UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)

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

                    For the quarter ended September 30, 2006

[ ] 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: 001-32581

                         S.E. ASIA TRADING COMPANY, INC.
                         -------------------------------
          (Exact name of small business issuer as specified in charter)

                 NEVADA                                  20-0507518
                 ------                                  ----------
    (State or other jurisdiction of              (I.R.S. Employer I.D. No.)
     incorporation or organization)

     Boca Corporate Plaza, 7900 Glades Road, Suite 420, Boca Raton, FL 33434
     -----------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (954) 208-0154
                                 --------------
                (Issuer's telephone number, including area code)

                                       N/A
                                       ---
          (Former name or former address, if changed since last report)

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

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 41,280,000 shares at November 6, 2006

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]


<PAGE>

<TABLE>

<CAPTION>


                S.E. ASIA TRADING COMPANY, INC. AND SUBSIDIARIES
                                   FORM 10-QSB
                    QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                                      INDEX
                                                                                          Page
                                                                                          ----
<S>                                                                             <C>       <C>

PART I - FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements
         Consolidated Balance Sheet (Unaudited) As of September 30, 2006 ..............    3
         Consolidated Statements of Operations (Unaudited)
                  For the Three and Nine Months Ended September 30, 2006 and 2005 .....    4
         Consolidated Statements of Cash Flows (Unaudited)
                  For the Nine Months Ended September 30, 2006 and 2005 ...............    5
         Notes to Unaudited Consolidated Financial Statements .........................    6
Item 2.  Management's Discussion and Analysis or Plan of Operation.....................   15
Item 3.  Controls and Procedures ......................................................   23

PART II - OTHER INFORMATION
Item 1.  Legal Proceedings ............................................................   24
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds ..................   24
Item 3.  Default Upon Senior Securities ...............................................   24
Item 4.  Submission of Matters to a Vote of Security Holders...........................   24
Item 5.  Other Information.............................................................   24
Item 6.  Exhibits .....................................................................   24

</TABLE>

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

         Certain  statements  in this  quarterly  report  contain or may contain
forward-looking  statements  that  are  subject  to  known  and  unknown  risks,
uncertainties  and other factors which may cause actual results,  performance or
achievements to be materially different from any future results,  performance or
achievements  expressed  or implied by such  forward-looking  statements.  These
forward-looking  statements  were  based on  various  factors  and were  derived
utilizing  numerous  assumptions  and other  factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors  include,  but are not limited to, our ability to increase our revenues,
develop our brands, implement our strategic initiatives, economic, political and
market conditions and fluctuations, government and industry regulation, U.S. and
global  competition,  and other factors.  Most of these factors are difficult to
predict accurately and are generally beyond our control.

         You should  consider the areas of risk described in connection with any
forward-looking  statements  that may be made in our annual report as filed with
the  SEC.   Readers  are  cautioned  not  to  place  undue   reliance  on  these
forward-looking  statements and readers should  carefully  review this quarterly
report in its entirety,  Except for our ongoing obligations to disclose material
information  under the Federal  securities  laws,  we undertake no obligation to
release  publicly any  revisions to any  forward-looking  statements,  to report
events  or  to  report   the   occurrence   of   unanticipated   events.   These
forward-looking  statements speak only as of the date of this quartlery  report,
and you should not rely on these  statements  without also considering the risks
and uncertainties associated with these statements and our business.

         When used in this quarterly report,  the terms the "Company," "we," and
"us" refers to S.E. Asia Trading  Company,  Inc., a Nevada  corporation,and  our
wholly-owned  subsidiary  Lotus  Pharmaceutical  International,  Inc ., a Nevada
Corporation.

                                      -2-
<PAGE>

<TABLE>

<CAPTION>


                S.E. ASIA TRADING COMPANY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               September 30, 2006
                                   (Unaudited)

                                     ASSETS
<S>                                                                           <C>

CURRENT ASSETS:
    Cash                                                                      $  1,252,750
    Accounts receivable, net of allowance for doubtful accounts of $161,914      3,076,364
    Inventories                                                                  9,777,319
                                                                              ------------

        Total Current Assets                                                    14,106,433

PROPERTY AND EQUIPMENT - Net                                                     5,841,531

OTHER ASSETS
   Intangible assets, net of accumulated amortization                              236,970
   Due from related parties                                                      2,293,261
                                                                              ------------

        Total Assets                                                          $ 22,478,195
                                                                              ============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable and accrued expenses                                     $  1,123,586
    Income tax payable                                                              30,511
    Advances from customers                                                        151,134
    Other current payables                                                          51,393
    Unearned revenue                                                               272,678
    Due to related parties                                                         858,139
                                                                              ------------

        Total Current Liabilities                                                2,487,441

LONG-TERM LIABILITIES:
   Notes payable - related parties                                               8,155,170
                                                                              ------------

        Total Liabilities                                                       10,642,611
                                                                              ------------

SHAREHOLDERS' EQUITY:
    Common stock ($.001 par value; 50,000,000 shares authorized;
         41,280,000 shares issued and outstanding)                                  41,280
    Additional paid-in capital                                                   5,965,323
    Retained earnings                                                            5,457,999
    Other comprehensive gain - foreign currency                                    370,982
                                                                              ------------

        Total Shareholders' Equity                                              11,835,584
                                                                              ------------

        Total Liabilities and Shareholders' Equity                            $ 22,478,195
                                                                              ============
</TABLE>


            See notes to unaudited consolidated financial statements

                                       -3-



<PAGE>

<TABLE>

<CAPTION>

           S.E. ASIA TRADING COMPANY, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS


                                       For the Three Months Ended      For the Nine Months Ended
                                              September 30,                  September 30,
                                      ----------------------------    ----------------------------
                                          2006             2005             2006            2005
                                      ------------    ------------    ------------    ------------
                                       (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)
<S>                                   <C>             <C>             <C>             <C>

NET REVENUES
     Tangible products                $  8,110,441    $  3,448,528    $ 21,874,576    $ 12,197,281
      Other revenues                       601,134            --         2,248,800            --
                                      ------------    ------------    ------------    ------------

        Total Revenues                   8,711,575       3,448,528      24,123,376      12,197,281

COST OF SALES                            6,508,446       2,956,529      17,772,567      10,075,380
                                      ------------    ------------    ------------    ------------
GROSS PROFIT                             2,203,129         491,999       6,350,809       2,121,901
                                      ------------    ------------    ------------    ------------

OPERATING EXPENSES:
     Selling expenses                      288,679         111,926         765,425         237,286
     Salaries and employee benefits        283,942         103,098         851,490         248,957
     Research and development                 --           432,969            --         1,429,650
     General and administrative            410,919         102,988       1,080,767         446,860
                                      ------------    ------------    ------------    ------------

        Total Operating Expenses           983,540         750,981       2,697,682       2,362,753
                                      ------------    ------------    ------------    ------------

INCOME (LOSS) FROM OPERATIONS            1,219,589        (258,982)      3,653,127        (240,852)
                                      ------------    ------------    ------------    ------------

OTHER INCOME (EXPENSE):
     Other income                          320,431         161,899         956,312       1,674,166
     Interest income                          (188)             63            --               114
     Interest expense                     (103,457)            (24)       (308,710)            (24)
                                      ------------    ------------    ------------    ------------
        Total Other Income                 216,786         161,938         647,602       1,674,256
                                      ------------    ------------    ------------    ------------

INCOME (LOSS) BEFORE INCOME TAXES        1,436,375         (97,044)      4,300,729       1,433,404

INCOME TAXES                                  --               266            --             2,109
                                      ------------    ------------    ------------    ------------

NET INCOME (LOSS)                     $  1,436,375    $    (97,310)   $  4,300,729    $  1,431,295
                                      ============    ============    ============    ============

NET INCOME (LOSS) PER COMMON
  SHARE - Basic                       $       0.04    $       --      $       0.11    $       0.04
                                      ============    ============    ============    ============
  SHARE - Diluted                     $       0.04    $       --      $       0.11    $       0.04
                                      ============    ============    ============    ============

WEIGHTED AVERAGE COMMON SHARES
    OUTSTANDING - Basic                 40,068,522      40,041,600      40,050,673      40,041,600
                                      ============    ============    ============    ============

    OUTSTANDING - Diluted               40,068,522      40,041,600      40,050,673      40,041,600
                                      ============    ============    ============    ============

</TABLE>


            See notes to unaudited consoldiated financial statements

                                       -4-

<PAGE>

<TABLE>

<CAPTION>

              S.E. ASIA TRADING COMPANY, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                      For the Nine Months Ended
                                                                            September 30,
                                                                      --------------------------
                                                                         2006          2005
                                                                      -----------    -----------
                                                                      (Unaudited)    (Unaudited)
<S>                                                                   <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                        $ 4,300,729    $ 1,431,295
    Adjustments to reconcile net income from operations to net cash
       provided by operating activities:
       Depreciation and amortization                                      433,158        330,360
       Allowance for doubtful accounts                                    114,368         13,365
    Changes in assets and liabilities:
       Accounts receivable                                             (2,218,221)      (423,046)
       Inventories                                                     (2,687,949)       525,568
       Prepaid and other current assets                                   171,041        407,159
       Other assets                                                          --           29,857
       Accounts payable and accrued expenses                              742,332         59,755
       Other current payable                                              (67,346)       153,500
       Income tax payable                                                  24,155         (4,815)
       Unearned revenue                                                    53,445        (13,689)
       Advances from customers                                            (37,171)       (44,106)
                                                                      -----------    -----------

NET CASH PROVIDED BY OPERATING ACTIVITIES                                 828,541      2,465,203
                                                                      -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Decrease (increase) in due from related parties                    754,746     (3,017,996)
       Purchase of property and equipment                                    --          (15,117)
                                                                      -----------    -----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                       754,746     (3,033,113)
                                                                      -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Capital contributions                                                 --              801
       Repayments on related party advances                              (508,366)          --
       Proceeds from related party advances                                  --        1,384,394
                                                                      -----------    -----------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                      (508,366)     1,385,195
                                                                      -----------    -----------

EFFECT OF EXCHANGE RATE ON CASH                                            16,895         14,981
                                                                      -----------    -----------

NET INCREASE IN CASH                                                    1,091,816        832,266

CASH  - beginning of year                                                 160,934         84,657
                                                                      -----------    -----------

CASH - end of period                                                  $ 1,252,750    $   916,923
                                                                      ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
    Cash paid for:
         Interest                                                     $   308,710    $      --
                                                                      ===========    ===========
         Income taxes                                                 $      --      $     1,843
                                                                      ===========    ===========
</TABLE>



            See notes to unaudited consolidated financial statements.

                                       -5-



<PAGE>

                S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006



NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         -----------------------------------------------------------

Organization
------------
S.E. Asia Trading  Company,  Inc.  ("SEAA" or the "Company") was incorporated on
January  28,  2004 under the laws of the State of  Nevada.  SEAA  operated  as a
retailer of jewelry, framed art and home accessories.

On September 6, 2006,  SEAA entered into a definitive  Share Exchange  Agreement
with Lotus  Pharmaceutical  International,  Inc.  ("Lotus"),  whereby SEAA would
acquire  all  of  the  outstanding   common  stock  of  Lotus  in  exchange  for
newly-issued  stock of SEAA to Lotus'  shareholders.  On September 28, 2006 (the
closing  date),  Lotus  became a  wholly-owned  subsidiary  of SEAA  and  Lotus'
shareholders  own the majority of SEAA's voting stock.  The  acquisition  of the
Lotus by SEAA was  accounted  for as a reverse  merger  because on a post-merger
basis,  the former  shareholders  of Lotus held a  majority  of the  outstanding
common stock of SEAA on a voting and fully-diluted  basis. As a result, Lotus is
deemed to be the acquirer for accounting purposes.

On September 6, 2006, the Lotus entered into various  agreements with Liang Fang
Pharmaceuticals  Co. Ltd. ("Liang Fang") and Beijing  Enzejiashi  Pharmaceutical
Co.,  Ltd.  ("Enzejiashi")  (herein  referred  to as "Lotus  East")  whereby the
shareholders  of Lotus East  transferred  all  operating,  voting and control to
Lotus.  Lotus was incorporated  under the laws the State of Nevada on August 28,
2006 to develop and market  pharmaceutical  products in the People's Republic of
China  ("PRC"  or  "China").  The  acquisition  of the  Lotus  East by Lotus was
accounted for as a reverse merger because on a post-merger basis, the members of
Lotus East held a majority of the outstanding  common stock of Lotus on a voting
and fully-diluted basis.

PRC law  currently  has limits on foreign  ownership  of certain  companies.  To
comply  with  these  foreign  ownership  restrictions,  Lotus will  operate  its
pharmaceutical  business  in China  through  Lotus East.  Lotus has  contractual
arrangements  with Lotus East and its shareholders  pursuant to which Lotus will
provide  technology  consulting and other general business operation services to
Lotus East. Through these contractual  arrangements,  Lotus also has the ability
to substantially  influence Lotus East's daily operations and financial affairs,
appoint its senior  executives  and approve  all matters  requiring  shareholder
approval. As a result of these contractual  arrangements,  which enable Lotus to
control Lotus East, Lotus is considered the primary beneficiary of Lotus East.

On  September  6,  2006  the  Company  entered  into the  following  contractual
arrangements:

Consulting  Services  Agreement.  Pursuant to the exclusive  consulting services
agreements  between  Lotus and Lotus  East,  Lotus  has the  exclusive  right to
provide to Lotus East general  pharmaceutical  business  operations  services as
well  as  consulting   services  related  to  the  technological   research  and
development of  pharmaceutical  products as well as general  business  operation
advice and strategic planning (the "Services"). Under this agreement, Lotus owns
the intellectual  property rights  developed or discovered  through research and
development,  in the course of  providing  the  Services,  or  derived  from the
provision of the Services.  Lotus East pays a quarterly  consulting service fees
in  Renminbi  ("RMB") to Lotus  that is equal to the Lotus  East's  revenue,  as
defined, for such quarter.


                                      -6-
<PAGE>

               S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006




NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Organization (continued)
-----------------------

Operating Agreement. Pursuant to the operating agreement among Lotus, Lotus East
and the shareholders of Lotus East,  (collectively "Lotus East's Shareholders"),
Lotus  provides  guidance and  instructions  on Lotus  East's daily  operations,
financial  management and employment issues. The shareholders of Lotus East must
designate the candidates  recommended by Lotus as their representatives on Lotus
East's board of directors.  Lotus has the right to appoint senior  executives of
Lotus East.  In addition,  Lotus agrees to  guarantee  Lotus East's  performance
under  any  agreements  or  arrangements   relating  to  Lotus  East's  business
arrangements with any third party.  Lotus East, in return,  agrees to pledge its
accounts receivable and all of its assets to Lotus. Moreover,  Lotus East agrees
that  without  the prior  consent  of Lotus,  Lotus  East will not engage in any
transactions  that could materially  affect the assets,  liabilities,  rights or
operations  of  Lotus  East,  including,   without  limitation,   incurrence  or
assumption  of any  indebtedness,  sale or  purchase  of any  assets or  rights,
incurrence  of any  encumbrance  on any of its assets or  intellectual  property
rights in favor of a third party or transfer of any  agreements  relating to its
business  operation to any third party.  The term of this  agreement is ten (10)
years from  September  6, 2006 and may be  extended  only upon  Lotus's  written
confirmation  prior to the expiration of the this  agreement,  with the extended
term to be mutually agreed upon by the parties.

Equity  Pledge  Agreement.   Under  the  equity  pledge  agreement  between  the
shareholders of Lotus East and Lotus, the shareholders of Lotus East pledged all
of their  equity  interests  in Lotus East to Lotus to  guarantee  Lotus  East's
performance of its obligations under the technology consulting agreement. If the
Lotus East or Lotus  East's  Shareholders  breaches its  respective  contractual
obligations,  Lotus, as pledgee,  will be entitled to certain rights,  including
the right to sell the pledged equity interests.  Lotus East's  Shareholders also
agreed that upon  occurrence of any event of default,  Lotus shall be granted an
exclusive,  irrevocable power of attorney to take actions in the place and stead
of the Lotus East's  Shareholders  to carry out the security  provisions  of the
equity  pledge  agreement  and take any action and execute any  instrument  that
Lotus may deem  necessary or advisable to accomplish  the purposes of the equity
pledge  agreement.  The  shareholders of Lotus East agreed not to dispose of the
pledged  equity  interests  or take any  actions  that  would  prejudice  Lotus'
interest.  The equity  pledge  agreement  will  expire two (2) years after Lotus
East's obligations under the exclusive  consulting services agreements have been
fulfilled.

Option  Agreement.  Under the option agreement between the shareholders of Lotus
East and Lotus, the shareholders of Lotus East irrevocably  granted Lotus or its
designated person an exclusive option to purchase, to the extent permitted under
PRC law,  all or part of the equity  interests in Lotus East for the cost of the
initial  contributions  to the  registered  capital  or the  minimum  amount  of
consideration  permitted by applicable PRC law.  Lotus or its designated  person
has sole discretion to decide when to exercise the option, whether in part or in
full.  The term of this  agreement is ten (10) years from  September 6, 2006 and
may be extended prior to its expiration by written agreement of the parties.

Proxy  Agreement.  Pursuant to the proxy  agreement among Lotus and Lotus East's
Shareholders,  Lotus East's Shareholders agreed to irrevocably grant a person to
be  designated  by Lotus with the right to exercise  Lotus East's  Shareholders'
voting rights and their other rights, including the attendance at and the voting
of Lotus  East's  Shareholders'  shares  at the  shareholders'  meetings  (or by
written consent in lieu of such meetings) in accordance with applicable laws and
its Article of  Association,  including but not limited to the rights to sell or
transfer all or any of his equity interests of Lotus East, and appoint and vote


                                      -7-
<PAGE>


               S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

for  the  directors  and  Chairman  as  the  authorized  representative  of  the
shareholders  of Lotus East. The term of this Proxy  Agreement is ten (10) years
from  September 6, 2006 and may be extended  prior to its  expiration by written
agreement of the parties.

Liang  Fang  Pharmaceuticals  Co.  Ltd.  ("Liang  Fang")  is a  Chinese  limited
liability company and was formed under laws of the People's Republic of China on
June 21, 2000.  Liang Fang is engaged in the production,  trade and retailing of
pharmaceuticals.  Further,  Liang Fang is focused on  development  of innovative
medicines and investing  strategic  growth to address  various medical needs for
patients worldwide. The Liang Fang's operations are based in Beijing, China.

Liang Fang owns and operates  several  drug stores  throughout  Beijing,  China.
These  drugstores  sell Western and traditional  Chinese  drinking  pieces,  and
medical  treatment  facilities.

Liang  Fang's   affiliate,   Beijing   Enzejiashi   Pharmaceutical   Co.,   Ltd.
("Enzejiashi")  is a Chinese limited liability company and was formed under laws
of the People's Republic of China on September 17, 1999.  Enzejiashi is the sole
manufacturer  for Liang Fang and  maintains  facilities  for the  production  of
medicines,  patented Chinese medicine, as well as the research and production of
other new medicines.

As a result of the share exchanges, Lotus East was deemed to be the acquirer for
accounting  purposes.  Accordingly,  the financial  statement data presented are
those of Lotus East for all periods prior to the Company's  acquisition of Lotus
on  September  28,  2006,  and  the  financial  statements  of the  consolidated
companies from the acquisition date forward.

Basis of presentation
---------------------

The financial  statements  are prepared in accordance  with  generally  accepted
accounting  principles  in  the  United  States  of  America  ("US  GAAP").  The
consolidated  statements include the accounts of S.E. Asia Trading Company, Inc.
and its wholly-owned  subsidiaries.  All significant  inter-company balances and
transactions have been eliminated.

The  financial   statements  have  been  prepared  pursuant  to  the  rules  and
regulations of the Securities and Exchange Commission ("SEC").  The accompanying
financial  statements  for the  interim  period are  unaudited  and  reflect all
adjustments  (consisting only of normal recurring adjustments) which are, in the
opinion  of  management,  necessary  for a fair  presentation  of the  financial
position  and  operating  results  for  the  periods  presented.  The  financial
statements  should be read in conjunction with the financial  statements for the
year ended  December 31, 2005 and notes.  The results of operations for the nine
months ended  September 30, 2006 are not  necessarily  indicative of the results
for the full calendar year ending December 31, 2006.

Use of estimates
----------------

The  preparation  of financial  statements in  conformity  with US GAAP requires
management  to make  estimates  and  assumptions  that affect  certain  reported
amounts and  disclosures.  Accordingly,  actual  results could differ from those
estimates.  Significant  estimates  in 2006 include the  allowance  for doubtful
accounts, the useful life of property and equipment and intangible assets.



                                      -8-
<PAGE>

               S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Fair value of financial instruments
-----------------------------------

The  carrying   amounts  reported  in  the  balance  sheet  for  cash  and  cash
equivalents,   accounts  receivable,  accounts  payable  and  accrued  expenses,
customer advances,  loans and amounts due from related parties approximate their
fair market value based on the short-term maturity of these instruments.

Cash and cash equivalents
-------------------------

For purposes of the statements of cash flows,  the Company  considers all highly
liquid  instruments  purchased with a maturity of three months or less and money
market accounts to be cash equivalents.

Accounts receivable
-------------------

The Company has a policy of reserving for  uncollectible  accounts  based on its
best estimate of the amount of probable  credit losses in its existing  accounts
receivable.   The  Company  periodically  reviews  its  accounts  receivable  to
determine  whether an allowance  is  necessary  based on an analysis of past due
accounts and other factors that may indicate that the  realization of an account
may be in doubt.  Account balances deemed to be uncollectible are charged to the
allowance  after all means of collection  have been  exhausted and the potential
for  recovery is  considered  remote.  At September  30,  2006,  the Company has
established,  based on a review of its  outstanding  balances,  an allowance for
doubtful accounts in the amount of $161,914.

Inventories
-----------

Inventories,  consisting  of raw  materials  and finished  goods  related to the
Company's  products  are  stated at the lower of cost or  market  utilizing  the
weighted average method.

Property and equipment
----------------------

Property and equipment are carried at cost. The cost of repairs and  maintenance
is expensed as incurred;  major  replacements  and improvements are capitalized.
When assets are retired or disposed  of, the cost and  accumulated  depreciation
are removed from the accounts, and any resulting gains or losses are included in
income in the year of  disposition.  In accordance  with  Statement of Financial
Accounting

Standards  (SFAS)  No.  144,  "Accounting  for the  Impairment  or  Disposal  of
Long-Lived  Assets",  the Company  examines the  possibility of decreases in the
value of fixed assets when events or changes in  circumstances  reflect the fact
that their recorded value may not be recoverable.

Advances from customers
-----------------------

Advances from customers at September 30, 2006 of $151,134 consist of prepayments
from third  party  customers  to the Company  for  merchandise  that had not yet
shipped.  The Company will  recognize the deposits as revenue as customers  take
delivery of the goods, in compliance with its revenue recognition policy.



                                      -9-
<PAGE>


               S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

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," The Company
periodically  reviews its long-lived  assets for impairment  whenever  events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable.  The Company recognizes an impairment loss when the sum of
expected  undiscounted future cash flows is less than the carrying amount of the
asset.  The amount of  impairment  is  measured  as the  difference  between the
asset's estimated fair value and its book value. The Company did not consider it
necessary  to  record  any  impairment  charges  during  the nine  months  ended
September 30, 2006.

Income taxes
------------

The Company is governed by the Income Tax Law of the People's Republic of China.
Income taxes are accounted for under Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," which is an asset and liability approach
that requires the  recognition  of deferred tax assets and  liabilities  for the
expected  future tax  consequences  of events that have been  recognized  in the
Company's financial statements or tax returns.

Revenue recognition
-------------------

The Company  follows the guidance of the  Securities  and Exchange  Commission's
Staff Accounting Bulletin 104 for revenue  recognition.  In general, the Company
records revenue when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred,  the sales price to the customer
is  fixed  or  determinable,  and  collectibility  is  reasonably  assured.  The
following policies reflect specific criteria for the various revenues streams of
the Company:

The Company's revenues from the sale of products are recorded when the goods are
shipped, title passes, and collectibility is reasonably assured.

Shipping costs
--------------

Shipping costs are included in cost of sales and totaled approximately  $196,000
and  $176,000  for  the  nine  months  ended   September   30,  2006  and  2005,
respectively.

Advertising
-----------

Advertising  is expensed as incurred.  Advertising  expenses for the nine months
ended  September  30,  2006 and 2005  totaled  approximately  $71,664  and $680,
respectively.



                                      -10-
<PAGE>


               S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
         -----------------------------------------------------------------------

Concentrations of credit risk
-----------------------------

Financial instruments which potentially subject the Company to concentrations of
credit risk  consist  principally  of cash and trade  accounts  receivable.  The
Company  places its cash with high  credit  quality  financial  institutions  in
China. Almost all of the Company's sales are credit sales which are primarily to
customers  whose  ability  to pay  is  dependent  upon  the  industry  economics
prevailing in these areas;  however,  concentrations of credit risk with respect
to trade accounts  receivables is limited due to generally  short payment terms.
The Company also performs  ongoing  credit  evaluations of its customers to help
further reduce credit risk.

Research and development

Research  and  development  costs are  expensed  as  incurred  and  included  in
operating  expenses.  These costs primarily consist of cost of material used and
salaries paid for the  development  of the  Company's  products and fees paid to
third  parties.  Research  and  development  costs  for the  nine  months  ended
September 30, 2006 and 2005 was $ 0 and $1,429,650, respectively.

Foreign currency translation

The  reporting  currency  is the U.S.  dollar.  The  functional  currency of the
Company is the local  currency,  the Chinese  Renminbi  ("RMB").  The  financial
statements  of the  Company are  translated  into United  States  dollars  using
year-end  rates of exchange  for assets and  liabilities,  and average  rates of
exchange  for  the  period  for  revenues,  costs,  and  expenses.   Translation
adjustments  resulting  from the  process  of  translating  the  local  currency
financial statements into U.S. dollars are included in determining comprehensive
income.  The  cumulative  translation  adjustment  and effect of  exchange  rate
changes on cash at September 30, 2006 was $16,895.

NOTE 2 - PROPERTY AND EQUIPMENT

At September 30, 2006, property and equipment consist of the following:

                                                 Useful Life
                                           -----------------------

       Office equipment and furniture             5-8 Years       $    133,403
       Manufacturing equipment                  10 - 15 Years        4,649,473
       Building and building improvements       20 - 40 Years        2,355,733
                                                                ---------------
                                                                     7,138,609

       Less: accumulated depreciation                               (1,297,078)
                                                                ---------------

                                                                  $  5,841,531
                                                                ===============


For the nine months  ended  September  30, 2006 and 2005,  depreciation  expense
amounted to approximately $295,000 and $187,000.



                                      -11-
<PAGE>


               S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


NOTE 3 - INVENTORIES
         -----------

At September 30, 2006, inventories consisted of the following:

         Raw materials                           $2,027,700
         Packaging materials                         67,354
         Finished goods                           7,682,265
                                                 ----------


                                                 $9,777,319
                                                 ==========

NOTE 4 - INTANGIBLE ASSETS
         -----------------

At September  30, 2006,  the Company holds  manufacturing  rights for two issued
drugs.  The  manufacturing  rights issued are in  connection  with the Company's
products  Valsartan  and  Brimonidine.  The  manufacturing  rights for Valsartan
became   effective  in  November  2000  and  has  al  life  of  6.5  years.  The
manufacturing rights for Brimonidine became effective on August 27, 2005 and has
a life of 5 years.


At September 30, 2006, intangible assets consist of the following:

         Manufacturing rights                    $1,097,160
         Less:  accumulated amortization           (860,190)
                                                 ----------

                                                 $  236,970
                                                 ==========

Amortization  expense  amounted to  approximately  $138,000 and $133,000 for the
nine months ended September 30, 2006 and 2005.


Amortization expense attributable to future periods is as follows:

         Year ending September 30:
         2007                                    $   86,968
         2008                                        76,257
         2009                                        73,745
                                                 ----------

                                                 $  236,970
                                                 ==========


NOTE 5 - RELATED PARTY TRANSACTIONS
         --------------------------

DUE FROM RELATED PARTIES

As of  September  30,  2006,  the  financial  statements  include  balances  and
transactions  with related  parties.  At September  30, 2006,  the Company had a
receivable from affiliated  entity owned by an officer of the Company  amounting
to  $2,293,261.  These  advances  were  payable  on demand  and were  personally
guaranteed by the officer.  The Company is aware that the  receivable  from this
related party may be in violation of the Sarbanes-Oxley Act of 2002. The Company
intends to rectifiy this  situation in the near term and will initiate  policies
and procedures to prevent this situation and other  weaknesses from occurring in
the future.





                                      -12-
<PAGE>

<TABLE>

<CAPTION>

               S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

<S>                                                                                   <C>

NOTE 5 - RELATED PARTY TRANSACTIONS (continued)
         --------------------------------------

DUE TO RELATED PARTIES

The  President  of the  Company,  from time to time,  provided  advances  to the
Company for operating  expenses.  At September  30, 2006,  the Company had a net
payable to the President of the Company  amounting to $248,824.  These  advances
are short-term in nature and non-interest bearing.

At September  30, 2006,  the  Company's  vice  president  and director  provided
advances  to fund the  operations  of the Company  amounting  to  $463,418.  The
advances are non-interest bearing and payable on demand.

At  September  30,  2006,  an officer of the  Company  provided  advances to the
Company  for  operating  expenses  amounting  to  $145,897.   The  advances  are
non-interest bearing and payable on demand.

NOTES PAYABLE - RELATED PARTIES

Notes  payable - related  parties  consisted of the  following at September  30,
2006:

Note to Song Guoan, officer and director, due on December 30, 2015 with
variable annual interest at 80% of current bank rate (4.80% at September 30,
2006), and unsecured                                                                  $     1,856,811

Note to Zheng Gui Xin,  employee,  due on December  30, 2015 with with  variable
annual interest at 80% of current bank rate (4.80% at September 30, 2006), and
unsecured                                                                                   1,427,976

Note to Ma Zhao Zhao,  employee,  due on December 30, 2015 with variable  annual
interest at 80% of current bank rate (4.80% at September 30, 2006), and
unsecured                                                                                     571,901

Note to Liu Zong Yi,  officer  and  director,  due on  December  30,  2015  with
variable annual interest at 80% of current bank rate (4.80% at September 30,
2006), and unsecured                                                                        1,266,954

Note to Song Zheng Hong,  officer and  director,  due on December  30, 2015 with
variable annual interest at 80% of current bank rate (4.80% at September 30,
2006), and unsecured                                                                        3,031,528
                                                                                 ---------------------

     Total notes payable - related parties, long term                                 $     8,155,170
                                                                                 =====================
</TABLE>


NOTE 6 - INCOME TAXES
         ------------

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards No. 109,  "Accounting  for Income Taxes" "SFAS 109". SFAS 109 requires
the  recognition  of deferred tax assets and  liabilities  for both the expected
impact of  differences  between the  financial  statements  and the tax basis of
assets and  liabilities,  and for the expected  future tax benefit to be derived
from tax losses and tax credit carryforwards. SFAS 109 additionally requires the
establishment of a valuation allowance to



                                      -13-
<PAGE>

                S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


NOTE 6 - INCOME TAXES (continued)
---------------------------------

reflect the  likelihood of  realization  of deferred tax assets.  The Company is
governed by the Income Tax Law of the People's Republic of China.

The PRC local government has provided  various  incentives to companies in order
to encourage economic development. Such incentives include reduced tax rates and
other  measures.  Since 2002,  the  Company  has been  entitled to an income tax
exemption for a six-year period and was exempted from  substantially  all of its
income tax in the 2006 and 2005 period.

NOTE 7 -  OTHER INCOME
          ------------

During the nine months ended  September  30, 2005,  the Company  recorded  other
income of $1,213,418 related to the sale of a patent to a third party for a drug
formula that it had developed.

The Company  leased retail and counter space to various  vendors on a short-term
basis.  For the nine  months  ended  September  30,  2006 and 2005,  the Company
recorded rental income of $507,339 and $460,747, respectively.

During the nine months ended  September  30, 2006,  the Company  recorded  other
income of  $448,973  related  to the  lease of  billboard  advertising  space to
vendors on a short term basis.


NOTE 8 - OPERATING RISK
         --------------

(a) Country risk

Currently,  the  Company's  revenues  are  primarily  derived  from  the sale of
pharmaceutical products to customers in the Peoples Republic of China (PRC). The
Company hopes to expand its  operations to countries  outside the PRC,  however,
such  expansion  has not been  commenced  and there are no  assurances  that the
Company  will be able to achieve such an expansion  successfully.  Therefore,  a
downturn  or  stagnation  in the  economic  environment  of the PRC could have a
material adverse effect on the Company's financial condition.

(b) Products risk

In addition to competing  with other  manufacturers  of  pharmaceutical  product
offerings,  the Company  competes  with larger  Chinese  companies  who may have
greater funds available for expansion,  marketing,  research and development and
the ability to attract more qualified personnel.  These Chinese companies may be
able to offer  products at a lower  price.  There can be no  assurance  that the
Company will remain competitive should this occur.

(c) Political risk

Currently,  PRC is in a  period  of  growth  and is  openly  promoting  business
development in order to bring more business into PRC.  Additionally PRC allows a
Chinese corporation to be owned by a United States  corporation.  If the laws or
regulations are changed by the PRC government,  the Company's ability to operate
the PRC subsidiaries could be affected.



                                      -14-
<PAGE>


                S.E. ASIA TRADING COMPANY, INC., AND SUBSIDIARIES
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

OVERVIEW

The following  discussion of the financial condition and results of operation of
S.E.  Asia  Trading,  Inc.  should  be read in  conjunction  with the  financial
statements  and the  notes  to  those  statements  included  in this  8-K.  This
discussion   includes   forward-looking   statements   that   involve  risk  and
uncertainties.  As a result of many factors, such as those set forth under "Risk
Factors",  actual results may differ  materially  from those  anticipated in the
forward-looking statements.

On September 6, 2006, we entered into a definitive Share Exchange Agreement with
Lotus Pharmaceutical International, Inc. ("Lotus"), whereby we would acquire all
of the outstanding common stock of Lotus in exchange for newly-issued  shares of
our common  stock o Lotus'  shareholders.  On  September  28, 2006 (the  closing
date), Lotus became our wholly-owned  subsidiary and Lotus' shareholders own the
majority of our voting stock. The acquisition of Lotus by us is accounted for as
a reverse  merger because on a post-merger  basis,  the former  shareholders  of
Lotus  held  a  majority  of  our  outstanding  common  stock  on a  voting  and
fully-diluted  basis.  As a  result,  Lotus is  deemed  to be the  acquirer  for
accounting purposes.

Additionally,  on September 6, 2006, Lotus entered various agreements with Liang
Fang   Pharmaceuticals   Co.  Ltd.   ("Liang   Fang")  and  Beijing   Enzejiashi
Pharmaceutical  Co., Ltd.  ("Enzejiashi")  (herein  referred to as "Lotus East")
whereby the shareholders of the Lotus East transferred all operating, voting and
control to Lotus.  Lotus was incorporated  under the laws the State of Nevada on
August 28, 2006 to develop and market  pharmaceutical  products in the  People's
Republic of China ("PRC" or "China"). The acquisition of the Lotus East by Lotus
is accounted for as a reverse merger because on a post-merger basis, the members
of Lotus  East held a majority  of the  outstanding  common  stock of Lotus on a
voting and fully-diluted basis.

As a result of the share exchanges, Lotus East was deemed to be the acquirer for
accounting  purposes.  Accordingly,  the financial  statement data presented are
those  of Lotus  East  for all  periods  prior  to our  acquisition  of Lotus on
September 28, 2006, and the financial  statements of the consolidated  companies
from the acquisition date forward.

For purposes of the  following  discussion  and  analysis,  references  to "we",
"our", "us" refers to Lotus East.

Liang Fang is a Chinese limited  liability  company and was formed under laws of
the  People's  Republic  of  China  on  June  21,  2000  and is  engaged  in the
production,  trade and  retailing  of  pharmaceuticals.  Further,  Liang Fang is
focused on development of innovative medicines and investing strategic growth to
address various medical needs for patients  worldwide.  Liang Fang's  operations
are based in Beijing, China.

Liang Fang owns and operates  several  drug stores  throughout  Beijing,  China.
These  drugstores  sell Western and traditional  Chinese  drinking  pieces,  and
medical  treatment  facilities.

Liang  Fang's   affiliate,   Beijing   Enzejiashi   Pharmaceutical   Co.,   Ltd.
("Enzejiashi")  is a Chinese limited liability company and was formed under laws
of the People's Republic of China on September 17, 1999.  Enzejiashi is the sole
manufacturer of pharmaceuticals for the Company and maintains facilities for the
production of medicines,  patented Chinese medicine, as well as the research and
production of other new medicines.




                                      -15-
<PAGE>

Results of Operations

Nine months  ended  September  30,  2006 as  compared  to the nine months  ended
--------------------------------------------------------------------------------
September 30, 2005
------------------

Total revenues

         Total  revenues  for the nine  months  ended  September  30,  2006 were
$24,123,376  as compared to total  revenues of  $12,197,281  for the nine months
ended September 30, 2005, an increase of $11,926,095 or  approximately  98%. For
the nine months ended September 30, 2006, sales of tangible  products  accounted
for  $21,874,576  or 91% of our revenues as compared to  $12,197,281 or 100% for
the nine months ended September 30, 2005. The  significant  increase in tangible
product  revenues is mainly  attributed  to  continued  strong sales of our best
selling product, VALSARTAN Capsules, a medicine for primary hypertension or high
blood pressure.  Other revenues,  primarily  attributable to  manufacturing  and
examination/inspection service income amounted to $2,248,800 or approximately 9%
of our revenues for the nine months ended  September  30, 2006 as compared to 0%
for the comparable nine month period in fiscal 2005.

Cost of sales

         Cost of sales includes raw materials, packing materials,  shipping, and
manufacturing  costs, which includes allocated portion of overhead expenses such
as utilities and depreciation  directly related to product  production.  For the
nine months ended  September 30, 2006,  cost of sales amounted to $17,772,567 or
approximately  74% of total revenues as compared to cost of sales of $10,075,380
or  approximately  83%. The  decrease in cost of sales as a percentage  of total
revenues  for the nine months ended  September  30, 2006 as compared to the nine
months ended September 30, 2005 is  attributable  to increase  revenues from our
other revenues from  manufacturing and  examination/inspection  services for the
nine  months  ended  September  30,  2006 as compared to $ 0 for the nine months
ended September 30, 2005.

Gross profit

         Gross  profit  for  the  nine  months  ended  September  30,  2006  was
$6,350,809 or approximately 26% of total revenues,  as compared to $2,121,901 or
approximately  17% of revenues for the nine months ended September 30, 2005. The
increase in gross profit was  attributable  to increase  revenues from our other
revenues from  manufacturing  and  examination/inspection  services for the nine
months  ended  September  30,  2006  which  we did not have a  comparable  other
revenues for the nine months ended  September  30, 2005.  Although we recognized
higher than average  gross  profits  during the nine month ended  September  30,
2006,  there could be no assurances  that we will continue to recognize  similar
gross profit margin in the future.

Operating expenses

         Total  operating  expenses for the nine months ended September 30, 2006
were  $2,697,682,  an increase of $334,929,  or  approximately  14%,  from total
operating  expenses in the nine months ended  September 30, 2005 of  $2,362,753.
This increase included the following:

         For the nine months ended September 30, 2006, selling expenses amounted
to $765,425 as compared to  $237,286  for the nine months  ended  September  30,
2005,  an  increase  of  $528,139  or  approximately   220%.  This  increase  is
attributable to increase  shipping costs to customers of approximately  $457,000
and increased advertising costs of approximately  $71,000. We expect our selling
expenses to  increase as our  revenues  increase  and expect to spend  increased


                                      -16-
<PAGE>

funds on adverting  and  promotion  of our  products as well as sales  training.
During  fiscal 2006, we intend to expand our  marketing  efforts  related to our
products.

         For the nine months ended  September  30, 2006,  salaries and wages and
related benefits  increased by  approximately  $602,533 to $851,490 for the nine
months  ended  September  30,  2006 from  $248,957 in the 2005 period due to the
hiring of additional employees.

         We did not incur research and development  costs during the nine months
ended  September  30, 2006 as compared to  $1,429,650  for the nine months ended
September  30,  2005.  In fiscal 2006,  we ceased our  research and  development
activities to concentrate on the sale and marketing of developed products. As of
the date of this filing,  we can not predict when we will begin the  development
of new pharmaceutical products or the related costs.

         For  the  nine  months   ended   September   30,   2006,   general  and
administrative  expenses  were  $1,080,767  as compared to $446,860 for the nine
months ended September 30, 2005, an increase of $633,907,  or approximately 142%
as summarized below:


                                         Nine months ended September 30,
                                   ---------------------------------------------
                                           2006                     2005
                                   ----------------------    -------------------
       Amortization                           $  137,734              $ 133,264
       Bad debt                                  114,368                 20,048
       Depreciation                               15,947                 15,771
       Rent                                      185,355                176,916
       Travel and entertainment                  228,075                 10,567
       Other                                     399,288                 90,294
                                   ----------------------    -------------------

            Total                            $ 1,080,767              $ 446,860
                                   ======================    ===================


         The changes in these expenses from the nine months ended  September 30,
2006 as compared to the nine  months  ended  September  30,  2005  included  the
following:

     o    Amortization of patents increased by $4,470 or approximately 3%.
     o    An  increase  of  $94,320  or 470%,  in bad debt  expenses  due to the
          increase  in  write-off  of our  accounts  receivable  during the nine
          months ended September 30, 2006.
     o    Depreciation increased by $176 or approximately 1%.
     o    Rent  increased  by  $8,439 or  approximately  5% due to  increase  in
          monthly rentals of lease properties.
     o    Travel and entertainment  expenses  increased by $217,508 or 2058% due
          to increased sales-related travel.
     o    Other selling,  general and  administrative  expenses,  which includes
          utilities, office supplies and expenses increased by $308,994 or 342%.

Income from operations

            We reported income from operations of $3,653,127 for the nine months
ended September 30, 2006 as compared to loss from operations of $240,852 for the
nine months ended September 30, 2005, an increase of $3,893,979 or approximately
1,617%.


                                      -17-
<PAGE>

Other income (expense)

            For the nine months ended  September  30,  2006,  total other income
amounted  to  $647,602 as  compared  to  $1,674,256  for the nine  months  ended
September  30,  2005,  a  decrease  of  $1,026,654.  This  change  is  primarily
attributable to:

     o    The sale of patent to a third  party  for a drug  formula  that we had
          developed in 2005 for  approximately  $1.2 million for the nine months
          ended September 30, 2005.

     o    Advertising  income  from  lease of  billboard  advertising  space was
          $448,973 for the nine months ended  September  30, 2006 as compared to
          $0 for the nine months ended September 30, 2005.

     o    Rental  income  from  lease of retail  and  counter  space to  various
          vendors on a short term basis for the nine months ended  September 30,
          2006 was  approximately  $507,000 as compared to $461,000 for the nine
          months ended September 30, 2005, an increase of approximately $46,000.

     o    Interest  expense was  $308,710 as compared to $24 for the nine months
          ended  September  30,  2005,  an increase of $308,686 due to our notes
          payable to related parties issued on December 31, 2005.

Net income

            As a result of these  factors,  we reported net income of $4,300,729
for the nine  months  ended  September  30,  2006 as  compared  to net income of
$1,431,295 for the nine months ended September 30, 2005.

Liquidity and Capital Resources

         Liquidity is the ability of a company to generate  funds to support its
current and future operations,  satisfy its obligations and otherwise operate on
an ongoing basis.

         At September 30, 2006, we had a cash balance of $1,252,750.

         Our working  capital  position  increased  $5,667,756 to $11,618,992 at
September  30, 2006 from  $5,951,236  at December  31,  2005.  This  increase in
working capital is primarily  attributable to an increase of approximately  $2.2
million  in  accounts   receivable  due  from  third  parties  and   inventories
(approximately   $2.7  million).   The  increase  in  accounts   receivable  and
corresponding  increase in inventories  reflects the effects of increased  sales
during the nine months period of fiscal 2006 and the  corresponding  receivables
generated by those sales.

       At September  30, 2006,  our  inventories  of raw  materials and finished
goods totaled  $9,777,319,  an increase of approximately  $2.7 million,  or 41%,
from December 31, 2005.  During  fiscal 2005 we introduced  several new products
which had been in  development  for a period of time;  these new  products  were
partially  attributable  for our increased sales in fiscal 2005 and for the nine
months ended September 30, 2006. We expect to maintain higher  inventory  levels
to accommodate for anticipated future sales growth as well as a wider variety of
products.


                                      -18-
<PAGE>


         At September 30, 2006 our accounts  receivable,  allowance for doubtful
accounts  from third parties was $161,914 as compared to $45,205 at December 31,
2005 and reflects  our best  estimate of probable  losses.  In  determining  the
allowance for doubtful accounts,  our management reviews our accounts receivable
aging as well as the facts and  circumstances  of specific  customers  which may
indicate the collection of specific  amounts are at risk. As is customary in the
PRC, we extend relatively long payment terms to our customers. Our terms of sale
generally  require  payment  within four to nine months,  which is  considerably
longer than customary  terms offered in the United States,  however,  we believe
that our terms of sale are customary  amongst our  competitors for a company our
size within our  industry.  We also  occasionally  offer  established  customers
longer payment terms on new products as an incentive to purchase these products,
which has served to further  increase the average days  outstanding for accounts
receivable.  As the  market  for  these new  products  is  established,  we will
discontinue  offering  this  sales  incentive.  Occasionally  we will  request a
customer  prepaid an order prior to shipment.  At September 30, 2006 our balance
sheet reflected advances from customers of $151,134,  a decrease of $37,171,  or
approximately 20%, from December 31, 2005.

         Our balance  sheet at September 30, 2006 also reflects a due to related
parties of $858,139 which is a working capital loan made to us by our President,
vice-president  and an  officer of the  Company.  These  loans are  non-interest
bearing and are due on demand.

         Our balance sheet at September 30, 2006 also reflects  notes payable to
related parties of approximately  $8.1 million due on December 30, 2015 which is
a working capital loan made to us by certain  officers,  directors and employees
of the Company.  These loans bear a variable  annual  interest at 80% of current
bank rate and are unsecured.

         Net cash  provided by  operating  activities  for the nine months ended
September  30, 2006 was $828,541 as compared to  $2,465,203  for the nine months
ended September 30, 2005. For the nine months ended September 30, 2006, net cash
provided by operating activities was attributable  primarily to increases in our
accounts  receivable  and  inventory  balances  of  $2,218,221  and  $2,687,949,
respectively, offset by net income of $4,300,729,  depreciation and amortization
of  $433,158,  an increase in allowance  for  doubtful  accounts of $114,368 and
changes in other asset and liability  accounts of $886,456.  For the nine months
ended  September  30,  2005,  net cash  provided  by  operating  activities  was
attributable  primarily  to our net  income of  $1,431,295,  a  decrease  in our
inventory  of  $525,568,  a decrease  in  prepaid  and other  current  assets of
$437,016,  an increase accounts payable and accrued expense of $59,755 and other
current  payable  of  $153,500,  and the  add  back of  non-cash  items  such as
depreciation  and  amortization of $330,360 and bad debts of $13,365,  offset by
cash used to fund a net increase in accounts  receivable of $423,046 and changes
in other assets and liabilities and non-cash items of $62,610.

         Net cash  provided by  investing  activities  for the nine months ended
September  30, 2006 was $754,746  attributable  to payment  received on due from
related parties. Net cash used in investing activities for the nine months ended
September  30,  2005  amounted  to  $3,033,113  which  consisted  of  $3,017,996
attributable  to  advances  made to an  affiliated  company  owned by one of our
officers and purchases of equipment of $15,117.

         Net cash used in financing  activities was $508,366 for the nine months
ended  September  30, 2006 and was  attributable  to  payments on related  party
advances as compared to net cash provided by financing  activities of $1,385,195
for the nine months ended September 30, 2005 and reflects proceeds received from
related party advances.

         We reported a net increase in cash for the nine months ended  September
30, 2006 of $1,091,816 as compared to a net increase in cash of $832,266 for the
nine months ended September 30, 2005.



                                      -19-
<PAGE>


         We currently  have no material  commitments  for capital  expenditures.
Other than working  capital and loans,  we presently  have no other  alternative
source of working capital. We want to build an additional manufacturing line and
upgrade our manufacturing  facilities and  technologies,  in order to expand our
products.  We do not have sufficient working capital to fund the additional line
and upgrade our  manufacturing  facilities and technologies as well as providing
working capital  necessary for our ongoing  operations and obligations.  We will
need to raise additional  working capital to complete this project.  We may seek
to raise additional capital through the sale of equity securities. No assurances
can be given that we will be successful in obtaining additional capital, or that
such capital will be available in terms acceptable to our company. At this time,
we have no commitments or plans to obtain additional capital.

Critical accounting policies

         The discussion  and analysis of our financial  condition and results of
operations are based on our financial  statements and accompanying  notes, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States, US GAAP. The preparation of these  consolidated  financial
statements  requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent  assets and  liabilities.  On an  on-going  basis,  we  evaluate  our
estimates based on historical  experience and on various other  assumptions that
are believed to be reasonable under the circumstances, the results of which form
the  basis  for  making  judgments  about the  carrying  values  of  assets  and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

         We follow the  guidance of the  Securities  and  Exchange  Commission's
Staff Accounting  Bulletin 104 for revenue  recognition.  In general,  we record
revenue when persuasive  evidence of an arrangement  exists,  services have been
rendered or product  delivery has  occurred,  the sales price to the customer is
fixed  or  determinable,  and  collectability  is  reasonably  assured.  We have
identified  the  policy  below  as  critical  to  our  business  operations  and
understanding of our financial results:

Accounts receivable

         We have a policy of reserving for  uncollectible  accounts based on its
best estimate of the amount of probable  credit losses in its existing  accounts
receivable.  We periodically review our accounts receivable to determine whether
an allowance  is  necessary  based on an analysis of past due accounts and other
factors that may indicate  that the  realization  of an account may be in doubt.
Account balances deemed to be  uncollectible  are charged to the allowance after
all means of  collection  have been  exhausted and the potential for recovery is
considered remote. At December 31, 2005, we have established,  based on a review
of its outstanding balances, an allowance for doubtful accounts in the amount of
$45,205.

Inventories

         Inventories,  consisting of raw materials and finished goods related to
the Company's  products are stated at the lower of cost or market  utilizing the
weighted average method.  The Company  evaluates the net realizable value of its
inventories  on a regular  basis and records a provision  for loss to reduce the
computed weighted average cost if it exceeds the net realizable value.



                                      -20-
<PAGE>


Property and equipment

         Property  and  equipment  are carried at cost.  The cost of repairs and
maintenance is expensed as incurred;  major  replacements  and  improvements are
capitalized.  When assets are retired or disposed  of, the cost and  accumulated
depreciation  are removed from the accounts,  and any resulting  gains or losses
are included in income in the year of disposition.  In accordance with Statement
of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment
or Disposal of  Long-Lived  Assets",  the Company  examines the  possibility  of
decreases in the value of fixed  assets when events or changes in  circumstances
reflect the fact that their recorded value may not be recoverable.

         Depreciation is calculated on a straight-line  basis over the estimated
useful lives of the assets.  The useful lives for property and  equipment are as
follows:

                  Buildings and leasehold improvement            20 to 40 years
                  Manufacturing equipment                        10 to 15 years
                  Office equipment and furniture                  5 to 8 years

Income taxes

         Taxes are calculated in accordance with taxation  principles  currently
effective in the PRC. The Company  accounts for income taxes using the liability
method.  Deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized as income in the
period that includes the enactment  date. A valuation  allowance is provided for
the amount of deferred tax assets that,  based on  available  evidence,  are not
expected to be realized.

Related parties

         Parties  are  considered  to be related  if one party has the  ability,
directly or  indirectly,  to control  the other  party or  exercise  significant
influence over the other party in making  financial and  operational  decisions.
Parties are also  considered to be related if they are subject to common control
or common significant influence. Related parties may be individuals or corporate
entities.

Use of estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities 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.


                                      -21-
<PAGE>



RECENT ACCOUNTING PRONOUNCEMENTS

         In February  2006,  the FASB issued SFAS 155,  which applies to certain
"hybrid  financial  instruments,"  which are instruments  that contain  embedded
derivatives.  The new standard  establishes a requirement to evaluate beneficial
interests  in  securitized  financial  assets  to  determine  if  the  interests
represent   freestanding   derivatives  or  are  hybrid  financial   instruments
containing embedded derivatives  requiring  bifurcation.  This new standard also
permits  an  election  for fair  value  remeasurement  of any  hybrid  financial
instrument  containing  an embedded  derivative  that  otherwise  would  require
bifurcation  under  SFAS 133.  The fair  value  election  can be  applied  on an
instrument-by-instrument  basis to existing  instruments at the date of adoption
and can be applied to new  instruments on a prospective  basis.  The adoption of
SFAS No.155 did not have a material impact on the Company's  financial  position
and results of operations.

         In March 2006, the FASB issued SFAS No. 156,  "Accounting for Servicing
of Financial  Assets,  an amendment of FASB  Statement No. 140,  Accounting  for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent  measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization  and impairment  requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and  servicing  liabilities  at fair value  eliminates  the necessity for
entities  that  manage the risks  inherent  in  servicing  assets and  servicing
liabilities  with  derivatives  to qualify for hedge  accounting  treatment  and
eliminates  the  characterization  of declines in fair value as  impairments  or
direct write-downs.  SFAS No. 156 is effective for an entity's first fiscal year
beginning  after  September  15,  2006.  The  adoption of this  statement is not
expected to have a significant effect on the Company's future reported financial
position or results of operations.

         In July 2006, the Financial  Accounting  Standards  Board (FASB) issued
FASB Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109." This interpretation provides guidance
for  recognizing and measuring  uncertain tax positions,  as defined in SFAS No.
109,  "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition
that a tax  position  must  meet  for any of the  benefit  of an  uncertain  tax
position to be recognized in the financial statements. Guidance is also provided
regarding  de-recognition,  classification,  and  disclosure  of  uncertain  tax
positions. FIN No. 48 is effective for fiscal years beginning after December 15,
2006. The Company does not expect that this  interpretation will have a material
impact on its financial position, results of operations, or cash flows.

         In September  2006, the FASB issued  Statement of Financial  Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This Statement defines
fair  value  as  used  in  numerous  accounting  pronouncements,  establishes  a
framework for measuring fair value in generally accepted  accounting  principles
and expands  disclosure  related to the use of fair value  measures in financial
statements.  The  Statement  is to be  effective  for  the  Company's  financial
statements  issued in 2008;  however,  earlier  application is  encouraged.  The
Company is  currently  evaluating  the timing of  adoption  and the impact  that
adoption might have on its financial position or results of operations

         Other  accounting  standards  that have been  issued or proposed by the
FASB or other  standards-setting  bodies  that do not require  adoption  until a
future  date are not  expected  to have a  material  impact on the  consolidated
financial statements upon adoption.



                                      -22-
<PAGE>



ITEM 3.  CONTROLS AND PROCEDURES


 Overview

         In connection with the preparation of our interim report on Form 10-QSB
for the period ended  September 30, 2006,  our  management  identified  material
weaknesses  in the  Company's  internal  contols over  financial  reporting.  As
defined by the Public  Accounting  Oversight  Board (the  "PCAOB")  in  Auditing
Standard No. 2. a material weakness is a significant deficiency,  or combination
of significant deficiences,  that result in more than a remote likelihood that a
material  mistatement of the interim financial  statements will not be prevented
or detected.

         The identified  material  weaknesses in the Company's internal controls
over  financial  reporting  have resulted in  insufficient  controls  related to
inventory accounting, accounts receivable and payable cut-offs, accrued expenses
and  segrergation  of  duties.  The  conclusions  of  the  Company's  management
regarding  the   effectiveneness  of  the  Company's   disclosure  controls  and
procedures  as of  September  30,  2006 , the end of the period  covered by this
Quarterly  Report of Form  10-QSB,  are covered in more detail in the  following
paragraph.

Disclsoure Controls and Procedures

         As required by Rule  13a-15(e) and 15d-15(e)  under the  Securities and
Exchange Act of 1934, as of September 30, 2006, the end of the period covered by
this quarterly  report,  our  management,  with the  participation  of our Chief
Executive Officer and Chief Financial  Officer,  concluded its evaluation of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures.  Disclosure  controls and  procedures  are  controls and  procedures
designed to reasonably  assure that information  required to be disclosed in our
reports filed under the Securities  Exchange Act of 1934, such as this quarterly
report, is recorded, processed,  summarized and reported within the time periods
prescribed  by SEC rules and  regulations,  and to  reasonably  assure that such
information is accumulated and  communicated  to our  management,  including our
Chief  Executive   Officer,   to  allow  timely  decisions   regarding  required
disclosure.  Based on that evaluation, the Company's Chief Executive Officer and
Chief Financial  Officer  concluded that our disclosure  controls and procedures
were not effective as of the end of the period covered by this Quarterly  Report
on Form 10-QSB.

Changes in Internal Controls

            On September  28, 2006,  in  connection  with the  completion of the
Lotus  East  acquisition,  we hired  our  Chief  Financial  Officer.  Our CFO is
becoming  more  familiar with the Company,  its finances and  accounting  needs.
Additionally,  the Company's  CEO is becoming more familiar with SEC  disclosure
requirements and procedures.  The Company's management believes that substantial
remediation  measures  are required in order to improve the  Company's  internal
controls.  We believe that the material weaknesses  identified above resulted in
part from  inadequate  staffing and training  within the  Company's  finance and
accounting  group.  We  believe  that we will  face  challenges  in  integrating
procedures  and  operations  and  integration  activites may affect our internal
control over financial reporting. We intend on continuing to work to improve our
internal controls.

                                      -23-
<PAGE>


Other

         Our management,  including our Chief Executive Officer, does not expect
that our  disclosure  controls  and  procedures  will  prevent all error and all
fraud. A control system,  no matter how well designed and operated,  can provide
only reasonable,  not absolute,  assurance that the control system's  objectives
will be met. Further,  the design of a control system must reflect the fact that
there are resource constraints,  and the benefits of controls must be considered
relative to their  costs.  Because of the  inherent  limitations  in all control
systems,  no  evaluation  of controls can provide  absolute  assurance  that all
control  issues  and  instances  of fraud,  if any,  have been  detected.  These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake.

         The  design of any  system of  controls  is based in part upon  certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving  its stated goals under all  potential
future conditions.


PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

                  None.

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

                  None.

Item 3.           Defaults Upon Senior Securities

                  None.

Item 4.           Submissions of Matters to a Vote of Security Holders

                  None.

Item 5.           Other Information

                  None.

Item 6.           Exhibits.

31.1     Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
31.2     Rule 13a-14(a)/15d-14(a) certificate of Principal Financial Officer
32.1     Section 1350 certification of Chief Executive Officer
32.2     Section 1350 certification of Principal Accounting Officer




                                      -24-
<PAGE>


                                   SIGNATURES

In accordance  with the  requirements  of the Exchange Act, the  registrant  has
caused this report to be signed on its behalf by the undersigned  thereunto duly
authorized.

                                                S.E. Asia Trading  Company, Inc.

Date:  November 20, 2006                        By: /s/ Liu Zhong Yi
                                                  ------------------
                                                Liu Zhong Yi
                                                Chief Executive Officer

Date:  November 20, 2006                        By: /s/ Adam Wasserman
                                                  --------------------
                                                Adam Wasserman
                                                Chief Financial Officer






                                      -25-