
              
              240,126Loss
                  on disposals of fixed assets
              
              
              8,398
              
              
              248,209Depreciation
              
              
              608,108
              
              
              106,296Amortization
                  of intangible assets
              
              
              291,855
              
              
              143,211Amortization
                  of debt issue costs (Note 22)
              
              
              134,653
              
              
              -Interest
                  expense (amortization of debt discount) (Note 22)
              
              
              1,923,611
              
              
              -Government
                  subsidy income (Note 20)
              
              
              (1,690,974
              )
              
              -Changes
                  in operating assets and liabilities:Trade
                  receivables
              
              
              (1,547,577
              )
              
              (2,149,051
              )Other
                  receivables
              
              
              126,535
              
              
              (4,883
              )Prepaid
                  expenses and deposits
              
              
              (208,455
              )
              
              (136,500
              )Inventories
              
              
              (797,918
              )
              
              (708,311
              )Accounts
                  payable and accrued liabilities
              
              
              (442,978
              )
              
              85,362Others
                  payable
              
              
              -
              
              
              -Taxes
                  payable
              
              
              404,427
              
              
              (60,257
              )**Net
                  cash provided by operating activities**
              
              
              1,790,077
              
              
              1,516,855**Cash
                  Flows From Investing Activities**Acquisition
                  cost paid
              
              
              (2,471,568
              )
              
              -Purchases
                  of property and equipment
              
              
              (4,886,889
              )
              
              (882,402
              )Purchases
                  of intangible assets
              
              
              (2,173,711
              )
              
              (708,554
              )Loans
                  to related parties, net
              
              
              (629,960
              )
              
              123,946**Net
                  cash used in investing activities**
              
              
              (10,162,128
              )
              
              (1,467,010
              )**Cash
                  Flows From Financing Actives**Proceeds
                  from issuance of convertible promissory note (Note 22)
              
              
              7,030,800
              
              
              -Proceeds
                  and repayments of borrowings under related parties, net
              
              
              (222,198
              )
              
              354,518Proceeds
                  and repayments of borrowings under government debts payable, net
              
              
              484,708
              
              
              -Proceeds
                  and repayments of borrowing under commercial bank notes,net
              
              
              1,378,451
              
              
              -Proceeds
                  and repayments of borrowings under bank loans, net
              
              
              (596,760
              )
              
              (58,280
              )**Net
                  cash provided by (used in) financing activities**
              
              
              8,075,001
              
              
              296,238Effect
                  of exchange rate changes on cash
              
              
              (27,177
              )
              
              -**Net
                  increase in cash and cash equivalents**
              
              
              (324,227
              )
              
              346,083**Cash
                  and cash equivalents, beginning of period**
              
              
              1,676,119
              
              
              308,082**Cash
                  and cash equivalents, end of period**
              
              $
              1,351,892
              
              $
              654,165**Supplemental
                  Disclosure of Cash Flow Information****Cash
                  paid for interest**
              
              $
              98,430
              
              $
              113,366**Cash
                  paid for income taxes**
              
              $
              -
              
              $
              -




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


F-3


**Benda
      Pharmaceutical, Inc.**


**Notes
      to Consolidated Financial Statements**


(Amounts
      and Disclosures at and for the Three and Nine Months Ended September 30, 2007
      and 2006 are Unaudited)




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




**1.**
            **Restatement
                of Previously Issued Financial
                Statements**


Benda’s
      previously issued financial statements are being restated as a result of an
      internal review of its previously issued financial statements, which review
      was
      prompted by an SEC comment during its review of the Company’s Form S-1 filing.
      After a review of the comment and further analysis, Benda determined that it
      incorrectly calculated its depreciation and amortization expense. Benda also
      believes such restatements reflect the correction of any errors and omissions
      of
      material disclosures in the financial statements in accordance with SFAS 154:
      Accounting changes and error corrections (as amended).




The
      following are explanations of the restatement adjustments and presentation
      of
      affected accounts in the consolidated balance sheet and statement of operations
      as previously reported and restated.




**Statements
      of Operations for the nine months ended September 30, 2007 and
      2006**




The
      Company restated its previously recognized Depreciation expense by ($925,795)
      and ($423,983) for the nine months ended September 30, 2007 and 2006 due to
      incorrect calculation of depreciation expense previously
      reported.




The
      Company restated its previously recognized Amortization expense by ($342,671)
      and ($194,027) for the nine months ended September 30, 2007 and 2006 due to
      incorrect calculation of amortization expense previously
      reported.




**Balance
      Sheets September 30, 2007 and 2006**




Adjustments
      were made to Property and Equipment, net and Intangible assets, net and Retained
      (deficit) earnings unrestricted to reflect the restatement of the statements
      of
      operations.




The
      consolidated financial statements as of September 30, 2007 and 2006 and for
      the
      ended September 30, 2007 and 2006 and the notes thereto, have been restated
      to
      include the items identified above. The following financial statement line
      items
      were impacted:




**Consolidated
      Balance Sheet**


As PreviouslyReported
              
              RestatedNine Months Ended
              
              Nine Months EndedSeptember 30,
              
              September 30,2007
              
              2007Property
                  and equipments, net
              
              $
              25,591,918
              
              $
              26,333,187Intangible
                  assets, net
              
              
              5,501,321
              
              
              5,619,892Retained
                  (deficit) earnings unrestricted
              
              $
              (181,966
              )
              $
              634,882


F-4




**Consolidated
      Statement of Operations**




As
                    Previously
                
                
                
                As
                    PreviouslyReported
                
                Restated
                
                Reported
                
                RestatedNine Months Ended
                
                Nine Months Ended
                
                Three Months Ended
                
                Three Months EndedSeptember
                    30,
                
                September
                    30,
                
                September
                    30,
                
                September
                    30,2007
                
                2007
                
                2007
                
                2007Cost
                    of good solds
                
                $
                (8,523,044
                )
                $
                (8,154,541
                )
                $
                (3,941,262
                )
                $
                (3,818,427
                )As
                    included in General and administrative expensesDepreciation
                    expense
                
                $
                (175,270
                )
                $
                (175,270
                )
                $
                38,986
                
                $
                38,986Amortization
                    expense
                
                
                (89,107
                )
                
                (89,107
                )
                
                (33,888
                )
                
                (33,888
                )Total
                    operating expense
                
                
                (12,982,279
                )
                
                (12,982,279
                )
                
                (1,987,877
                )
                
                (1,987,877
                )Operating
                    income / (loss)
                
                
                (5,709,028
                )
                
                (5,340,525
                )
                
                1,630,304
                
                
                1,753,139Income
                    / (loss) before minority interest and income taxes
                
                
                (6,112,568
                )
                
                (5,744,065
                )
                
                1,914,966
                
                
                2,037,801Net
                    income / (loss)
                
                
                (7,619,629
                )
                
                (7,269,552
                )
                
                862,240
                
                
                978,930Earnings
                    / (loss) per share - basic
                
                
                (0.08
                )
                
                (0.08
                )
                
                0.01
                
                
                0.01Earnings
                    / (loss) per share - diluted
                
                $
                (0.06
                )
                $
                (0.06
                )
                $
                0.01
                
                $
                0.01




**Consolidated
      Balance Sheet**


As
                  PreviouslyReported
              
              RestatedNine Months Ended
              
              Nine Months EndedSeptember
                  30,
              
              September
                  30,2006
              
              2006Property
                  and equipments, net
              
              $
              11,307,075
              
              $
              11,624,762Intangible
                  assets, net
              
              
              1,529,450
              
              
              1,580,266Retained
                  (deficit) earnings unrestricted
              
              $
              8,736,316
              
              $
              9,086,396




**Consolidated
      Statement of Operations**




As
                    Previously
                
                
                
                As
                    PreviouslyReported
                
                Restated
                
                Reported
                
                RestatedNine Months Ended
                
                Nine Months Ended
                
                Three Months Ended
                
                Three Months EndedSeptember
                    30,
                
                September
                    30,
                
                September
                    30,
                
                September
                    30,2006
                
                2006
                
                2006
                
                2006Cost
                    of good solds
                
                $
                (7,399,471
                )
                $
                (7,030,968
                )
                $
                (2,936,583
                )
                $
                (2,813,748
                )As
                    included in General and administrative expensesDepreciation
                    expense
                
                $
                (50,553
                )
                $
                (50,553
                )
                $
                (21,180
                )
                $
                (21,180
                )Amortization
                    expense
                
                
                (76,390
                )
                
                (76,390
                )
                
                (20,321
                )
                
                (20,321
                )Total
                    operating expense
                
                
                (1,639,391
                )
                
                (1,639,391
                )
                
                227,162
                
                
                227,162Operating
                    income / (loss)
                
                
                3,326,561
                
                
                3,695,064
                
                
                2,017,374
                
                
                2,140,209Income
                    / (loss) before minority interest and income taxes
                
                
                3,206,453
                
                
                3,574,956
                
                
                1,975,399
                
                
                2,098,234Net
                    income / (loss)
                
                
                2,984,750
                
                
                3,334,830
                
                
                1,831,304
                
                
                1,947,997Earnings
                    / (loss) per share - basic
                
                
                0.04
                
                
                0.05
                
                
                0.03
                
                
                0.03Earnings
                    / (loss) per share - diluted
                
                $
                0.04
                
                $
                0.05
                
                $
                0.03
                
                $
                0.03




**2.**
            **Organization**


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




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




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


F-5




Altogether,
      the total consideration for 60.13% shares of SiBiono’s common stock was Rmb62.56
      million or $8.22 million. As of September 30, 2007, an accumulated amount,
      approximately Rmb51.50 million or $6.69 million was paid and leaving a balance
      approximately $1.47 million (see Note 10 for the details).




As
      of
      September 30, 2007, the organization and ownership structure of the Group is
      as
      follows:




BENDA PHARMACEUTICAL, INC.




**3.**
            **Significant
                Accounting Policies**





**Cash
      and Cash Equivalents**


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




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





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





As
      of
      September 30, 2007 and 2006, the Company provided a $1,138,503 and $517,350
      respectively for the allowance of doubtful accounts against trade receivables,
      other receivables and prepaid and deposits (please refer to Note 5 for details).
      Management's estimate of the appropriate allowance on those accounts receivable
      for the reporting periods was based on the aged nature of these accounts. In
      making its judgment, management assessed its customers' ability to continue
      to
      pay their outstanding invoices and the collectibility of those accounts on
      a
      timely basis, and whether their financial position might deteriorate
      significantly in the future, which would result in their inability to pay their
      debts to the Company.





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


F-6


For
      the
      nine months ended September 30, 2007 and 2006, the Company provided a reserve
      against its work-in-progress amounting to $4,110,409 and none respectively.
      The
      reserve was raised due to the fact that most of the original liquid, a liquid
      element o produce Gendicine, was produced in the year of 2004 and this
      particular liquid can only be stored for approximately five years, therefore
      a
      reserve was provide against the work-in-progress (see Note 7). However, no
      reserve for obsolete, slow-moving or non-salable inventory was required for
      the
      reporting periods.




**Property
      and Equipment**


Property
      and equipment are recorded at cost and depreciated using the straight-line
      method, with an estimated 5% salvage value of original cost, over the estimated
      useful lives of the assets as follows:


Buildings
              20-30yearsMachinery
                  and equipment
              10-15
                  yearsMotor
                  Vehicles
              5
                  yearsElectronics
                  and office equipment
              5
                  years


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




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




**Impairment
      of Long-Lived Assets**


The
      Company evaluates potential impairment of long-lived assets, in accordance
      with
      Statement of Financial Accounting Standards (“SFAS”) No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      which
      requires the Company to (a) recognize an impairment loss only if the carrying
      amount of a long-lived asset is not recoverable from its undiscounted cash
      flows
      and (b) measure an impairment loss as the difference between the carrying amount
      and fair value of the asset. The Company believes that long-lived assets in
      the
      accompanying consolidated balance sheets are appropriately valued at September
      30, 2007 and 2006.




**Intangible
      Assets**


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




**Revenue
      Recognition**


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


1.       Persuasive evidence of an arrangement
      exists;


2.       Delivery has occurred or services have
      been rendered;


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


4.       Collectibility is reasonably
      assured.





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


F-7




**Research
      and Development**


Research
      and development costs are expensed as incurred and consist primarily of salaries
      and related expenses of personnel engaged in research and development
      activities. The Company spent $310,084 and $33,138 on direct research and
      development (“R&D”) efforts for the nine months ended September 30, 2007 and
      2006, respectively.







**Income
      Taxes**


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




**Comprehensive
      Income**


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




**Concentration
      of Credit Risk**


A
      significant portion of the Company's cash at quarter ended September 30, 2007
      and 2006 is maintained at various financial institutions in the PRC which do
      not
      provide insurance for amounts on deposit.




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




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




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




NINE MONTHS ENDED SEPTEMBER 30,
                
                THREE MONTHS ENDED SEPTEMBER 30,2007
                
                2006
                
                2007
                
                2006(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)Revenue
                
                $
                15,796,295
                
                
                %
                
                $
                12,365,423
                
                
                %
                
                $
                7,559,443
                
                
                %
                
                $
                4,726,795
                
                
                %*Individual
                    customer's revenue*Zhuhai
                    Gongbei Pharmaceutical Co, Ltd.
                
                
                2,926,070
                
                
                19
                %
                
                1,919,106
                
                
                16
                %
                
                1,071,841
                
                
                14
                %
                
                369,653
                
                
                8
                %Jiangxi
                    Huiren Pharmaceutical Co. Ltd.
                
                
                1,831,311
                
                
                12
                %
                
                1,759,774
                
                
                14
                %
                
                476,851
                
                
                6
                %
                
                590,273
                
                
                12
                %Shenzhen
                    Huihua Pharmaceutical Co. Ltd.
                
                
                1,983,733
                
                
                13
                %
                
                1,840,557
                
                
                15
                %
                
                752,449
                
                
                10
                %
                
                707,565
                
                
                15
                %Shenyang
                    Pharmaceutical Co. Ltd.
                
                
                1,758,171
                
                
                11
                %
                
                1,633,459
                
                
                13
                %
                
                629,027
                
                
                8
                %
                
                670,733
                
                
                14
                %Guangdong
                    Shaoqing Xinghu Technology Development Co. Ltd.
                
                
                110,460
                
                
                1
                %
                
                1,035,539
                
                
                8
                %
                
                484
                
                
                0
                %
                
                301,538
                
                
                6
                %Shenzhen
                    Sailede Bio-Tech. Development Co. Ltd.
                
                
                95,828
                
                
                1
                %
                
                901,898
                
                
                7
                %
                
                420
                
                
                0
                %
                
                248,441
                
                
                5
                %Hubei
                    Jiuzhoutong Pharmaceutical Co. Ltd
                
                
                1,174,584
                
                
                7
                %
                
                -
                
                
                0
                %
                
                893,623
                
                
                12
                %
                
                -
                
                
                0
                %Auhui
                    Huayuen Pharmaceutical Co. Ltd.
                
                
                1,136,774
                
                
                7
                %
                
                413,078
                
                
                3
                %
                
                956,129
                
                
                13
                %
                
                413,078
                
                
                9
                %Account
                    receivable, gross
                
                $
                7,079,790
                
                
                %
                
                $
                5,658,475
                
                
                %
                
                $
                7,079,790
                
                
                %
                
                $
                5,658,475
                
                
                %*Individual
                    customer's account receivable gross balance*Zhuhai
                    Gongbei Pharmaceutical Co, Ltd.
                
                
                762,854
                
                
                11
                %
                
                300,208
                
                
                5
                %
                
                762,854
                
                
                11
                %
                
                300,208
                
                
                5
                %Jiangxi
                    Huiren Pharmaceutical Co. Ltd.
                
                
                675,836
                
                
                10
                %
                
                679,804
                
                
                12
                %
                
                675,836
                
                
                10
                %
                
                679,804
                
                
                12
                %Shenzhen
                    Huihua Pharmaceutical Co. Ltd.
                
                
                1,084,825
                
                
                15
                %
                
                759,029
                
                
                13
                %
                
                1,084,825
                
                
                15
                %
                
                759,029
                
                
                13
                %Shenyang
                    Pharmaceutical Co. Ltd.
                
                
                856,113
                
                
                12
                %
                
                693,146
                
                
                12
                %
                
                856,113
                
                
                12
                %
                
                693,146
                
                
                12
                %Guangdong
                    Shaoqing Xinghu Technology Development Co. Ltd.
                
                
                276,674
                
                
                4
                %
                
                637,216
                
                
                11
                %
                
                276,674
                
                
                4
                %
                
                637,216
                
                
                11
                %Shenzhen
                    Sailede Bio-Tech. Development Co. Ltd.
                
                
                212,818
                
                
                3
                %
                
                297,131
                
                
                5
                %
                
                212,818
                
                
                3
                %
                
                297,131
                
                
                5
                %Hubei
                    Jiuzhoutong Pharmaceutical Co. Ltd
                
                
                158,642
                
                
                2
                %
                
                117,430
                
                
                2
                %
                
                158,642
                
                
                2
                %
                
                117,430
                
                
                2
                %Auhui
                    Huayuen Pharmaceutical Co. Ltd.
                
                
                488,795
                
                
                7
                %
                
                519,138
                
                
                9
                %
                
                488,795
                
                
                7
                %
                
                519,138
                
                
                9
                %


F-8




**Basic
      and Diluted Earnings Per Share**




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





**Foreign
      Currency Translation**


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




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




The
      exchange rates in effect at September 30, 2007 and 2006 were stated as follows:
      (for RMB 1.00):





September
                30,
            
            September
                30,2007
            
            2006Fixed
                rate
            
            $
            0.1330
            
            $
            0.1266Average
                rate
            
            $
            0.1303
            
            $
            0.1250




In
      the
      nine months and three months ended September 30, 2007, the foreign exchange
      losses were $13,702 and $45,684 respectively.




**Fair
      Value of Financial Instruments**


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




**Recent
      Accounting Pronouncements**


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




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


F-9




**Recently
      Adopted Accounting Pronouncements**


SFAS
      No. 123R, *Share-Based
      Payment, an Amendment of SFAS No. 123* ,
      was
      issued in December 2004 and was effective as of the beginning of the
      Company’s 2006 fiscal year. SFAS No. 123R requires all share-based payments
      to qualified individuals, including grants of employee stock options, to be
      recognized as compensation expense in the financial statements based on their
      grant date fair values.




**Interim
      Financial Information**




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




**4.**
            **Basis
                of Preparation**


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




**Use
      of Estimates**


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




**5.**
            **Trade
                Trade Receivables, Other Receivables and Prepaid and Deposits - Allowance
                for Doubtful Debts**




As
      mentioned in Note 4 that the company estimates of the appropriate allowance
      on those
      accounts receivable for the reporting periods was based on the aged nature
      of
      these accounts. The table below shows the allowance for doubtful debts of the
      Company’s trade receivables, other receivables and prepaid and deposit as of
      September 30, 2007 and 2006:


F-10





September
                  30,
              
              September
                  30,2007
              
              2006(Unaudited)
              
              (Unaudited)Trade
                  receivables, gross
              
              $
              8,218,293
              
              $
              6,175,826Allowance
                  for doubtful debts
              
              
              (768,659
              )
              
              (517,350
              )Trade
                  receivables, net
              
              $
              7,449,634
              
              $
              5,658,476
  September
                  30,
              
              September
                  30,2007
              
              2006(Unaudited)
              
              (Unaudited)Other
                  receivables, gross
              
              $
              672,087
              
              $
              -Allowance
                  for doubtful debts
              
              
              (31,617
              )
              
              -Other
                  receivables, net
              
              $
              640,470
              
              $
              -
  September
                  30,
              
              September
                  30,2007
              
              2006(Unaudited)
              
              (Unaudited)Prepaid
                  expenses and deposits, gross
              
              $
              919,230
              
              $
              -Allowance
                  for doubtful debts
              
              
              (338,227
              )
              
              -Prepaid
                  expenses and deposits, net
              
              $
              581,003
              
              $
              -




The
      allowance for debts for the Company’s trade receivables, other receivables,
      prepaid expenses and deposit for the nine months ended September 30, 2007 and
      2006 are comprised as follows:


NINE MONTHS ENDED SEPTEMBER 30,2007
              
              2006(Unaudited)
              
              (Unaudited)Balance
                  at beginning of period
              
              $
              (467,015
              )
              $
              (92,014
              )Provision
                  during the year
              
              
              (502,273
              )
              
              (417,823
              )Addition
                  in lieu of acquisition of SiBiono
              
              
              (118,288
              )
              
              -Foreign
                  exchange difference
              
              
              (50,927
              )
              
              (7,513
              )Balance
                  at end of period
              
              $
              (1,138,503
              )
              $
              (517,350
              )




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




On,
      December 7, 2006, Benda Ebei paid approximately $1.2 million to SECO (Shenzhen)
      Biotech Co., Ltd. (“SECO”) pursuant to a purchase agreement signed between SECO
      and Benda Ebei on December 3, 2006 to acquire a technology know-how and drug
      specifications / technical parameters in producing a Gastropathy drug owned
      by
      SECO. As of quarter ended September 30, 2007, the deal has not been closed
      as
      the product certificate still not received from FDA of United States of America
      and the amount paid is refundable per agreement if such approval is not
      obtained.




**7.**
            **Inventories**




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





September 30, 2007
              
              December 31, 2006(Unaudited)Raw
                  materials
              
              $
              1,010,338
              
              $
              311,064Packing
                  materials
              
              
              200,697
              
              
              80,639Other
                  materials / supplies
              
              
              89,914
              
              
              -Finished
                  goods
              
              
              535,789
              
              
              309,637Work-in-progress
              
              
              4,479,169
              
              
              -Total
                  inventories at cost
              
              
              6,315,907
              
              
              701,339Less:
                  Reserves on work-in-progress
              
              
              (4,110,409
              )
              
              -Total
                  inventories, net
              
              $
              2,205,498
              
              $
              701,339





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





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





BENDA PHARMACEUTICAL, INC.





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





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





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


F-11





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





After
      the
      acquisition with the effective date April 1, 2007, the same accounting treatment
      was adopted for the treatment of the provision of reserve on work in progress.
      As of September 30, 2007, the provision of reserve on work in progress was
      $4,110,409.





No
      reserve for obsolete, slow-moving or non-salable inventory were required at
      year
      ended December 31, 2006, and an amount $4,110,409 was made a reserve on
      work-in-progress at quarter ended September 30, 2007.





**8.**
            **Property
                and Equipment (Restated)**




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


ForeignDecember 31, 2006
              
              Addition
              
              Disposal
              
              Currency
                  Translation
                  Difference
              
              September 30, 2007(Unaudited)Buildings
              
              $
              2,227,710
              
              
              223,468
              
              
              -
              
              
              182,319
              
              $
              2,633,497Machinery
                  and equipment
              
              
              3,941,187
              
              
              7,271,852
              
              
              (290,142
              )
              
              457,519
              
              
              11,380,416Office
                  equipment
              
              
              10,672
              
              
              14,264
              
              
              (486
              )
              
              (4,846
              )
              
              19,604Motor
                  Vehicles
              
              
              32,971
              
              
              60,827
              
              
              -
              
              
              3,857
              
              
              97,655Cost
              
              
              6,212,540
              
              
              7,570,411
              
              
              (290,628
              )
              
              638,849
              
              
              14,131,172Less:
                  Accumulated DepreciationBuildings
              
              $
              (778,238
              )
              
              (55,417
              )
              
              -
              
              
              (35,734
              )
              $
              (869,389
              )Machinery
                  and equipment
              
              
              (1,512,562
              )
              
              (515,784
              )
              
              102,026
              
              
              (82,904
              )
              
              (2,009,224
              )Office
                  equipment
              
              
              (2,748
              )
              
              (9,304
              )
              
              60
              
              
              982
              
              
              (11,010
              )Motor
                  Vehicles
              
              
              (7,129
              )
              
              (27,604
              )
              
              -
              
              
              (845
              )
              
              (35,578
              )Accumulated
                  Depreciation
              
              
              (2,300,678
              )
              
              (608,109
              )
              
              102,086
              
              
              (118,501
              )
              
              (2,925,201
              )Construction
                  in progress
              
              $
              10,184,787
              
              
              4,469,109
              
              
              -
              
              
              473,320
              
              $
              15,127,216Total
                  property and equipment, net
              
              $
              14,096,649
              
              
              11,431,411
              
              
              (188,542
              )
              
              993,668
              
              $
              26,333,187




The
      table
      above shows the fixed assets movement during the year of 2007. In which, the
      net
      book value of SiBiono’s fixed assets was recorded as the addition in the year of
      2007 when the acquisition was taken place and effective on April 1, 2007. The
      accumulated depreciation from SiBiono as of March 31, 2007 was not carried
      forward. As of March 31, 2007, the net book value of SiBiono’s fixed assets was
      approximately $6.9 million, in which $183K was accounted for buildings; $1.6
      million was accounted for machinery and equipment; $5.7K was accounted for
      office equipment; $18.5K was accounted for motor vehicles; and $5.1 million
      was
      accounted for construction in progress at original cost.




As
      mentioned in Note 11, Benda Ebei entered into a commercial bank note issuance
      agreement with the Shanghai Pudong Development Bank (“Pudong Bank’) on August
      14, 2007 and this credit facility is guaranteed by SiBiono and secured by the
      buildings, machinery and equipment of Benda Ebei. As of September 30, 2007,
      the
      ner book value of secured property and equipment was approximately Rmb 71.37
      million (or $9.49 million).




The
      deprecation expense for the nine months ended September 30, 2007 was calculated
      as follows:


F-12





Original
                CostDecember 31,
            
            September 30,2006
            
            2007
            
            Average
            
            Salvage
            
            Estimated
            
            Depreciation
            
            Deprecation(Unaudited)
            
            
            
            Value
            
            Useful lives
            
            Calculated
            
            Reported
            
            DifferenceBuilding
            
            $
            2,227,710
            
            
            2,633,497
            
            
            2,430,604
            
            
            5
            %
            
            25
            
            $
            69,272
            
            
            55,417
            
            
            13,855Property
                and equipment
            
            
            3,941,187
            
            
            11,380,416
            
            
            7,660,802
            
            
            5
            %
            
            13
            
            
            436,666
            
            
            515,784
            
            
            (79,118
            )Office
                equipment
            
            
            10,672
            
            
            19,604
            
            
            15,138
            
            
            5
            %
            
            5
            
            
            2,157
            
            
            9,304
            
            
            (7,147
            )Motor
                vehicle
            
            
            32,971
            
            
            97,655
            
            
            65,313
            
            
            5
            %
            
            5
            
            
            9,307
            
            
            27,604
            
            
            (18,297
            )Total
                property and equipments
            
            $
            6,212,540
            
            
            14,131,172
            
            
            10,171,856
            
            
            
            
            
            
            
            $
            517,402
            
            
            608,108
            
            
            (90,706
            )





The
      above
      tabl e
      shows
      the calculation of depreciation expenses for the nine months ended Septemebr
      30,
      2007. The difference between the depreciation calculated and depreciation
      reported was due to the changes of foreign exchange translation.




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




The
      total
      depreciation expense was $608,108 and $106,296 for the nine months ended
      September 30, 2007 and 2006, respectively and is broken down as
      follows:


September
                  30,
              
              September
                  30,2007
              
              2006(Unaudited)
              
              (Unaudited)Cost
                  of sales
              
              $
              432,838
              
              $
              55,743Operating
                  expense
              
              
              175,270
              
              
              50,553Total
                  depreciation expense
              
              $
              608,108
              
              $
              106,296




**9.**
            **Intangible
                Assets (Restated)**




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


Foreign CurrencyDecember
                  31, 2006
              
              Addition
              
              Translation
                  Difference
              
              September 30, 2007(Unaudited)Land-use
                  rights
              
              $
              1,068,036
              
              
              1,130,466
              
              
              83,893
              
              $
              2,282,395Drugs
                  permits and licenses
              
              
              1,055,893
              
              
              1,172,522
              
              
              84,109
              
              
              2,312,524Technology
                  formulas
              
              
              679,700
              
              
              260,561
              
              
              30,799
              
              
              971,060Patent
              
              
              -
              
              
              1,602,090
              
              
              33,714
              
              
              1,635,804Cost
              
              
              2,803,630
              
              
              4,165,639
              
              
              232,515
              
              
              7,201,784Less:
                  Accumulated amortizationLand-use
                  rights
              
              
              (136,790
              )
              
              (24,738
              )
              
              (6,321
              )
              
              (167,849
              )Drugs
                  permits and licenses
              
              
              (1,031,392
              )
              
              (81,090
              )
              
              (42,945
              )
              
              (1,155,427
              )Technology
                  formulas
              
              
              (66,210
              )
              
              (56,128
              )
              
              (3,645
              )
              
              (125,983
              )Patent
              
              
              -
              
              
              (129,899
              )
              
              (2,734
              )
              
              (132,633
              )Accumulated
                  amortization
              
              
              (1,234,391
              )
              
              (291,855
              )
              
              (55,645
              )
              
              (1,581,891
              )Total
                  intangible assets, net
              
              $
              1,569,238
              
              
              
              
              
              
              
              $
              5,619,892




The
      table
      above shows the intangible assets movement during the year of 2007. In
      which, the net book value of SiBiono’s intangible assets was recorded as the
      addition in the year of 2007 when the acquisition was taken place and effective
      on April 1, 2007. In other words, the accumulated amortization from SiBiono,
      as
      of March 31, 2007 was not carried forward. As of March 31, 2007, the net book
      value of SiBiono’s intangible assets was approximately $1.97 million, in which
      $353K was accounted for land use rights; $1.62 million was accounted for
      patents.




As
      of
      September 30, 2007, the cost of intangible assets was increased by $4,165,639
      which was mainly composed of the followings:


F-13




a)
            Due
                to the acquisition of SiBiono, two items were included: (1) patent,
                the
                innovation and research results of Genedicine, with cost approximately
                $1.6 million; (2) land use right with a total area 20,574 square
                meters,
                with cost approximately $0.32;




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




c)
            Benda
                Ebei purchased a license for a new drug, which is a kind of anti-virus
                product in nature with total purchase cost Rmb10 million or approximately
                $1.3 million. During the nine months ended as of September 30, 2007,
                an
                amount Rmb9 million or approximately $1.2 million was paid.




d)
            In
                May 2007, SiBiono enter into a co-operation agreement with DNAVEC,
                a
                Japanese gene therapy research institute, Under the terms of the
                agreement, DNAVEC will leverage SiBiono’s proven gene therapy
                manufacturing platform and will transfer the exclusive development
                and
                distribution rights of SeV-Gag in China to SiBiono. The total purchase
                cost Rmb2 million or approximately $0.27 million was paid during
                the nine
                months ended September 30, 2007 for obtaining such exclusive right.




The
      amortization expense for the nine months ended September 30, 2007 was calculated
      as follows:







Original
                CostDecember 31,
            
            September 30,2006
            
            2007
            
            
            
            Estimated
            
            Amortization
            
            Amortization(Unaudited)
            
            Average
            
            Useful lives
            
            Calculated
            
            Reported
            
            DifferenceLand-use
                rights
            
            $
            1,068,036
            
            
            2,282,395
            
            
            1,675,216
            
            
            40
            
            $
            31,410
            
            
            24,738
            
            
            6,672Drugs
                permits and licenses
            
            
            1,055,893
            
            
            2,312,524
            
            
            1,684,209
            
            
            10
            
            
            126,316
            
            
            81,090
            
            
            45,226Technology
                formulas
            
            
            679,700
            
            
            971,060
            
            
            825,380
            
            
            10
            
            
            61,904
            
            
            56,128
            
            
            5,776Patent
            
            
            -
            
            
            1,635,804
            
            
            1,635,804
            
            
            6
            
            
            136,317
            
            
            129,899
            
            
            6,418Total
            
            $
            2,803,630
            
            
            7,201,784
            
            
            5,820,609
            
            
            
            
            $
            355,947
            
            
            291,855
            
            
            64,092





The
      above
      table shows the calculation of amortization expenses for the nine months ended
      September 30, 2007. The difference between the amortization calculated and
      amortization reported was due to the changes of foreign exchange
      translation.




From
      the
      above calculation table, the patent, $1.64 million, was acquired in during
      the
      acquisition of SiBiono. It is amortized over the remaining useful lives, 6
      years, whereas the original useful lives are 10 years.




The
      total
      amortization expense was $291,855 and $143,211 for the nine months ended
      September 30, 2007 and 2006, respectively and is broken down as
      follows:


September
                  30,
              
              September
                  30,2007
              
              2006(Unaudited)
              
              (Unaudited)Cost
                  of sales
              
              $
              202,748
              
              $
              66,821Operating
                  expense
              
              
              89,107
              
              
              76,390Total
                  amortization expense
              
              $
              291,855
              
              $
              143,211




As
      mentioned in Note 8, the original cost used for amortization calculation is
      different from the consolidated original cost. It is due to the fact that when
      Ever Leader acquired Benda Ebei in November 2005, a negative goodwill of
      $7,924,763 was resulted. The negative goodwill was recognized as reduction
      of
      the fair values of acquired fixed assets and intangible assets at $6,836,955
      and
      $1,087,808, respectively. As a result, the consolidated costs of fixed assets
      are reduced by this $6,836,955. The table below shows the reconciliation between
      the total of the original cost of all subsidiaries and the consolidated original
      costs:


F-14


September
                    30,
                
                December
                    31,2007
                
                2006(Unaudited)Original
                    cost of all subsidiaries
                
                $
                8,289,592
                
                $
                3,891,438Less:
                    negative goodwill
                
                
                (1,087,808
                )
                
                (1,087,808
                )Consolidated
                    original cost
                
                $
                7,201,784
                
                $
                2,803,630




**10.**
            **Goodwill
                and Acquisition Cost Payable and Commercial Notes
                Payable**




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




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




The
      total
      consideration for 60.13% shares of SiBiono’s common stock was Rmb62.56 million
      or $8.22 million. As of September 30, 2007, an accumulated amount, approximately
      Rmb51.50 million or $6.75 million was paid and leaving a balance approximately
      $1.47 million.




**11.**
            **Restricted
                Cash and Bank Indebtedness**




The
      Company’s restricted cash
      at
      nine month ended September 30, 2007 and 2006 was comprised as
      follows:


September
                  30,
              
              December
                  31,2007
              
              2006(Unaudited)Deposits
                  for issuance of commercial notes
              
              $
              1,787,708
              
              $
              -Funds
                  from government technology agencies
              
              
              1,272,657
              
              
              -Total
                  restricted cash
              
              $
              3,060,365
              
              $
              -







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




a)
            Duration
                of the agreement is three years;


b)
            It
                is non-interest bearing;


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


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


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


f)
            As
                mentioned in Note 8, this credit facility is guaranteed by SiBiono
                and
                secured by the buildings, machinery and equipment of Benda
                Ebei.


F-15




As
      of
      September 30, 2007, Benda Ebei and Jiangling Benda deposited an amount
      $1,787,708 in Shanghai Pudong Development Bank as
      deposit for the issuance of commercial bank notes. Such deposits will be
      released when the commercial bank notes are cleared. As of September 30, 2007,
      the balance of the commercial bank notes payable was $3,166,159. Thus the net
      commercial bank notes payable was $1,378,451 as of September 30,
      2007.




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




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




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




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




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




Due
      to
      the above reasons, SiBiono relocated the balances of restricted cash from the
      cash and cash equivalents balances with an amount $1,272,657 as of quarter
      ended
      September 30, 2007. However, since the balances of the restricted cash were
      larger than the balance of cash and cash equivalents balances, thus bank
      indebtedness were resulted with an amount $1,218,240 as of September 30,
      2007.




**12.**
            **Bank
                Loans Payable**




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





September 30, 2007
            
            December 31, 2006(Unaudited)Bank
                loans due within one year
            
            $
            2,918,768
            
            $
            256,492Bank
                loans due after one year
            
            
            -
            
            
            -Total
                debt
            
            $
            2,918,768
            
            $
            256,492




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


F-16




At
      September 30, 2007, the Company’s subsidiary, Sibiono, had one outstanding bank
      loan with an amount $2,918,768 which was used primarily to fund construction
      in
      progress projects and for general working capital purposes. This loan carries
      annual interest rate of 6.34% and payable monthly on the 20 th day of
      each month with maturity in 3 years, starting from April 30, 2005 and matures
      on
      April 29, 2008. This loan is considered as a term loan and is not revolving
      or
      renewable. This loan is personal guaranteed by Zhaohui Peng, the Chairman and
      a
      shareholder of SiBiono.




Total
      interest expense paid
      related to the Company’s outstanding bank loans was $98,430 and $46,925 in the
      nine months and three months ended September 30, 2007,
      respectively.




**13.**
            **Long
                Term Debt Payable**




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




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




September 30, 2007
            
            December 31, 2006(Unaudited)Long-term
                debt payable due within one year
            
            $
            2,357,986
            
            $
            -Long-term
                debt payable due after one year
            
            
            412,368
            
            
            -Total
                Debt
            
            $
            2,770,354
            
            $
            -




Even
      though there were $2,357,986 long term debt payable due within one year as
      of
      quarter ended September 30, 2007, because of its non-repayable feature (except
      for the one formed with 3 Nanshan District Technology Funds dated on August
      2,
      2005. The remaining balance of this debt payable was Rmb1,500,000 or $199,533
      and due on August 2, 2006. However, the company has obtained the oral consent
      from the 3 Nanshan District Technology Funds for delaying the payment. The
      final
      due date is the end of year 2007), the obligations will be discharged once
      the
      examination by the various government technology agencies is conducted and
      most
      of the examination will be carried out and completed.




During
      the reporting period ended September 30, 2007, an amount of Rmb12,900,000 or
      $1,690,974,of long term debt payable was discharged and recorded as government
      subsidies, (see Note 20 for the related details).




**14.**
            **Accounts
                Payable and Accrued
                Liabilities**




The Company’s
      accounts payable and accrued liabilities as of September 30, 2007 and December
      31, 2006 were comprised as follows:


September
                  30,
              
              December
                  31,2007
              
              2006(Unaudited)Trade
                  payable
              
              $
              382,352
              
              $
              387,073Deposits
                  paid by customer
              
              
              364,029
              
              
              2,488Accrued
                  liabilities
              
              
              778,684
              
              
              1,165,300Miscellaneous
                  payables
              
              
              502,803
              
              
              268,169Total
                  account payables and accrued liabilities
              
              $
              2,027,868
              
              $
              1,823,030




Among
      of
      the accrued liabilities, an amount $50,055 was accrued for the legal litigation
      fee for the nine months ended September 30, 2007. The litigation was about
      a
      purchase of
      equipment by SiBiono with the total contract amount of Rmb1.73 million or $0.22
      million. According to the judicial decision of the People’s Court (Junior) of
      Lian Yun District of Lian Yun City, PRC dated on April 20, 2007, the supplier
      should return the deposit paid by SiBiono and related interest with the total
      amount Rmb293,376 or approximately $38,000; while SiBiono should compensate
      the
      supplier with a net amount of Rmb398,625 or approximately $50,055.


F-17




According
      to the legal judgment was received on September 21, 2007 from the People’s court
      (Senior) of Lian Yun District of Lian Yun City, PRC that SiBiono had to pay
      off
      the outstanding amount, $50,055.




**15.**
            **Welfare
                and Employment Liabilities**




As
      stipulated by the relevant laws and regulations for enterprises operating in
      the
      PRC, the Company is required to maintain a welfare plan for all of its employees
      who are residents of the PRC. Based on the wages payable and according to the
      labor law of the PRC, the Company accrues 14%, on a monthly basis, for
      employees’ welfare, labor union fees, and education and training programs,
      respectively.




As
      of
      September 30, 2007 and 2006, the company had accrued accumulate approximately
      $520,043 and $112,833, respectively for the employees’ welfare.




**16.**
            **Statutory
                Reserves**




As
      stipulated by the relevant laws and regulations for enterprises operating in
      the
      PRC, the Company is required to make annual appropriations to a statutory
      surplus reserve fund for each of its PRC subsidiaries. Specifically, the Company
      is required to allocate 15% its profits after taxes at the fiscal year end,
      as
      determined in accordance with the PRC accounting standards applicable to the
      Company, to a statutory surplus reserve until such reserve reaches 50% of the
      registered capital of the Company. As of September 30, 2007, and December 31,
      2006, the registered capital of the Company’s PRC subsidiaries was $20,026,617
      and $12,017,575 respectively.




**17.**
            **Related
                Party Transactions and Long Term Loan
                Receivable**




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


September 30, 2007
              
              December 31,2006(Unaudited)Yiqing,
                  WanDue
                  to Ever Leader Holdings Co. Ltd.
              
              $
              529,710
              
              $
              455,275Hubei
                  Benda Science and Technology Co. LtdDue
                  to Yidu Benda Chemicals Co. Ltd.
              
              
              1,457,467
              
              
              1,299,479Due
                  to Ever Leader Holdings Co. Ltd.
              
              
              569,405
              
              
              210,518Xiaozhi
                  ZhangDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              4,932
              
              
              -Pong
                  TsaiohueiDue
                  to Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              1,839
              
              
              -Eric
                  YuDue
                  to Benda Pharmaceutical Inc.
              
              
              231
              
              
              -Feng
                  WangDue
                  to Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              28,447
              
              
              11,543Total
                  due from related parties
              
              $
              2,592,031
              
              $
              1,976,815




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


F-18


September 30, 2007
              
              December 31,2006(Unaudited)Hubei
                  Benda Science and Technology Co. LtdDue
                  from Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd.
              
              $
              144,085
              
              $
              236,205Due
                  from Jiangliang Benda Pharmaceutical Co. Ltd.
              
              
              1,818,402
              
              
              1,833,358Due
                  from Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              3,025
              
              
              -Wei
                  XuDue
                  from Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd.
              
              
              931,153
              
              
              943,865Due
                  from Beijing Shusai Pharyngitis Research Co. Ltd.
              
              
              59,779
              
              
              20,937Yiqing,
                  WanDue
                  from Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd.
              
              
              128,600
              
              
              -Due
                  from Shenzhen SiBiono Gene Tech Co. Ltd.
              
              
              74,424
              
              
              -$
              3,159,468
              
              $
              3,034,365




The
      above
      advances bear no interest and the above loans due to related parties are
      unsecured, non-interest bearing and are not convertible into equity. Long-term
      debts are due on December 31, 2012. Proceeds from the above loans were used
      primarily for general working capital purposes.




A t
      September 30, 2007, there was a long term loan receivable, with an amount
      $133,022 which was advanced to Hua Shen, Deputy General Manager of Sales of
      SiBiono, for the promotion, marketing, and conference activities. This advance
      for the related parties is unsecured, non-interest bearing and the repayment
      period would be 18 months, and starting date was December 29, 2006. This was
      under the normal course of business and those expenses would be settled in
      due
      course.




**18.**
            **Redeemable
                Common Stock Issuable For
                Services**




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




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




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




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


F-19




The
      total
      consulting and professional fees was $8,222,184 and which was composed
      of:




a)
            Since
                the issuance of common shares to Super Pioneer, Wang and Zhang was
                in the
                form of financial and technical consultancy services to be rendered,
                thus
                the corresponding amount $7,882,416 was recorded as consulting and
                professional fees.




b)
            As
                of September 30, 2007, the placement agent, Keating Investment, exercised
                it warrants at a strike price $0.555 per share through the cashless
                arrangement. The amount of warrants being exercised was 612,194,
                thus the
                corresponding amount $339,768 was recorded as consulting and professional
                fees.




**19.**
            **Other
                general and administrative**




For
      the
      reporting periods, nine months ended September 30, 2007 and 2006 and three
      months ended September 30, 2007 and 2006, the amount of other general and
      administrative expenses was $1,801,814, $391,632, $827,675, and $115,271
      respectively. The following table shows the major events that
      included:





NINE
                MONTHS ENDED
              SEPTEMBER
                30,
            
            THREE
                MONTHS ENDED
              SEPTEMBER
                30,2007
            
            2006
            
            2007
            
            2006(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Audit
                and accounting
            
            $
            265,608
            
            $
            64,191
            
            $
            57,670
            
            $
            5,794Legal
                fees
            
            
            199,034
            
            
            -
            
            
            118,357
            
            
            -Advertisment
                expense
            
            
            48,818
            
            
            -
            
            
            33,965
            
            
            -Office
                expenses
            
            
            258,047
            
            
            60,982
            
            
            115,968
            
            
            -Salaries
                and wages
            
            
            482,316
            
            
            132,889
            
            
            257,716
            
            
            39,702Consulting
            
            
            47,054
            
            
            -
            
            
            -
            
            
            -Rent
                & Utilities
            
            
            43,510
            
            
            9,623
            
            
            14,736
            
            
            13,576Investor
                relation, Transfer agent and filing fees
            
            
            92,641
            
            
            -
            
            
            26,788
            
            
            -Travel
                and transportation
            
            
            205,159
            
            
            44,138
            
            
            121,403
            
            
            11,993Miscellaneous
            
            
            159,627
            
            
            79,809
            
            
            81,072
            
            
            44,206Total
                other general & administrative
            
            $
            1,801,814
            
            $
            391,632
            
            $
            827,675
            
            $
            115,271




**20.**
            **Government
                Subsidies / Grants**




As
      mentioned in the note 13, long term debt payable, various technology funds
      were
      obtained from various government technology agencies to support its gene therapy
      research and development activities during the past years and recorded as long
      term debt payable. According to the technology fund agreements, the various
      government technology agencies will examine the results of research and
      development according to the status of the projects. Once the examination is
      taken place, the obligation of a particular debt payable is discharge
      accordingly.




According
      to US GAAP, once the obligation of a particular debt payable is discharged,
      the
      amount of this particular debt payable should be treated as government subsidies
      / grants. During the reporting period ended September 30, 2007, an amount of
      Rmb12,900,000 or $1,690,974 was recognized as government subsidies / grants
      and
      the corresponding debt payable was discharged.




**21.**
            **Income
                Taxes**




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


F-20




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




Benda
      Ebei was registered as a Sino-Foreign Equity Joint Venture on May 26, 2004
      and
      is subject to the tax laws applicable to Sino-Foreign Equity Joint Ventures
      in
      the PRC. Benda Ebei, starting from 2005, is fully exempt from PRC enterprise
      income tax for two years starting from the first profit-making year, followed
      by
      a 50% reduction in income taxes, at 18%, for the following three years,
      commencing from the first profitable year.




Jiangling
      Benda and Yidu Benda are cross-municipal investment entities and enjoy the
      same
      tax treatment as Sino-Foreign Joint Ventures, starting from 2005, and were
      therefore exempt from PRC enterprise income tax for two years starting from
      the
      first profit-making year, followed by a 50% reduction in income taxes, at 18%,
      for the following three years, commencing from the first profitable year.
      Cross-municipal investments entities refer to entities that are incorporated
      in
      one municipal region but have investments in another municipal region.




The
      exemption periods for Benda Ebei, Jiangling Benda and Yidu Benda expired in
      the
      year of 2006, after which they are subject to 50% reduction in income taxes;
      whereas the full income tax rate is 33%. The remaining tax holidays will be
      expired in 2009.




However,
      starting and effective from January 1, 2008, the full income tax rate would
      be
      changed from 33% to 25% according to the new PRC Taxation Regulations.
      Thereafter these subsidiaries will be subject to the regular full income tax
      rate at 25%.




Beijing
      Shusai did not have taxable income for the nine months and three months ended
      September 30, 2007 and 2006.




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




As
      a
      result of the above mentioned taxation scheme , the income taxes payable for
      the
      Company for the nine months and three months ended September 30, 2007 would
      be
      $465,645.




**22.**
            **Long
                Term Convertible Promissory
                Note**





Our
      quarterly financial statements (for the three months and nine months ended
      September 30, 2007) include enhanced note disclosure addressing the fair value
      of the convertible promissory notes and warrants and the appropriate accounting
      treatment for the overall transaction.




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


F-21


In
        March
        and April of 2007, the Company entered into Investment Agreements (“Agreements”)
        with certain accredited and institutional investors (“Investors”) pursuant to
        which the Investors purchased from the Company a total of 252 Units (“Units”),
        resulting in aggregate gross proceeds to the Company $7,560,000, with each
        Unit
        consisting of: (i) a Convertible Promissory Note (“Note”) in the principal
        amount of $30,000 and convertible into 54,087 shares of the Company's common
        stock; and (ii) a Common Stock Warrant (“Warrant”) to acquire 54,087 shares
        of the Company’s common stock at an exercise price of $0.555 per share and
        expiring on November 14, 2011. The Notes are immediately convertible at the
        option of each Investor, bear interest at a rate of 4% per annum, and mature
        on
        March 28, 2009. At September 30, 2007, the aggregate $7,560,000 principal
        balance of the notes remained outstanding and during the nine months and
        three
        months ended September 30, 2007, the Company recorded $148,300 and $76,221,
        respectively of interest expense related to the Notes.


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




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




During
      the nine and three months ended September 30, 2007, the Company recorded
      $1,923,611and $962,626 , respectively, in interest expense related to the
      amortization of the debt discount associated with the Warrants and the debt
      discount associated with the beneficial conversion feature.




The
      Company also incurred $529,200 in placement agent commissions related to the
      issuance of the Notes and Warrants. This amount was recorded by the Company
      as
      debt issue costs and is being amortized over expected term of the Notes. For
      the
      nine and three months ended September 30, 2007, the Company recorded $134,653
      and $67,384, respectively, in amortization expense related to debt issue
      costs.




The
      securities underlying the Notes and Warrants issued to the Investors are also
      subject to the terms of a Make Good Agreement entered into in connection with
      a
      financing the Company executed in November of 2006 (the “Make Good Agreement”).
      The Company further represented to the Investors that its target net income
      for
      fiscal year 2007 (“FY07 Net Income”) will be greater than or equal to $10.0
      million (adjusted for a variety of non-cash charges) (the “Performance
      Threshold”). In the event the Performance Threshold is not attained, the Company
      is required to issue to the Investors a pro rata portion of 1,000,000 shares
      of
      the Company’s common stock for every one (1) cent by which the Company’s
      earnings per share, determined on a fully diluted basis, is less than $0.065.
      In
      our accounting for the Long Term Convertible Promissory Note, our analysis
      of
      the Performance Threshold had no effect because of the cap of the debt
      discounted and beneficial conversion feature as calculated in accordance with
      EITF 98-5.


F-22




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




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




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




Specifically,
      in the event the Registration Statement is not declared effective by August
      15,
      2007 (“Effectiveness Deadline”), we are required to pay to the investors in cash
      an amount equal to 1% of the purchase price paid by each investor for the
      convertible promissory notes and warrants (“Registration Delay Payments”).
      Additionally, for every 30 day period (or part) thereafter that the Registration
      Statement is not declared effective, we are required to continue to make
      Registration Delay Payments, provided that such Registration Delay Payments
      shall not exceed 10% of the purchase price paid by each investor for the
      convertible promissory notes and warrants.




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




In
      accordance with FASB staff position No.. EITF00-19-2 the Company recorded
      $420,000 in Registration Delay Expense of which $240,000 is for the period
      from
      October 1 through November 30, 2007. EITF 00-19-2 requires the Company to record
      the expense when it is probable that the liability has been incurred and the
      amount can be reasonably estimated.




**23.**
            **Common
                Stock, Preferred Stock, Additional Paid-in Capital, Warrants and
                Options**




As
      of
      September 30, 2007 and December 31, 2006, the Group had an aggregate of:




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




(b)
            As
                of December 31, 2006, 96,258,411 shares of common stock were issued
                and
                outstanding, par value $0.001 each; During the reporting period of
                the
                year 2007: (i) 2,189,560 common shares were issued to Super Pioneer,
                Yaojin Wang and Huimin Zhang (see Note 18); (ii) 612,194 common shares
                were issued to placement agent for being exercised their warrants
                (see
                Note 18); and (iii) 706,195 shares were issued to the various consultants
                who rendered services related to the reverse merger and were valued
                at the
                private placement offering price at $0.4622 per share on November
                15,
                2006. Thus, the share of common stock issued and outstanding was
                99,766,360 as of September 30, 2007.


F-23




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


September
                  30,December
                    31,
              
              Events occurred
              
              2007Events
              
              
              2006
              
              
              during the year
              
              
              (Unaudited)To
                  record the changes of par value from $0.01 to $0.001of
                  the outstanding common stock as of 11/17/2005
              
              $
              584,481
              
              
              -
              
              $
              584,481To
                  adjust the par value of outstanding common stock as of 3/31/2006
              
              
              (5,354
              )
              
              -
              
              
              (5,354
              )Waiver
                  of shareholder loan on 9/5/2006
              
              
              2,298,434
              
              
              -
              
              
              2,298,434To
                  eliminate the common stock and additional paid-in capital of the
                  former
                  shellcompany
                  "Applied Spectrum Technologies, Inc." on 11/15/2006
              
              
              16,215,770
              
              
              -
              
              
              16,215,770To
                  eliminate the accumulated deficit of the former shell
                  company"Applied
                  Spectrum Technologies, Inc." on 11/15/2006
              
              
              (16,209,962
              )
              
              -
              
              
              (16,209,962
              )Issuance
                  of common stock, 25,961,760 shares at $0.4622 per share, on 11/15/2006
              
              
              11,974,038
              
              
              -
              
              
              11,974,038Issuance
                  of common stock, 64,942,369 shares at $0.001 per share on 11/15/2006
              
              
              (64,942
              )
              
              -
              
              
              (64,942
              )To
                  relocate the original common stock of Ever Leader on 11/15/2006
              
              
              1,285
              
              
              -
              
              
              1,285To
                  record the placement agent commission and transaction related
                  feeof
                  reverse merger on 11/15/2006
              
              
              (1,694,326
              )
              
              -
              
              
              (1,694,326
              )Issuance
                  of common stock 706,195 at $0.4622 per share
              
              
              -
              
              
              325,697
              
              
              325,697Debt
                  discount on beneficial conversion feature on convertible promissory
                  notes
              
              
              -
              
              
              2,385,089
              
              
              2,385,089Debt
                  discount on warrants issued with convertible promissory notes
              
              
              -
              
              
              5,174,911
              
              
              5,174,911Placement
                  agent exercised 612,194 warrants at strike price, $0.555 through
                  cashless
                  arrangement
              
              
              -
              
              
              339,156
              
              
              339,156Additional
                  paid-in capital, balance for the period ended
              
              $
              13,099,424
              
              
              8,224,853
              
              $
              21,324,277




(d)
            As
                of December 31, 2006, 28,557,936 Warrants, each convertible into
                one (1)
                share of the Group’s Common Stock, issued and outstanding, and as of
                September 20, 2007, since the placement agent exercised 612,194 warrants
                through the cashless arrangement, thus the remaining balance was
                27,945,742 Warrants, each convertible into one (1) share of the Company’s
                Common Stock, issued and outstanding,
                and;


(e)
            None
                Options issued and outstanding.







**24.**
            **Commitments
                and Contingencies**




As
      of
      reporting periods ended at September 30 2007, there was an operating lease
      commitment and the amount is stated as follows;


September
                  30,2007(Unaudited)Operating
                  LeaseRental
                  and Property Management FeeWithin
                  one year
              
              $
              27,364One
                  to two year
              
              
              20,891Total
                  commitments payable
              
              $
              48,254




**25.**
            **Segment
                Information**




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




a)
            Benda
                Ebei produces branded and generic
                medicines;


F-24




b)
              Jiangling
                  Benda produces active pharmaceutical ingredients,
                  APIs;


c)
            Yidu
                Benda produces bulk chemicals;


d)
            Beijing
                Shusai produces pharyngitis killer therapy; and


e)
            SiBiono
                produces gene therapy medicines, Gendicine.




Therefore,
      according to the requirement stated in paragraph of SFAS 131, the company
      reports the segment information according to the un-identical products that
      produced in each subsidiary.




Since
      five different categories of products are produced in five difference
      subsidiaries or operation plants, therefore according to the requirement stated
      in paragraph 27 of FSAS 131, the company reports the total assets for each
      of
      the reportable segments according to the total assets of each
      subsidiary.




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


F-25


NINE
                  MONTHS ENDED
              
              THREE
                  MONTHS ENDEDSEPTEMBER
                  30,
              
              SEPTEMBER
                  30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)*Branded/generic
                  medicine segment*
              
              
              2007
              
              
              2006
              
              
              2007
              
              
              2006Revenue
                  from external customers
              
              $
              11,780,412
              
              $
              7,634,663
              
              $
              5,749,690
              
              $
              2,773,289Cost
                  of sales
              
              
              (7,458,024
              )
              
              (4,550,187
              )
              
              (3,685,158
              )
              
              (1,814,309
              )Gross
                  profit
              
              
              4,322,388
              
              
              3,084,476
              
              
              2,064,532
              
              
              958,980Gross
                  margin
              
              
              37
              %
              
              40
              %
              
              36
              %
              
              35
              %Research
                  and development
              
              
              -
              
              
              -
              
              
              -
              
              
              -Selling
                  expense
              
              
              (154,359
              )
              
              (247,132
              )
              
              (60,925
              )
              
              (81,168
              )General
                  and administrative expense
              
              
              (696,510
              )
              
              (395,983
              )
              
              40,576
              
              
              274,529Segment
                  contribution
              
              $
              3,471,519
              
              $
              2,441,361
              
              $
              2,044,183
              
              $
              1,029,508Contribution
                  margin
              
              
              29
              %
              
              32
              %
              
              36
              %
              
              37
              %Total
                  assets, segment
              
              $
              27,091,099
              
              $
              10,523,526
              
              $
              27,091,099
              
              $
              10,523,526*Active
                  pharmaceutical ingredients segment*
              
              
              2007
              
              
              2006
              
              
              2007
              
              
              2006Revenue
                  from external customers
              
              $
              -
              
              $
              15,491
              
              $
              -
              
              $
              45Cost
                  of sales
              
              
              (5,863
              )
              
              (13,129
              )
              
              (26
              )
              
              (38
              )Gross
                  profit
              
              
              (5,863
              )
              
              2,362
              
              
              (26
              )
              
              7Gross
                  margin
              
              
              -
              
              
              15
              %
              
              -
              
              
              16
              %Research
                  and development
              
              
              (355
              )
              
              -
              
              
              (355
              )
              
              -Selling
                  expense
              
              
              -
              
              
              (10,308
              )
              
              -
              
              
              (3,122
              )General
                  and administrative expense
              
              
              (55,568
              )
              
              (160,720
              )
              
              (39,794
              )
              
              142,735Segment
                  contribution
              
              $
              (61,786
              )
              $
              (168,666
              )
              $
              (40,175
              )
              $
              139,620Contribution
                  margin
              
              
              -
              
              
              -1089
              %
              
              -
              
              
              310267
              %Total
                  assets, segment
              
              $
              7,678,034
              
              $
              3,889,715
              
              $
              7,678,034
              
              $
              3,889,715*Bulk
                  chemicals segment*
              
              
              2007
              
              
              2006
              
              
              2007
              
              
              2006Revenue
                  from external customers
              
              $
              701,590
              
              $
              4,696,623
              
              $
              3,071
              
              $
              1,934,815Cost
                  of sales
              
              
              (388,657
              )
              
              (2,466,626
              )
              
              (1,701
              )
              
              (998,375
              )Gross
                  profit
              
              
              312,933
              
              
              2,229,997
              
              
              1,370
              
              
              936,440Gross
                  margin
              
              
              45
              %
              
              47
              %
              
              45
              %
              
              48
              %Research
                  and development
              
              
              -
              
              
              (33,138
              )
              
              -
              
              
              (26,907
              )Selling
                  expense
              
              
              (26,669
              )
              
              (158,602
              )
              
              (116
              )
              
              (53,853
              )General
                  and administrative expense
              
              
              (828,357
              )
              
              (218,869
              )
              
              (68,111
              )
              
              35,937Segment
                  contribution
              
              $
              (542,093
              )
              $
              1,819,388
              
              $
              (66,857
              )
              $
              891,617Contribution
                  margin
              
              
              -77
              %
              
              39
              %
              
              -2177
              %
              
              46
              %Total
                  assets, segment
              
              $
              7,259,480
              
              $
              8,222,931
              
              $
              7,259,480
              
              $
              8,222,931*Pharynigitis
                  killer therapy segment*
              
              
              2007
              
              
              2006
              
              
              2007
              
              
              2006Revenue
                  from external customers
              
              $
              35,791
              
              $
              18,646
              
              $
              12,738
              
              $
              18,646Cost
                  of sales
              
              
              (1,912
              )
              
              (1,026
              )
              
              (725
              )
              
              (1,026
              )Gross
                  profit
              
              
              33,879
              
              
              17,620
              
              
              12,013
              
              
              17,620Gross
                  margin
              
              
              95
              %
              
              94
              %
              
              94
              %
              
              -Research
                  and development
              
              
              -
              
              
              -
              
              
              -
              
              
              -Selling
                  expense
              
              
              (34,526
              )
              
              (5,604
              )
              
              (11,999
              )
              
              (3,984
              )General
                  and administrative expense
              
              
              (84,745
              )
              
              (53,496
              )
              
              (33,142
              )
              
              (31,081
              )Segment
                  contribution
              
              $
              (85,392
              )
              $
              (41,480
              )
              $
              (33,128
              )
              $
              (17,445
              )Contribution
                  margin
              
              
              -239
              %
              
              -222
              %
              
              -260
              %
              
              -94
              %Total
                  assets, segment
              
              $
              115,588
              
              $
              134,023
              
              $
              115,588
              
              $
              134,023*Gendicine
                  (Ad-p53) segment*
              
              
              2007
              
              
              2006
              
              
              2007
              
              
              2006Revenue
                  from external customers
              
              $
              3,278,502
              
              $
              -
              
              $
              1,793,944
              
              $
              -Cost
                  of sales
              
              
              (300,085
              )
              
              -
              
              
              (130,817
              )
              
              -Gross
                  profit
              
              
              2,978,417
              
              
              -
              
              
              1,663,127
              
              
              -Gross
                  margin
              
              
              91
              %
              
              -
              
              
              93
              %
              
              -Research
                  and development
              
              
              (309,729
              )
              
              -
              
              
              (212,610
              )
              
              -Selling
                  expense
              
              
              (459,459
              )
              
              -
              
              
              (257,087
              )
              
              -General
                  and administrative expense
              
              
              (573,814
              )
              
              -
              
              
              (241,394
              )
              
              -Segment
                  contribution
              
              $
              1,635,415
              
              $
              -
              
              $
              952,036
              
              $
              -Contribution
                  margin
              
              
              50
              %
              
              -
              
              
              53
              %
              
              -Total
                  assets, segment
              
              $
              12,449,840
              
              $
              -
              
              $
              12,449,840
              
              $
              -


F-26





TOTAL
              NINE
                MONTHS ENDED September
            
            TOTAL
              THREE
                MONTHS ENDED2007
            
            2006
            
            2007
            
            2006(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Total
                revenue from external customers
            
            $
            15,796,295
            
            $
            12,365,423
            
            $
            7,559,443
            
            $
            4,726,795Cost
                of sales
            
            
            (8,154,541
            )
            
            (7,030,968
            )
            
            (3,818,427
            )
            
            (2,813,748
            )Gross
                profit
            
            
            7,641,754
            
            
            5,334,455
            
            
            3,741,016
            
            
            1,913,047Gross
                margin
            
            
            48
            %
            
            43
            %
            
            49
            %
            
            40
            %Research
                and development
            
            
            (310,084
            )
            
            (33,138
            )
            
            (212,965
            )
            
            (26,907
            )Selling
                expense
            
            
            (675,013
            )
            
            (421,646
            )
            
            (330,127
            )
            
            (142,127
            )General
                and administrative expense
            
            
            (2,238,994
            )
            
            (829,068
            )
            
            (341,865
            )
            
            422,120Total
                segment contribution
            
            $
            4,417,663
            
            $
            4,050,603
            
            $
            2,856,059
            
            $
            2,166,133Contribution
                margin
            
            
            28
            %
            
            33
            %
            
            38
            %
            
            46
            %Total
                assets, segment
            
            $
            54,594,041
            
            $
            22,770,195
            
            $
            54,594,041
            
            $
            22,770,195




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


TOTAL
              
              TOTALNINE MONTHS ENDED September 30,
              
              THREE MONTHS ENDED September 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Total
                  segment contribution
              
              $
              4,417,663
              
              $
              4,050,603
              
              $
              2,856,059
              
              $
              2,166,133Unallocated
                  amounts:Government
                  subsidies
              
              
              1,690,974
              
              
              -
              
              
              1,417,859
              
              
              -Loss
                  on disposal of assets
              
              
              (8,398
              )
              
              (248,209
              )
              
              6,533
              
              
              (715
              )Other
                  corporate expense
              
              
              (11,844,304
              )
              
              (227,438
              )
              
              (2,242,650
              )
              
              (67,184
              )Total
                  income / (loss) before minority interest and income taxes
              
              $
              (5,744,065
              )
              $
              3,574,956
              
              $
              2,037,801
              
              $
              2,098,234




The
      other
      corporate expense were composed of the following events:


NINE MONTHS ENDED September 30,
              
              THREE MONTHS ENDED September 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Consulting
                  and professional fees (Note 19)
              
              $
              8,222,184
              
              $
              -
              
              
              339,768
              
              
              -Penalty
                  to investor
              
              
              540,000
              
              
              -
              
              
              420,000
              
              
              -Wages
                  and salaries
              
              
              239,599
              
              
              -
              
              
              65,000
              
              
              -Audit
                  and accounting
              
              
              208,692
              
              
              58,161
              
              
              9,982
              
              
              13Amortization
                  of debt issue cost
              
              
              134,653
              
              
              -
              
              
              67,384
              
              
              -Consulting
                  fee
              
              
              35,000
              
              
              -
              
              
              -
              
              
              -Investor
                  relation, transfer agent and filing fees
              
              
              92,641
              
              
              -
              
              
              26,788
              
              
              -Director
                  renumeration
              
              
              58,959
              
              
              -
              
              
              25,014
              
              
              -Brokerage
                  fees
              
              
              50,106
              
              
              -
              
              
              50,106
              
              
              -Travel
                  and transportation
              
              
              32,448
              
              
              -
              
              
              22,779
              
              
              -Office
                  expense
              
              
              20,191
              
              
              -
              
              
              17,894
              
              
              -Interest
                  expense
              
              
              2,207,878
              
              
              118,674
              
              
              1,141,472
              
              
              39,437Miscellaneous
              
              
              1,953
              
              
              50,603
              
              
              56,463
              
              
              27,734Total
              
              $
              11,844,304
              
              $
              227,438
              
              
              2,242,650
              
              
              67,184




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




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


F-27


NINE MONTHS ENDED September 30,
              
              THREE MONTHS ENDED September 30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Total
                  assets, segment
              
              $
              54,594,041
              
              $
              22,770,195
              
              $
              54,594,041
              
              $
              22,770,195Total
                  assets of corporate:Cash
                  and cash equivalent
              
              
              221,298
              
              
              14,777
              
              
              221,298
              
              
              14,777Bank
                  indebtedness
              
              
              1,218,240
              
              
              
              
              
              1,218,240Prepaid
                  expenses and deposit
              
              
              9,983
              
              
              -
              
              
              9,983
              
              
              -Refundable
                  purchase price paid
              
              
              1,200,000
              
              
              -
              
              
              1,200,000
              
              
              -Due
                  from related parties
              
              
              1,099,345
              
              
              252,940
              
              
              1,099,345
              
              
              -Debit
                  issue costs:placement
                  agent commission
              
              
              394,547
              
              
              -
              
              
              394,547
              
              
              -Total
                  assets
              
              $
              58,737,454
              
              $
              23,037,912
              
              $
              58,737,454
              
              $
              22,784,972




The
      following table shows how the minority interest for nine months ended September
      30, 2007 and 2006 was derived:







**Nine
                        Month Ended September 30, 2007**Benda
                    
                    Jiangling
                    
                    Yidu
                    
                    BeijingEbei
                    
                    Benda
                    
                    Benda
                    
                    Shusai
                    
                    SiBiono
                    
                    Total**Segment
                        operating profit / (loss)**
                    
                    $
                    3,471,519
                    
                    
                    (61,786
                    )
                    
                    (542,093
                    )
                    
                    (85,392
                    )
                    
                    1,635,415
                    
                    $
                    4,417,663Loss
                        on disposal of assets
                    
                    
                    -
                    
                    
                    (3,278
                    )
                    
                    (5,120
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    (8,398
                    )Interest
                        income / (expenses)
                    
                    
                    (45,895
                    )
                    
                    90
                    
                    
                    (2,620
                    )
                    
                    (21
                    )
                    
                    (96,247
                    )
                    
                    (144,693
                    )Other
                        income / (expenses)
                    
                    
                    (2,879
                    )
                    
                    (14,268
                    )
                    
                    2,638
                    
                    
                    (1,303
                    )
                    
                    (1,907
                    )
                    
                    (17,719
                    )Prior
                        year adjustment
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    131,083
                    
                    
                    131,083Government
                        subsidies
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,690,974
                    
                    
                    1,690,974**Income
                        before minority interest**
                    
                    $
                    3,422,745
                    
                    
                    (79,242
                    )
                    
                    (547,195
                    )
                    
                    (86,716
                    )
                    
                    3,359,318
                    
                    $
                    6,068,910MI
                        percentage
                    
                    
                    5.00
                    %
                    
                    9.75
                    %
                    
                    9.75
                    %
                    
                    28.75
                    %
                    
                    42.88
                    %MI
                        interest
                    
                    $
                    171,137
                    
                    
                    (7,726
                    )
                    
                    (53,352
                    )
                    
                    (24,931
                    )
                    
                    1,440,359
                    
                    $
                    1,525,487**Nine
                        Month Ended September 30, 2006**Benda
                    
                    
                    Jiangling
                    
                    
                    Yidu
                    
                    
                    BeijingEbei
                    
                    
                    Benda
                    
                    
                    Benda
                    
                    
                    Shusai
                    
                    
                    SiBiono
                    
                    
                    Total**Segment
                        operating profit / (loss)**
                    
                    $
                    2,441,361
                    
                    
                    (168,666
                    )
                    
                    1,819,388
                    
                    
                    (41,480
                    )
                    
                    -
                    
                    $
                    4,050,603Loss
                        on disposal of assets
                    
                    
                    
                    
                    
                    (248,209
                    )
                    
                    
                    
                    
                    
                    
                    
                    -
                    
                    
                    (248,209
                    )Interest
                        income/ (expenses)
                    
                    
                    (97,325
                    )
                    
                    (68
                    )
                    
                    (20,900
                    )
                    
                    21
                    
                    
                    -
                    
                    
                    (118,272
                    )Other
                        income / (expenses)
                    
                    
                    (3,654
                    )
                    
                    787
                    
                    
                    844
                    
                    
                    589
                    
                    
                    -
                    
                    
                    (1,434
                    )Prior
                        year adjustment
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Government
                        subsidies
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Income
                        taxes
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -**Income
                        before minority interest**
                    
                    $
                    2,340,382
                    
                    
                    (416,156
                    )
                    
                    1,799,332
                    
                    
                    (40,870
                    )
                    
                    -
                    
                    $
                    3,682,688MI
                        percentage
                    
                    
                    5.00
                    %
                    
                    9.75
                    %
                    
                    9.75
                    %
                    
                    28.75
                    %MI
                        interest
                    
                    $
                    117,016
                    
                    
                    (40,575
                    )
                    
                    175,435
                    
                    
                    (11,750
                    )
                    
                    -
                    
                    $
                    240,126




**26.**
            **Subsequent
                Events**




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. As of September 30, 2007, the final arbitration award
      has
      not been received yet, thus no accounting treatment has been put through.


F-28





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




Forward-Looking
      Statements




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


-5-





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




**Critical
      Accounting Policies**




Accounting
      policies discussed in this section are those that we consider to be most
      critical to an understanding of our financial statements because they inherently
      involve significant judgment and uncertainties.  For all of these
      estimates, we caution that future events rarely develop exactly as forecast,
      and
      the best estimates routinely require adjustment. Also see note 2, Summary of
      Significant Accounting Policies.




**Revenue
      Recognition**




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


1.       Persuasive evidence of an arrangement
      exists;


2.       Delivery has occurred or services have
      been rendered;


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


4.       Collectibility is reasonably
      assured.


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


-6-




Estimates
      Affecting Accounts Receivable and Inventories





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





As
      of
      September 30, 2007 and 2006, the Company provided a $1,138,503 and $517,350
      respectively for the allowance of doubtful accounts against trade receivables,
      other receivables and prepaid and deposits (please refer to Note 5 of Notes
      to
      Consolidated Financial Statements for details). Management's estimate of the
      appropriate allowance on those accounts receivable for the reporting periods
      was
      based on the aged nature of these accounts. In making its judgment, management
      assessed its customers' ability to continue to pay their outstanding invoices
      and the collectibility of those accounts on a timely basis, and whether their
      financial position might deteriorate significantly in the future, which would
      result in their inability to pay their debts to the Company.





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




For
      the
      nine months ended September 30, 2007 and 2006, the Company provided a reserve
      against its work-in-progress amounting to $4,110,409 and none respectively.
      The
      reserve was raised due to the fact that most of the original liquid, a liquid
      element o produce Gendicine, was produced in the year of 2004 and this
      particular liquid can only be stored for approximately five years, therefore
      a
      reserve was provide against the work-in-progress (please refer to Note 7, Notes
      to Consolidated Financial Statements for details). However, no reserve for
      obsolete, slow-moving or non-salable inventory was required for the reporting
      periods.




**Operational
      Results**




Nine
      months ended September 30, 2007 Compared to nine months ended September 30,
      2006




The
      following table provides key components of our operational results for the
      nine
      months ended September 30 for Benda Pharmaceutical, Inc.


-7-


**September 30,**
              
              **September 30,****2007**
              
              **2006****(Restated)**
              
              **(Restated)****(Unaudited)**
              
              **(Unaudited)**Revenue
              
              $
              15,796,295
              
              $
              12,365,423Cost
                  of goods sold
              
              
              (8,154,541
              )
              
              (7,030,968
              )Gross
                  profit
              
              
              7,641,754
              
              
              5,334,455Selling
                  expenses
              
              
              (675,013
              )
              
              (421,646
              )General
                  and administravive expenses
              
              
              (11,988,784
              )
              
              (936,398
              )Gains
                  / (losses) on disposals of fixed assets
              
              
              (8,398
              )
              
              (248,209
              )Research
                  and development expenses
              
              
              (310,084
              )
              
              (33,138
              )Total
                  operating expenses
              
              
              (12,982,279
              )
              
              (1,639,391
              )Operating
                  income / (loss)
              
              
              (5,340,525
              )
              
              3,695,064Interest
                  expenses
              
              
              (2,207,878
              )
              
              (118,674
              )Other
                  income (expenses)
              
              
              113,364
              
              
              (1,434
              )Government
                  subsidies / grants
              
              
              1,690,974
              
              
              -Income
                  / (loss) before minority interest and income taxes
              
              
              (5,744,065
              )
              
              3,574,956Income
                  taxes
              
              
              -
              
              
              -Minority
                  interest
              
              
              (1,525,487
              )
              
              (240,126
              )Net
                  Income / (loss)
              
              $
              (7,269,552
              )
              $
              3,334,830Earnings
                  / (loss) per share - basic
              
              $
              (0.08
              )
              $
              0.05Weighted
                  average shares outstanding - basic
              
              
              96,872,524
              
              
              70,259,331Earnings
                  / (loss) per share - diluted
              
              $
              (0.06
              )
              $
              0.05Weighted
                  average shares outstanding - diluted
              
              
              125,103,425
              
              
              70,259,331




**Restatement**




The
      Company restated its previously recognized Depreciation expense by ($925,795)
      and ($423,983) for the nine months ended September 30, 2007 and 2006 due to
      incorrect calculation of depreciation expense previously
      reported.




The
      Company restated its previously recognized Amortization expense by ($342,671)
      and ($194,027) for the nine months ended September 30, 2007 and 2006 due to
      incorrect calculation of amortization expense previously
      reported.




*Net
      Revenue:*




Net
      revenue increased $3.4 MM or 28% to $15.8 MM for nine months ended September
      30,
      2007, from $12.4 MM for nine months ended September 30, 2006. Increase in
      revenue is contributed to the following factors,




1.
            Benda’s
                subsidiary, Benda Ebei’s net revenue increased $4.2 MM or 55% to $11.8 MM
                for nine months ended September 30, 2007 from $7.6 MM for nine months
                ended September 30, 2006, it was due to new products sales in 2007.
                New
                products introduced in 2007 are B12 Vitamin, Inosine, Gentamycin
                80
                Thousand Unit, B6 Vitamin, Methiouine, Lincomycin, and Troxerutin,
                they
                contributed approximately $2.4 MM to our net revenue.





2.
            Benda’s
                subsidiary, Jiangling Benda’s net revenue dropped to zero for the nine
                months ended September 30, 2007 as the plant was closed while it
                underwent
                an upgrade to meet GMP certification standards. Jiangling Benda was
                reopened on Aug 10, 2007 and resumes its production. The management
                expects that its sales will boost up in the coming months.


-8-




3.
            Benda’s
                subsidiary, Yidu Benda’s net revenue dropped $4.0 MM or 85% to $700K for
                the nine months ended September 30, 2007 from $4.7 MM for the nine
                months
                ended September 30, 2006 as the plant was temporarily closed since
                mid
                January to upgrade its waster water treatment system to comply with
                new
                environmental standards. Yidu Benda has completed the upgrade and
                filed
                the status report with related regulatory bodies for approval. The
                regulatory body is conducting environmental assessment for Benda.
                While
                awaiting the approval, the Company is transferring part of production
                from
                Yidu Benda to Jiangling Benda to minimize the negative impact on
                sales.





4.
            Benda’s
                subsidiary, Beijing Shusai, incorporated on July 15, 2006, realized
                net
                revenue of $37K for nine months ended September 30, 2007. China’s State
                Food and Drug Administration (SFDA) recently experienced an overhaul
                in
                its policies and regulatory systems in an effort to fight against
                corruption in Chinese pharmaceutical industry. Beijing Shusai’s operation
                is adversely affected by this recent policy changes which prohibits
                some
                state-owned hospitals from forming alliances with us. The management
                is
                now working hard with the local government departments and sort out
                the
                solutions for the future operation plan.




5.
            Benda’s
                newly acquired entity SiBiono (acquired and effective on April 1,
                2007)
                realized net revenue of $3.0 MM for the nine months ended September
                30,
                2007. (Refer to note 1 of Note to Consolidation Financial Statements
                for
                details.) SiBiono’s flagship product, Gendicine is the world’s only
                commercialized gene therapy. While only 1,869 vials of Gendicine
                were sold
                in Q1 2007 by SiBiono, sales ramped to 12,432 vials in Q3 2007 after
                Benda’s taking over SiBiono in April.




*Cost
      of Goods Sold*




Cost
      of
      goods sold increased $1.1 MM or 15% to $8.15 MM for nine months ended September
      30, 2007 from $7.03 MM for nine months ended September 30, 2006, primarily
      due
      to the acquisition of SiBiono and the resulting production of Gendicine.




*Gross
      Profit*




Gross
      Profit increased $2.31 MM or 41% to $7.64 MM for nine months ended September
      30,
      2007 from $5.33 MM for nine months ended September 30, 2006 mainly due to the
      followings factors:




1.
            Benda
                Ebei –
                gross profit margin dropped by 5% from 43% to 38% during the reporting
                period due to the following reasons,


a)
            Launch
                new products with lower gross margin of 38%. However, the management
                believes that those new products will increase our net revenue as
                they
                gain market acceptance, therefore we will continue and extend our
                efforts
                to produce and promote these new products.




2.
            Even
                though there was a slightly drop of gross profit margin in Benda
                Ebei,
                however the gross profit margin on the whole was better off with
                the
                presence of SiBiono, in which the gross margin of Gendicine, SiBiono’s
                flagship product was approximately 90% for the nine months ended
                September
                30, 2007 as a result of low procurement and manufacturing cost and
                high
                sales price.




*Selling
      Expenses:*




Selling
      expenses increased $253K or 60% to $675K for the nine months ended September
      30,
      2007 from $422K for nine months ended September 30, 2006, primarily due to
      the
      promotional fees for Gendicine.


-9-


*General
        and Administrative Expenses:*
  General
        and administrative expenses increased $11 MM to $11.9 MM for the nine months
        ended September 30, 2007 from $0.9 MM for nine months ended September 30,
        2006.
        The increase of G&A expenses in the reporting period was primarily due to
        the following factors:


a)
            $291K
                finder fee to China Hi-Tech Funds Co.
                Ltd.;


b)
            $135K
                amortization expense of the placement agent commission related to
                debt
                issue costs, (Refer to Note 22 of Notes to Consolidated Financial
                Statements for details);


c)
            $8.2MM
                consulting and professional fees, (Refer to Note 18 of Notes to
                Consolidated Financial Statements for
                details);


d)
            $120K
                for late filing of 10K; and $420K for late effective of registration
                statement;


e)
            $173K
                cash bonus;


f)
            $265K
                audit services fee;


g)
            $47K
                consulting fee;


h)
            $149K
                legal fee, 8K and 10K filing;


i)
            $59K
                directors remuneration;


j)
            $32K
                conference expenses for events including MoneyShow, Gene Therapy
                Conference etc,;


k)
            $93K
                investor relationship activities
                expenses;


l)
            $49K
                advertisement expense;


m)
            $20K
                postage, courier and printing expenses;


n)
            $258K
                office expenses;


o)
            $482K
                salary and wages;


p)
            $44K
                rental and utilities;


q)
            $205K
                travel and transportation expenses.




*Operating
      Income/ (Loss):*




The
      Company experienced an operating loss of $5.34 MM for the nine months ended
      September 30, 2007, slipping $9 MM from last year’s comparative period, due to
      significant increase in G&A expenses.




*Interest
      Expenses:*




Interest
      expenses increased to $2.2 MM for nine months ended September 30, 2007 from
      $119K for nine months ended September 30, 2006 primarily due to financial
      expense associated with the offering of convertible promissory note. (Refer
      to
      Note 22 of the Note to Consolidation Financial Statements for details.)




*Government
      Subsidies / Grants:*




The
      Company recognized $1.7 MM as government subsidies / grant for nine months
      ended
      September 30, 2007. (Refer to Note 20 of the Note to Consolidated Financial
      Statements for details)




*Income
      Taxes:*




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




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




Benda
      Ebei was registered as a Sino-Foreign Equity Joint Venture on May 26, 2004
      and
      is subject to the tax laws applicable to Sino-Foreign Equity Joint Ventures
      in
      the PRC. Benda Ebei, starting from 2005, is fully exempt from PRC enterprise
      income tax for two years starting from the first profit-making year, followed
      by
      a 50% reduction in income taxes, at 18%, for the following three years,
      commencing from the first profitable year.


-10-




Jiangling
      Benda and Yidu Benda are cross-municipal investment entities and enjoy the
      same
      tax treatment as Sino-Foreign Joint Ventures, starting from 2005, and were
      therefore exempt from PRC enterprise income tax for two years starting from
      the
      first profit-making year, followed by a 50% reduction in income taxes, at 18%,
      for the following three years, commencing from the first profitable year.
      Cross-municipal investments entities refer to entities that are incorporated
      in
      one municipal region but have investments in another municipal region.




The
      exemption periods for Benda Ebei, Jiangling Benda and Yidu Benda expired in
      the
      year of 2006, after which they are subject to 50% reduction in income taxes;
      whereas the full income tax rate is 33%. The remaining tax holidays will be
      expired in 2009.




However,
      starting and effective from January 1, 2008, the full income tax rate would
      be
      changed from 33% to 25% according to the new PRC Taxation Regulations.
      Thereafter these subsidiaries will be subject to the regular full income tax
      rate at 25%.




Beijing
      Shusai did not have taxable income for the nine months and three months ended
      September 30, 2007 and 2006.




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




As
      a
      result of the above mentioned taxation scheme , the income taxes payable for
      the
      Company for the nine months and three months ended September 30, 2007 would
      be
      $465,645.




*Net
      Income/ (Loss):*




The
      Company experienced a net loss of $7.27 MM for nine months ended September
      30,
      2007 due to significant increase in G&A expense.




LIQUIDITY
      AND CAPITAL RESOURCES




Operating
      cash flow increased slightly $0.3 MM to $1.8 MM for nine months ended September
      30, 2007 from $1.5 MM for nine months ended September 20, 2006 was primarily
      due
      to the decreased in net changes of trade receivables by $0.6 MM and increased
      in
      net changes of various tax payable by $0.46 MM, but was offset by the decreased
      in net changes of accounts payable and accrued liabilities by $0.5 MM.




Investing
      cash outflow was $10.2 MM for nine months ended September 30, 2007 due to the
      following factors




a)
            $2.5
                MM as part of the total consideration for SiBiono acquisition


b)
            $4.9
                MM for fixed assets and equipment
                purchase


c)
            $1.2
                MM for new drug license acquisition


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


-11-




Investing
      cash inflow was $8 MM for nine months ended September 30, 2007 mainly due to
      the
      following events occurred during the reporting period:




a)
            The
                proceeds from issuance of convertible promissory note, the net proceeds
                was $7.03 million.


b)
            The
                net proceeds from the issuance of commercial bank note. As of September
                30, 2007, Benda Ebei and Jiangling Benda deposited an amount $1,787,708
                in
                Shanghai Pudong Development Bank as deposit for the issuance of commercial
                bank notes. Such deposits will be released when the commercial bank
                notes
                are cleared. As of September 30, 2007, the balance of the commercial
                bank
                notes payable was $3,166,159. Thus the net commercial bank notes
                payable
                was $1,378,451 as of September 30, 2007 (please refer to Note 11
                of Notes
                to Consolidated Financial Statements for details).





**Item
      3. Controls and Procedures**


**Evaluation
        of Disclosure Controls and Procedures**
  As
        of the
        June 25, 2008, our Chief Executive Officer and our Chief Financial Officer
        performed an evaluation of the effectiveness of and the operation of our
        disclosure controls and procedures as defined in Rule 13a-15(e) or Rule
        15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive
        Officer and Chief Financial Officer could not conclude that as of September
        30,
        2007, our disclosure controls and procedures were effective in timely alerting
        them to material information relating to Benda Pharmaceutical, Inc required
        to
        be included in our Exchange Act filings and ensuring such information is
        recorded, processed, summarized and reported within the time periods specified
        in Securities and Exchange Commission rules and forms. Our Chief Executive
        Officer and Chief Financial Officer were unable to affirmatively conclude
        that
        our disclosure controls and procedures were effective as of September 30,
        2007,
        as the Negative Goodwill that was recorded at the time of the Benda Ebei
        acquisition in November 2005 was not properly recorded and resulted in the
        overstatement of depreciation expense, our Chief Executive Officer and Chief
        Financial Officer concluded that there was a further need to evaluate and
        implement appropriate disclosure controls and procedures to ensure the timely,
        accurate and comprehensive flow of material information, especially in relation
        to depreciation calculations, required to be disclosed in our Exchange Act
        Filings and to ensure that all such information is recorded, processed,
        summarized and reported within the time periods required. Our Chief Executive
        Officer and other members of the management team have been working to design
        and
        implement such effective disclosure controls and procedures.


-12-


**Internal
        Control Over Financial Reporting**
  There
        have been no changes in our internal control over financial reporting identified
        in connection with the evaluation required by Rule 13a-15(d) or Rule 15d-15(d)
        under the Exchange Act that occurred during the quarter ended September 30,
        2007
        that has materially affected, or is reasonably likely to materially affect,
        our
        internal control over financial reporting. However,
        this report does not include a report of management’s assessment regarding
        internal control over financial reporting or an attestation report of the
        company’s registered public accounting firm due to a transition period
        established by results of the Securities and Exchange Commission deferring
        the
        requirement of reports for non-accelerated issuers, such as the Company,
        for
        fiscal years ended prior to December 15, 2007. Although our Chief Executive
        Officer and Chief Financial Officer are aware of management’s responsibility for
        establishing and maintaining adequate internal control over financial reporting
        and sought to evaluate our internal controls as of September 30, 2007, they
        were
        unable to affirmatively conclude that our internal control over financial
        reporting was effective as of that date, although they did not identify any
        specific material weaknesses or significant deficiencies at the time. As
        a
        result of the overstatement in depreciation expense for all periods since
        November 2005 our Chief Financial Officer concluded that there was a further
        need to evaluate our internal control over financial reporting, especially
        in
        relation to Depreciation Calculations. Since the error was discovered, our
        Chief
        Executive Officer, Chief Financial Officer and other members of the management
        team have been working to carefully evaluate, and where deemed necessary
        improve, our internal control over financial reporting.




**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




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





Arbitration





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


-13-





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





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





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





1.
            Benda
                Ebei should pay for the consideration of Rmb 6.24 million, equal
                to 50% of
                the total consideration set forth in the Equity Transfer Agreement.
                For
                the other 50% of the total consideration which was supposed to be
                settled
                in the form of issuing common stock, since Zhang did not make an
                arbitration request on how to execute the arrangement, the Arbitration
                Commission did not make an award on this particular
                part.2.
            Benda
                Ebei should pay for the penalty of Rmb 46,800;3.
            Benda
                Eebi should pay for legal and arbitration expenses of Rmb
                268,971.





Intellectual
      Property





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





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




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




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





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





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




**Item
      2. Changes in Securities.**




None.





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




None.




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




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


-14-




**Item
      5. Other Information.**




None.




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





(a)       
      Exhibits





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





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





(b)    
      Reports of Form 8-K





On
      September 20, 2007, in its Current Report on Form 8-K for an event dated
      September 14, 2007, the Company reported appointment of Charles Mo as an
      independent director of the Board of Directors and as Chairman of the Audit
      Committee


-15-




**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:
                June 26, 2008
            
            By:*/s/
                Yiqing Wan*Yiqing
                WanPresident,
                Chief Executive OfficerChairman
                of Board of Directors


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