**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
        10-Q/A**


**(Amendment
        No. 1)**




(Mark
      One)





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





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





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: O-24512**





**RENHUANG
      PHARMACEUTICALS, INC.**


(Exact
      name of registrant as specified in its charter)





**Nevada**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **88-1273503**
              (I.R.S.
                Employer
              Identification
                No.)




**No.
      281, Taiping Road, Taiping District,**


**Harbin,
      Heilongjiang Province, 150050, P. R. China**


(Address
      of principal executive offices)





**Registrant’s
      telephone number, including area code 86-451-5762-0378**





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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 o





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





Large
      accelerated filer o Accelerated filer o Non-accelerated filer x





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





**Applicable
      only to issuers involved in bankruptcy proceedings during the preceding five
      years:**





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court. Yes o No o







**Applicable
      only to corporate issuers:**





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date. As of June 7, 2007, there were
      35,096,681 shares of common stock, par value $0.001, issued and
      outstanding .







**Renhuang
      Pharmaceuticals, Inc.**





**TABLE
      OF CONTENTS**




**PART
                I**ITEM
                1
            FINANCIAL
                STATEMENTS
            4ITEM
                2
            MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS.
            32ITEM
                3
            QUANTITATIVE
                      AND QUALITATIVE DISCLOSURES ABOUT MARKET
                      RISK
            39ITEM
                4
            CONTROLS
                AND PROCEDURES
            40**PART
                II**ITEM
                1
            LEGAL
                PROCEEDINGS
            41ITEM
                1A
            RISK
                FACTORS
            41ITEM
                2
            UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            41ITEM
                3
            DEFAULTS
                UPON SENIOR SECURITIES
            41ITEM
                4
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            41ITEM
                5
            OTHER
                INFORMATION
            41ITEM
                6
            EXHIBITS
            43




2


**Explanatory
        Note**





This
        Quarterly Report on Form 10-Q/A (Amendment No. 1) discloses and discusses
        the
        impact and effect of a restatement of our previously filed unaudited
        consolidated financial statements contained in our originally-filed Quarterly
        Report on Form 10-Q for the period ended April 30, 2007; and amends Items
        1 and
        2 of Part I of our Quarterly Report on Form 10-Q previously filed with the
        Securities and Exchange Commission on June 14, 2007.  This restatement is
        necessary due to the fact that during the review for the quarter ended July
        31,
        2007, we concluded that our previously reported unaudited consolidated balance
        sheet as of April 30, 2007, the unaudited consolidated statement of income
        for
        the three months ended April 30, 2007, and the unaudited consolidated statements
        of cash flows for the three months ended April 30, 2007 filed with our
        originally-filed Quarterly Report on Form 10-Q for the period ended April
        30,
        2007, did not accrue certain sales rebate payables from sales. As a result,
        we
        are filing this amended Quarterly Report on Form 10-Q/A for April 30, 2007,
        to
        make the necessary corrections to account for the sales rebates we owed third
        parties during this period, which contains an explanation in Note 19 to the
        financial statements. The revisions will result in the correction of certain
        amounts categorized as accounts payable and accruals to third parties, total
        current liabilities, and total liabilities, in our unaudited consolidated
        financial statements for above-mentioned periods.





This
        First Amended Quarterly Report on Form 10-Q/A for the quarter ended April
        30,
        2007 amends and restates only those items of the previously filed Quarterly
        Report on Form 10-Q which have been affected by the restatement.  In order
        to preserve the nature and character of the disclosures set forth in such
        items
        as originally filed, no attempt has been made in this amendment (i) to modify
        or
        update such disclosures except as required to reflect the effects of the
        restatement or (ii) to make revisions to the Notes to the unaudited consolidated
        financial statements except for those which are required by or result from
        the
        effects of the restatement.  For additional information regarding the
        restatement of our unaudited consolidated financial statements, see Note
        19 to
        our unaudited consolidated financial statements included in Part I - Item
        I.  Except for the corrections stated herein, no other information
        contained in our previously filed Form 10-Q for the quarter ended April 30,
        2007
        has been updated or amended.




**PART
      I - FINANCIAL INFORMATION**





This
      Quarterly Report includes forward-looking statements within the meaning of
      the
      Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based
      on management’s beliefs and assumptions, and on information currently available
      to management. Forward-looking statements include the information concerning
      possible or assumed future results of operations of the Company set forth under
      the heading “Management’s Discussion and Analysis of Financial Condition or Plan
      of Operation.” Forward-looking statements also include statements in which words
      such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,”
“consider” or similar expressions are used.





Forward-looking
      statements are not guarantees of future performance. They involve risks,
      uncertainties and assumptions. The Company’s future results and shareholder
      values may differ materially from those expressed in these forward-looking
      statements. Readers are cautioned not to put undue reliance on any
      forward-looking statements.


3





**ITEM
              1**
            **Financial
                Statements**




**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      BALANCE SHEETS**


**AS
      OF APRIL 30, 2007**




**(Amounts
      in United States Dollars)**




**ASSETS**





**April 30,**
                **2007**
              
              **October**
                **31,**
                **2006****(Unaudited)**
              
              **(Audited)****(Restated)****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              3,786,469
              
              
              1,021,267Trade
                  receivables, net (Note 5)
              
              
              11,859,115
              
              
              7,566,096Inventories
                  (Note 6)
              
              
              1,352,302
              
              
              622,144Prepaid
                  expenses and deposits
              
              
              135,883
              
              
              102,473Other
                  receivables
              
              
              20,172
              
              
              1,143,834Deferred
                  expenses (Note 9)
              
              
              118,434
              
              
              115,823**TOTAL
                  CURRENT ASSETS**
              
              
              17,272,375
              
              
              10,571,637PROPERTY,
                  PLANT AND EQUIPMENT (Note 7)
              
              
              2,615,139
              
              
              2,610,285CONSTRUCTION
                  IN PROGRESS (Note 8)
              
              
              667,575
              
              
              106,610**TOTAL
                  ASSETS**
              
              $
              20,555,089
              
              
              13,288,532





The
      accompanying notes are in integral part of the financial statements




4


**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      BALANCE SHEETS**


**AS
      OF APRIL 30, 2007**




**(Amounts
      in United States Dollars)**





**LIABILITIES
      AND STOCKHOLDERS’ EQUITY**





**April 30,**
                **2007**
              
              **October 31,**
                **2006****(Unaudited)**
              
              **(Audited)****(Restated)****CURRENT
                  LIABILITIES**Accounts
                  payables and accruals (Note 10)-
                  due to related parties
              
              $
              -
              
              $
              419,910-
                  due to third parties
              
              
              519,822
              
              
              366,805Total
                  accounts payables and accruals
              
              
              519,822
              
              
              786,715Other
                  payables (Note 11)
              
              
              2,616,891
              
              
              1,877,042**TOTAL
                  CURRENT LIABILITIES**
              
              
              3,136,713
              
              
              2,663,757**TOTAL
                  LIABILITIES**
              
              
              3,136,713
              
              
              2,663,757**STOCKHOLDERS’
                  EQUITY**Common
                  Stock - Authorized common shares 100,000,000, outstanding number
                  of shares
                  35,000,181 at par value of 0.001, authorized preferred shares
                  2,500,000
              
              
              35,000
              
              
              35,000Additional
                  paid in capital
              
              
              6,333,264
              
              
              6,310,822Reserves
              
              
              1,962,808
              
              
              847,133Retained
                  earnings
              
              
              8,707,552
              
              
              3,378,081Accumulated
                  other comprehensive income
              
              
              379,752
              
              
              53,739**TOTAL
                  STOCKHOLDERS’ EQUITY**
              
              
              17,418,376
              
              
              10,624,775**TOTAL
                  LIABILITIES AND****STOCKHOLDERS’
                  EQUITY**
              
              $
              20,555,089
              
              
              13,288,532





The
      accompanying notes are in integral part of the financial
      statements


5


**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENT OF INCOME**


**FOR
      THE THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 2007**


**(Amounts
      in United States Dollars, Except for Number of Common
      Shares)**





**ThreeMonths**
                **Ended**
                **April 30,**
                **2007**
              
              **Six Months**
                **Ended**
                **April 30,**
                **2007****(Unaudited)**
              
              **(Unaudited)****(Restated)**
              
              **(Restated)**SALES
              
              $
              6,315,332
              
              $
              15,819,325COST
                  OF SALES
              
              
              (3,120,081
              )
              
              (7,693,017
              )GROSS
                  PROFIT
              
              
              3,195,251
              
              
              8,126,308SELLING
                  AND DISTRIBUTION EXPENSES
              
              
              (16,871
              )
              
              (122,446
              )ADVERTISING
                  EXPENSE
              
              
              (163,532
              )
              
              (172,681
              )GENERAL
                  AND ADMINISTRATIVE EXPENSES
              
              
              (369,728
              )
              
              (636,504
              )PROVISION
                  FOR DOUBTFUL ACCOUNTS
              
              
              (568,113
              )
              
              (621,122
              )DEPRECIATION
                  AND AMORTIZATION
              
              
              (70,181
              )
              
              (138,475
              )INCOME
                  FROM OPERATIONS
              
              
              2,006,826
              
              
              6,435,080OTHER
                  INCOME
              
              
              6,732
              
              
              10,066INCOME
                  BEFORE INCOME TAXES
              
              
              2,013,558
              
              
              6,445,146INCOME
                  TAXES
              
              
              —
              
              
              —NET
                  INCOME
              
              $
              2,013,558
              
              $
              6,445,146BASIC
                  EARNINGS PER SHARE
              
              
              0,058
              
              
              0.184DILUTED
                  EARNING PER SHARE
              
              
              0.058
              
              
              0.184AVERAGE
                  NUMBER OF COMMON SHARES OUTSTANDINGBASIC
              
              
              35,000,181
              
              
              35,000,181DILUTED
              
              
              35,002,420
              
              
              35,000,181




The
      accompanying notes are in integral part of the financial
      statements


6


**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENT OF CHANGES IN**


**STOCKHOLDERS’
      EQUITY**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2007**




**(Amounts
      in United States Dollars)**




AccumulatedAdditional
              
              
              
              
              
              OtherCommon
              
              Paid-in
              
              
              
              Retained
              
              comprehensive
              
              TotalStock
              
              capital
              
              Reserves
              
              Earnings
              
              income
              
              EquityBalance
                  at October 31, 2006 (Audited)
              
              $
              35,000
              
              $
              6,310,822
              
              $
              847,133
              
              $
              3,378,081
              
              $
              53,739
              
              $
              10,624,775Net
                  income for 2 quarters 2007
              
              
              —
              
              
              —
              
              
              —
              
              
              6,445,146
              
              
              —
              
              
              6,445,146Transfer
                  to reserves
              
              
              —
              
              
              —
              
              
              1,115,675
              
              
              (1,115,675
              )
              
              —
              
              
              —Warrants
                  issued to director
              
              
              —
              
              
              22,442
              
              
              —
              
              
              —
              
              
              —
              
              
              22,442Other
                  comprehensive income-
                  foreign currency translation
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              326,013
              
              
              326,013Balance
                  at April 30, 2007 (Unaudited)
              
              $
              35,000
              
              $
              6,333,264
              
              $
              1,962,808
              
              $
              8,707,552
              
              $
              379,752
              
              $
              17,418,376





The
      accompanying notes are in integral part of the financial statements




7




**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENT OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2007**




**(Amounts
      in United States Dollars)**





**(Unaudited)****(Restated)****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  income
              
              $
              6,445,146Adjustments
                    to reconcile net income to net cash from operating activities
                    :Depreciation
                  and amortization
              
              
              138,475Fair
                  Value of Warrants Issued
              
              
              22,442Changes
                  in operating assets and liabilities:Trade
                  receivables, net
              
              
              (4,293,019
              )Inventories
              
              
              (730,158
              )Other
                  receivables, net
              
              
              1,123,662Deferred
                  expenses
              
              
              (2,610
              )Prepaid
                  expenses and deposits
              
              
              (33,410
              )Accounts
                  payable and accruals
              
              
              (266,893
              )Other
                  Payable
              
              
              739,849**NET
                  CASH PROVIDED BY OPERATING ACTIVITIES**
              
              
              3,143,484**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Acquisition
                  of property, plant and equipment
              
              
              (143,330
              )Construction
                  in Progress
              
              
              (560,965
              )**NET
                  CASH USED IN INVESTING ACTIVITIES**
              
              $
              (704,295
              )





The
      accompanying notes are in integral part of the financial
      statements


8


**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENT OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2007**




**(Amounts
      in United States Dollars)**





**(Unaudited)****(Restated)****NET
                  CHANGE IN CASH AND CASH EQUIVALENTS**
              
              
              2,439,189EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH AND CASHEQUIVALENTS
              
              
              326,013Cash
                  and cash equivalents, beginning of period
              
              
              1,021,267Cash
                  and cash equivalents, end of period
              
              $
              3,786,469**SUPPLEMENTARY
                  CASH FLOW DISCLOSURES**Interest
                  paid
              
              $
              45,996Income
                  taxes paid
              
              $
              —





The
      accompanying notes are in integral part of the financial statements




9


**RENHUANG
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007**





**1.**
            **REORGANIZATION
                TRANSACTIONS**





On
      August
      11, 2006, the Company performed a one for thirty reverse stock split, rounded
      up
      to the nearest whole share.





On
      September 7, 2006, the Company acquired Harbin Renhuang Pharmaceutical Company
      Limited, a Corporation incorporated under the laws of the British Virgin Island
      on January 18, 2006, (the “BVI”) including its 100% owned and only subsidiary,
      Harbin Renhuang Pharmaceutical Co. Ltd., incorporated under the laws of the
      People’s Republic of China on February 15, 2006 (“Renhuang China”) in
      exchange for issuing 29,750,000 shares of the Company’s common stock, par value
      $0.001 per share (the “Common Stock”) to the BVI’s stockholders, representing
      85% of the Company’s capital stock on a fully diluted basis after taking into
      account the contemplated transaction. This transaction is referred to throughout
      this report as the “Merger”.





The
      Merger agreement was filed as Exhibit 10.1 to the Company’s Current Report on
      Form 8-K filed with the Securities and Exchange Commission on August 29, 2006.
      The foregoing description of the Merger and the transactions contemplated
      thereby do not purport to be complete and are qualified in their entireties
      to
      the Merger agreement.





On
      August
      31, 2006, the Company’s Board of Directors approved the Merger.





Upon
      closing of the Merger, BVI became a wholly owned subsidiary of the Company.
      After giving effect to the Merger and the rounding up of shares after reverse
      stock split on August 11, 2006, the Company had 35,000,181 common shares issued
      and outstanding and the former stockholders of BVI own approximately 85% of
      the
      issued and outstanding Common Stock of the Company. Accordingly, the Merger
      represented a change in control of the Company.





On
      May 1,
      2006, principal revenue producing activities in Harbin Renhuang Pharmaceuticals
      Stock Co., Ltd, the predecessor company, have been transferred to Renhuang
      China
      at the carrying amounts of the transferor.





On
      December 5, 2006, the Company’s Board of Directors approved a change in the
      Company’s fiscal year end from April 30 to October 31, effective with the
      Company’s Transitional Report on Form 10-K for the period ended as of October
      31, 2006.





For
      accounting purposes, the Merger has been accounted for as a recapitalization
      with the Company as the accounting acquiree and the BVI as the accounting
      acquirer. Upon effectiveness of the Merger, Renhuang China’s business plan
      became the business plan of the Company.





On
      March
      3, 2007, the Company acquired all the assets and assumed a bank loan with
      accrued interest of Qingyang Extracting Factory, from Zhongfa Industrial Group
      Yerui Pharmaceutical Co., Ltd. for a total amount of RMB 3.7 million or
      approximately USD $480,000. The Company paid USD $310,000 in cash and assumed
      a
      bank loan with China Agriculture Bank in the principal amount of USD $140,000
      and accrued interest of USD $30,000 collateralized by the acquired assets.
      The
      transaction closed on March 3, 2007, and the Company has paid for the cash
      portion of the consideration USD $310,000 (RMB 2,415,000). The acquisition
      price
      of RMB 3.7 million had been allocated to various assets at their fair market
      value.




10





**2.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES**





Renhuang
      Pharmaceuticals, Inc., (“Renhuang”) or the (“Company”) was incorporated in the
      State of Nevada on August 18, 1988 as Solutions, Incorporated. Since that time,
      the Company has undergone a series of name changes as follows: Suarro
      Communications, Inc., e-Net Corporation, e-Net Financial Corp., e-Net.Com
      Corporation, e-Net Financial.Com Corporation, Anza Capital, Inc. and finally
      on
      July 28, 2006, the Company changed its name to Renhuang Pharmaceuticals,
      Inc.





On
      March
      3, 2006 the Company discontinued its operations and became a “shell”
company.





On
      September 7, 2006, the Company acquired Harbin Renhuang Pharmaceutical Company
      Limited, a Corporation incorporated under the laws of the British Virgin Island
      on January 18, 2006, (the “BVI”) including its 100% owned and only subsidiary,
      Harbin Renhuang Pharmaceutical Co. Ltd., incorporated under the laws of the
      People’s Republic of China on February 15, 2006 (“Renhuang China”) in
      exchange for issuing 29,750,000 shares of the Company’s common stock, par value
      $0.001 per share (the “Common Stock”) to the BVI’s stockholders, representing
      85% of the Company’s capital stock on a fully diluted basis after taking into
      account the contemplated transaction. This transaction is referred to throughout
      this report as the “Merger”.





Shares
      of
      the Company’s Common Stock are trading on the NASD-Over the Counter (OTC)
      Bulletin Board Market under the symbol RHGP.





Unless
      otherwise provided in this current report, all references in this current report
      to “we”, “us”, “our company”, “our”, or the “Company” refer to the combined
      Renhuang Pharmaceuticals, Inc. entity.





The
      subsidiary company Harbin Renhuang Pharmaceuticals Co., Ltd (“the Subsidiary”)
      was incorporated at Harbin City in the People’s Republic of China (“the PRC” or
“China”) in 1996. The Subsidiary is principally engaged in production and sales
      of nutraceutical and bio-pharmaceutical products including tablets, drinks
      and
      health food. The subsidiary’s extensive sales network covers various provinces,
      cities, and counties throughout China.





The
      products are made in the two plant facilities located at Harbin City with
      specialized machinery under stringent cleanliness and hygienic
      processes.





The
      Company is subject to the consideration and risks of operating in the PRC.
      These
      include risks associated with the political and economic environment, foreign
      currency exchange and the legal system in the PRC.





The
      economy of PRC differs significantly from the economies of the “western”
industrialized nations in such respects as structure, level of development,
      gross national product, growth rate, capital reinvestment, resource allocation,
      self-sufficiency, rate of inflation and balance of payments position, among
      others. Only recently has the PRC government encouraged substantial private
      economic activities. The Chinese economy has experienced significant growth
      in
      the past several years, but such growth has been uneven among various sectors
      of
      the economy and geographic regions. Actions by the PRC
      government to control inflation have significantly restrained economic expansion
      in the recent past. Similar actions by the PRC government in the future could
      have a significant adverse effect on economic conditions in PRC.




11




Many
      laws
      and regulations dealing with economic matters in general and foreign investment
      in particular have been enacted in the PRC. However, the PRC still does not
      have
      a comprehensive system of laws, and enforcement of existing laws may be
      uncertain and sporadic.





The
      Company’s operating assets and primary sources of income and cash flows are of
      interests in the PRC. The PRC economy has, for many years, been a
      centrally-planned economy, operating on the basis of annual, five-year and
      ten-year state plans adopted by central PRC governmental authorities, which
      set
      out national production and development targets. The PRC government has been
      pursuing economic reforms since it first adopted its “open-door” policy in 1978.
      There is no assurance that the PRC government will continue to pursue economic
      reforms or that there will not be any significant change in its economic or
      other policies, particularly in the event of any change in the political
      leadership of, or the political, economic or social conditions in, the PRC.
      There is no assurance that the Company will not be adversely affected by any
      such change in governmental policies or any unfavorable change in the political
      economic or social conditions, the laws or regulations, or the rate or method
      of
      taxation in the PRC.





As
      many
      of the economic reforms which have been or are being implemented by the PRC
      government are unprecedented or experimental, they may be subject to adjustment
      or refinement, which may have adverse effects on the Company. Further, through
      state plans and other economic and fiscal measures, it remains possible for
      the
      PRC government to exert significant influence on the PRC economy.





The
      Company’s financial instruments that are exposed to concentration of credit risk
      consist primarily of cash and cash equivalents, accounts receivable from
      customers and other receivables. Cash and cash equivalents are maintained with
      major banks in the PRC. The company and other public business activity is
      primarily with customers in the PRC.





Any
      devaluation of the Renminbi (RMB) against the United States dollar would
      consequently have adverse effects on the Company’s financial performance and
      asset values when measured in terms of the United States dollar. Should the
      RMB
      significantly devalue against the United States dollar, such devaluation could
      have a material adverse effect on the Company’s earnings and the foreign
      currency equivalent of such earnings. The Company does not hedge its RMB -
      United States dollar exchange rate exposure.





**3.**
            **BASIS
                OF PRESENTATION**





The
      consolidated financial statements are prepared in accordance with generally
      accepted accounting principles of the United States of America and include
      the
      financial statements of the Company and its wholly-owned subsidiary, Harbin
      Renhuang Pharmaceutical Company Limited and Harbin Renhuang Pharmaceutical
      Co.
      Ltd.





These
      consolidated financial statements should be read in conjunction with annual
      audited financial statements and the notes thereto included in the Company’s
      annual report on Form 10-KSB, and other reports filed with the SEC.





The
      accompanying unaudited interim financial statements reflect all adjustments
      of a
      normal and recurring nature which are, in the opinion of managements, necessary
      to present fairly the financial position, results of operations and cash flows
      of the Company for the interim periods presented. The results of operations
      for
      these periods are not necessarily comparable to, or indicative of, results
      of
      any other interim period or for the fiscal year taken as a whole.




12





**4.**
            **SUMMARY
                OF PRINCIPAL ACCOUNTING POLICIES**





**A.**
            **CASH
                AND CASH EQUIVALENTS**





The
      Company considers cash and cash equivalents to include cash on hand and demand
      deposits with banks with an original maturity of three months or less.





**B.**
            **ACCOUNTS
                RECEIVABLE**





Trade
      receivables are recognized and carried at the original invoice amount less
      allowance for any uncollectible amounts. An estimate for doubtful accounts
      is
      made when collection of the full amount is no longer probable. Bad debts are
      written off as incurred. An account is considered past due after ninety
      (90) days from the invoice date. The allowance on the doubtful accounts was
      $624,164 as at April 30, 2007.





**C.**
            **INVENTORIES**





Inventories
      are stated at the lower of cost and net realizable value. Cost is calculated
      on
      the weighted average basis and includes all costs to acquire and other costs
      incurred in bringing the inventories to their present location and condition.
      The Company evaluates the net realizable value of its inventories on a regular
      basis and records a provision for loss, if material, to reduce the computed
      weighted average cost if it exceeds the net realizable value.





**D.**
            **PROPERTY,
                PLANT AND EQUIPMENT**





Property,
      plant 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.





The
      Company recognizes depreciation of its property, plant and equipment on a
      straight-line basis over the estimated useful lives of the assets based on
      their
      costs less 5% residual value. The useful lives for property, plant and equipment
      are estimated as follows:





Plant
                and machinery
            10
                yearsOffice
                equipment and furnishings
            5
                to10 yearsMotor
                vehicles
            5
                to10 years





**E.**
            **FAIR
                VALUE OF FINANCIAL
                INSTRUMENTS**





The
      carrying value of financial instruments including cash, accounts receivables,
      other receivables, accounts payable, other payables and accrued expenses and
      debts, approximates their fair value at April 30, 2007 due to the relatively
      short-term nature of these instruments.





**F.**
            **CONSTRUCTION
                IN PROGRESS**





Construction
      in progress represents direct costs of construction or acquisition and design
      fees incurred. Capitalization of these costs ceases and the construction in
      progress is transferred to plant and equipment when substantially all the
      activities necessary to prepare the assets for their intended use are completed.
      No depreciation is provided until it is completed and ready for intended
      use.




13





**G.**
            **INCOME
                TAXES**





The
      Company accounts for income tax under the provisions of Statements of Financial
      Accounting Standards No. 109, which requires recognition of deferred tax assets
      and liabilities for the expected future tax consequences of events that have
      been included in the consolidated financial statements. Deferred income taxes
      are provided using the liability method. Under the liability method, deferred
      income taxes are recognized for all significant temporary differences between
      the tax and financial statement bases of assets and liabilities. In addition,
      the Company is required to record all deferred tax assets, including future
      tax
      benefits of capital losses carried forward, and to record a “valuation
      allowance” for any deferred tax assets where it is more likely than not that the
      asset will not be realized.





In
      accordance with the relevant income tax laws applicable to wholly foreign owned
      enterprises (WFOE) operating in PRC, the profits of the Company are fully exempt
      from income tax for two years (“tax holiday”), commencing from the first profit
      making year of operations, followed by a 50% exemption for the immediate next
      three years (“tax preferential period”), after which the profits of the Company
      will be taxable at the full rate, currently 33%.





Had
        this
        tax holiday not been available, income tax expense would have increased by
        approximately US$664,474 for the quarter ended April 30,
        2007.





**H.**
            **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.





**I.**
            **IMPAIRMENT
                OF LONG-TERM ASSETS**





In
      accordance with the provisions of SFAS No. 144, “Accounting for the Impairment
      or Disposal of Long-Lived Assets”, the Company’s policy is to record an
      impairment loss against the balance of a long-lived asset in the period when
      it
      is determined that the carrying amount of the asset may not be recoverable.
      The
      determination is based on an evaluation of such factors as the occurrence of
      a
      significant event, a significant change in the environment in which the business
      assets operate or if the expected future non-discounted cash flows of the
      business was determined to be less than the carrying value of the assets. If
      impairment is deemed to exist, the assets will be written down to fair value.
      Management also evaluates events and circumstances to determine whether revised
      estimates of useful lives are warranted. As of April 30, 2007, management
      expects its long-lived assets to be fully recoverable.





**J.**
            **FOREIGN
                CURRENCY TRANSLATION**





Harbin
      Renhuang Pharmaceuticals Co., Ltd. maintains its books and accounting records
      in
      Renminbi (“RMB”), the PRC’s currency, being the functional currency.





Foreign
      currency transactions in RMB are reflected using the temporal method. Under
      this
      method, all monetary items are translated into the functional currency at the
      rate of exchange prevailing at the balance sheet date. Non-monetary items are
      translated at historical rates. Income and expenses are translated at the rate
      in effect on the transaction dates. Transaction gains and losses if any, are
      included in the determination of net income (loss) for the period.


14




In
      translating the financial statements of the Company from its functional currency
      into its reporting currency in 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 an average exchange rate
      prevailing during the reporting period. Adjustments resulting from the
      transaction, if any, are included in accumulated other comprehensive income
      (loss) in stockholders’ equity.





The
      RMB
      is not freely convertible into foreign currency and all foreign exchange
      transactions must take place through authorized institutions. No representation
      is made that the RMB amounts could have been, or could be, converted into US$
      at
      the rates used in translation. The Foreign exchange rate between the RMB and
      the
      United States dollar on April 30, 2007 and the average through January 31,
      2007
      to April 30, 2007 are:





Balance
                Sheet- Year end RMB : US$ exchange rate
            
            
            7.7055:1Operating
                Statement: Average quarterly RMB : US$ exchange rate
            
            
            7.7355:1





**K.**
            **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. Significant estimates primarily related to the
      realizable value of accounts receivable, inventories, and the useful lives
      of
      plant and equipment. Actual results when ultimately realized could differ from
      those estimates.





**L.**
            **REVENUE
                RECOGNITION**





The
      Company recognizes revenue when the significant risks and rewards of ownership
      have transferred pursuant to PRC law, including factors such as when persuasive
      evidence of an arrangement exists, delivery has occurred, the sales price is
      fixed and determinable, and collectibility is reasonably assured. Renhuang
      generally recognizes products sales when the product is shipped. In the current
      period, no returns of any significance have occurred.





The
      Company provides a rebate to the sales agents as an incentive plan. The rebate
      rate is setup for each product. When revenue is recognized, the revenue is
      reduced by the amount of rebate. On average, the rebate rate is 20% of gross
      revenue.





In
      accordance with the provisions of Staff Accounting Bulletin No. 104, revenue
      is
      recognized when merchandise is shipped, title passes to the customer and
      collectibility is reasonably assured.





**M.**
            **CONCENTRATION
                OF CREDIT RISK**





Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist primarily of trade accounts receivable. The Company
      performs ongoing credit evaluations with respect to the financial condition
      of
      its creditors, but does not require collateral. In order to determine the value
      of the Company’s accounts receivable, the Company records a provision for
      doubtful accounts to cover probable credit losses. Management reviews and
      adjusts this allowance periodically based on historical experience and its
      evaluation of the collectibility of outstanding accounts receivable




15




**N.**
            **RESEARCH
                AND DEVELOPMENT**





Research
      and development costs are expensed as incurred. Engineers and technical staff
      are involved in the production of our products as well as on-going research,
      with no segregation of the portion of their salaries relating to research and
      development from the portion of their salaries relating to production. The
      total
      salaries are included in cost of sales. No research and development costs were
      incurred during this period.





**O.**
            **ADVERTISING**





Advertising
      costs consist primarily of promoting the Company and the Company’s products
      through printed advertisements in trade publications and television. Advertising
      costs are expensed as incurred. They are separately disclosed in income
      statements.





**P.**
            **CLASSIFICATION
                OF OPERATING COSTS AND
                EXPENSES**





The
      Company records its operating costs and expenses generally with the following
      classifications:





Cost
      of Goods Sold


Cost
      of
      goods sold consists primarily of raw materials, direct labor and manufacturing
      overhead. Manufacturing overhead includes an allocation of purchasing and
      receiving costs, inspection fees, warehousing utilities, supplies, factory
      and
      equipment repairs and maintenance, safety equipment and supplies, packing
      materials, and loading fees.





Selling
      Expenses


Selling
      expenses includes primarily of transportation and freight charges of delivering
      to customers, travel and entertainment, maintenance, payroll for sales staff,
      payroll taxes and benefits, advertising and promotion, telephone and utilities,
      insurance, sales commissions and exports fees.





General
      and Administrative Expenses


General
      and administrative expenses includes primarily of general office expenses,
      travel and entertainment, transportation, administrative payroll, payroll taxes
      and benefits, maintenance, telephone, utilities, printing, professional fees,
      continuing education, licenses and fees.





**Q.**
            **SEGMENTS**





No
      business segment analysis is provided for the quarter ended April 30, 2007,
      as
      no revenue and no income from operations is attributable to the segment other
      than sales of pharmaceutical products.





Further,
      no geographical segment analysis is provided for the quarter ended April 30,
      2007, as no revenue and no income from operations is attributable to the segment
      other than the Mainland China.





**R.**
            **EARNINGS
                PER SHARE**





The
      Company reports earnings per share in accordance with SFAS No. 128, “Earnings
      per Share.” Basic earnings per share is computed by dividing income available to
      common shareholders by the weighted average number of common shares available.




16


Diluted
      earnings per share is computed using the treasury stock method, taking into
      account the effect of the potential conversion of warrants into common shares
      and if the additional common shares were dilutive.





**S.**
            **COMPREHENSIVE
                INCOME**





The
        Company has adopted the provisions of Statement of Financial Accounting
        Standards No. 130, “Reporting Comprehensive Income” (“SFAS No. 130”). SFAS No.
        130 establishes standards for the reporting and display of comprehensive
        income,
        its components and accumulated balances in a full set of general-purpose
        financial statements. SFAS No. 130 defines comprehensive income to include
        all
        changes in equity except those resulting from investments by owners and
        distributions to owners, including adjustments to minimum pension liabilities,
        accumulated foreign currency translation, and unrealized gains or losses
        on
        marketable securities. In the current period, the only component of other
        comprehensive income is foreign translation gain of $326,013, which has been
        recorded as the accumulative other comprehensive income in the balance sheet.
        Consequently, the comprehensive income for the quarter and six months ended
        April 30, 2007 was $2,178,336 and $6,771,159,
        respectively.





**T.**
            **RECENT
                PRONOUNCEMENTS**





In
      November 2005, the FASB issued Staff Position (“FSP”) FAS115-1/124-1, The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments, which addresses the determination as to when an investment is
      considered impaired, whether that impairment is other than temporary, and the
      measurement of an impairment loss. This FSP also includes accounting
      considerations subsequent to the recognition of an other-than-temporary
      impairment and requires certain disclosures about unrealized losses that have
      not been recognized as other-than-temporary impairments. The guidance in this
      FSP amends FASB Statements No. 115, Accounting for Certain Investments in Debt
      and Equity Securities, and No. 124, Accounting for Certain Investments Held
      by
      Not-for-Profit Organizations, and APB Opinion No. 18, The Equity Method of
      Accounting for Investments in Common Stock. This FSP is effective for reporting
      periods beginning after March 15, 2005. We do not believe the adoption of this
      FSP will have a material impact on our financial statements.





In
      November 2005, the FASB issued FSP FAS123(R)-3, Transition Election to
      Accounting for the Tax Effects of Share-Based Payment Awards. This FSP requires
      an entity to follow either the transition guidance for the
      additional-paid-in-capital pool as prescribed in SFAS No. 123(R), Share-Based
      Payment, or the alternative transition method as described in the FSP. An entity
      that adopts SFAS No. 123(R) using the modified prospective application may
      make
      a one-time election to adopt the transition method described in this FSP. An
      entity may take up to one year from the later of its initial adoption of SFAS
      No. 123(R) or the effective date of this FSP to evaluate its available
      transition alternatives and make its one-time election. This FSP became
      effective in November 2005. We do not believe that the adoption of this FSP
      will
      have a material impact on our financial statements.





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections -
      a replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS
      154 changes the requirements for the accounting for and reporting of a change
      in
      accounting principle. These requirements apply to all voluntary changes and
      changes required by an accounting pronouncement in the unusual instance that
      the
      pronouncement does not include specific transition provisions. SFAS 154 is
      effective for fiscal years beginning after December 15, 2005. As such, the
      Company is required to adopt these provisions at the beginning of the fiscal
      year ended October 31, 2007. The Company is currently evaluating the impact
      of
      SFAS 154 on its consolidated financial statements.





17




In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 155, “Accounting for
      Certain Hybrid Financial Instruments - an amendment of FASB Statement No. 133
      and 140” (“SFAS 155”). SFAS 155 resolves issues addressed in Statement 133
      Implementation Issue No. D1, “Application of Statement 133 to Beneficial
      Interests in Securitized Financial Assets.” SFAS 155 is effective for all
      financial instruments acquired or issued after the beginning of the first fiscal
      year that begins after September 15, 2006. As such, the Company is required
      to
      adopt these provisions at the beginning of the fiscal year ended October 31,
      2007. The Company is currently evaluating the impact of SFAS 155 on its
      consolidated financial statements.





In
      March
      2006, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standard (“SFAS”) No. 156, “Accounting for Servicing of
      Financial Assets - an amendment of FASB Statement No. 140” (“SFAS 156”). SFAS
      156 amends FASB Statement No. 140 with respect to the accounting for separately
      recognized servicing assets and servicing liabilities. SFAS 156 requires all
      separately recognized servicing assets and servicing liabilities to be initially
      measured at fair value, if practical. SFAS 156 is effective as of the beginning
      of the first fiscal year that begins after September 15, 2006. As such, the
      Company is required to adopt these provisions at the beginning of the fiscal
      year ended October 31, 2007. The Company is currently evaluating the impact
      of
      SFAS 156 on its consolidated financial statements.





In
      September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
      157,
“Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework
      for measuring fair value under generally accepted accounting principles, and
      expands disclosures about fair value measurements. SFAS 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Renhuang is currently evaluating
      the impact the adoption of this statement could have on is financial condition,
      results of operations or cash flows.





In
      September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for
      Defined Benefit Pension and Other Postretirement Plans - An amendment of FASB
      Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). This Statement enhances
      disclosure regarding the funded status of an employer’s defined benefit
      postretirement plan by (a) requiring companies to include the funding status
      in
      comprehensive income, (b) recognize transactions and events that affect the
      funded status in the financial statements in the year in which they occur,
      and
      (c) at a measurement date of the employer’s fiscal year-end. Statement No. 158
      effective for fiscal years ending after December 15, 2008, and is not expected
      to apply to the Company.




In
      February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial
      Assets and Financial Liabilities Including an Amendment of FASB Statement No.
      115 (“ SFAS 159”). SFAS 159 permits entities to choose to measure many financial
      instruments and certain other items at fair values. SFAS 159 is effective for
      fiscal years after November 15, 2007. The Company is currently evaluating the

      impact of adopting SFAS 159 on our financial statements.




18




**5.**
            **ACCOUNTS
                RECEIVABLE**





The
      Company’s accounts receivable as at April 30, 2007 are summarized as follows:




April 30, 2007
            
            October 31, 2006(Unaudited)
            
            (Audited)Accounts
                receivable
            
            $
            12,483,279
            
            $
            7,566,096Less:
                Allowance for doubtful accounts
            
            
            624,164Accounts
                receivable, net
            
            $
            11,859,115
            
            $
            7,566,096





The
      balance over 10% of the total balance as at April 30, 2007 are made up of
      $1,538,412, $1,276,151 and $1,207,428, which are accounted for 13%, 11% and
      10%
      of the total balance respectively.





The
      customers who owed over 10% in value of the total sales as at April 30, 2007
      are
      listed as:





Customer
                A:
            
            $
            820,176
            
            
            10
            %Customer
                B:
            
            $
            758,904
            
            
            10
            %





**6.**
            **INVENTORIES**





The
      Company’s inventories as at April 30, 2007 are summarized as follows:





April 30, 2007
            
            October 31, 2006(Unaudited)
            
            (Audited)Raw
                materials
            
            $
            1,208,071
            
            $
            569,349Finished
                goods
            
            
            144,231
            
            
            52,795$
            1,352,302
            
            $
            622,144





Raw
      material is mainly comprised of Chinese herbs, herbal related ingredients and
      packing materials, and they were for manufacturing the products such as tablets
      and drinks.





The
      Company does not have obsolete inventories as of April 30, 2007 and October
      31,
      2006.





**7.**
            **PROPERTY,
                PLANT AND EQUIPMENT**





April 30, 2007
            
            October 31, 2006(Unaudited)
            
            (Audited)**Cost:-**Plant
                and machinery
            
            $
            2,840,889
            
            $
            2,718,407Office
                equipment and furnishings
            
            
            13,873
            
            
            3,966Motor
                vehicles
            
            
            34,893
            
            
            19,6722,889,655
            
            
            2,742,045**Less:
                Accumulated depreciation:-**Plant
                and machinery
            
            
            272,729
            
            
            131,405Office
                equipment and furnishings
            
            
            513
            
            
            44Motor
                vehicles
            
            
            1,274
            
            
            311274,516
            
            
            131,760**Net
                book value**
            
            $
            2,615,139
            
            $
            2,610,285




19




Depreciation
      expenses relating to property, plant and equipment were $70,181 for the quarter
      ended April 30, 2007, and $138,475 for the six months ended April 30, 2007.





**8.**
            **CONSTRUCTION
                IN PROGRESS**





The
      balance of construction in progress of a warehouse is $667,575 and $106,610
      as
      at April 30, 2007 and October 31, 2006 respectively. Pursuant to the contract,
      the project was supposed to be complete by October, 2006, however, due to severe
      weather conditions, the completion date of the above project has been delayed.





The
      increase in the CIP of $467,199 (RMB 3.6 million) related to the assets purchase
      from Qing Yang Extracting Factory, which closed on March 3, 2007. These assets
      have not been utilized as further construction is to be completed at the end
      of
      2007.





**9.**
            **DEFERRED
                EXPENSES**





The
      deferred expenses are related to the cost of fund raising, which is disclosed
      in
      Note 17 subsequent event.





**10.**
            **ACCOUNTS
                PAYABLES AND ACCRUALS**





The
      balances over 10% of the total balance as at April 30, 2007 are made up of
      $94,872, and $67,225, which are accounted for 18% and 13% of the total balance
      respectively.





The
      balance as at October 31, 2006 includes $419,901 payable to a related party
      on
      the purchase of plant raw materials, which accounted for 66% of the total
      payable balance. Another account payable balance over 10% is $93,664, or 15%
      of
      the total payable balance.





The
      suppliers from whom the purchased amount is over 10% of the total purchase
      for
      the three months ended April 30, 2007 are listed as:





Supplier
                A:
            
            $
            495,254
            
            
            30
            %Supplier
                B:
            
            $
            231,909
            
            
            14
            %Supplier
                C:
            
            $
            209,166
            
            
            13
            %Supplier
                D:
            
            $
            166,244
            
            
            10
            %





**11.**
            **OTHER
                PAYABLES**





The
        balance as at April 30, 2007 includes professional fee payable $307,500,
        sales
        rebate payable of $2,024,264, payroll payable of $35,000, VAT payable of
        $52,177, social insurance payable of $182,380, and accrual of employee training
        for $15,570.





As
      at
      October 31, 2006, the balance includes sales, rebate payable of $1,031,101,
      VAT
      payable of $419,121, professional fee payable of $302,500 and payroll payable
      of
      $124,320





**12.**
            **INCOME
                TAXES**





The
      Company is subject to state and local income taxes within the PRC at the
      applicable tax rate as reported in their PRC statutory financial statements
      in
      accordance with the relevant income tax laws.





For
      the
      years of 2006 and 2007, the Company was granted tax holiday and concession
      and
      is entitled to full exemption from corporation income taxes up to December
      2007.
      From 2008 onwards, the Company also receives a special income tax rate of 15%
      as
      it is wholly foreign owned company where there is tax exemption for certain
      enterprises.




20




**13.**
            **RESERVES**





The
      reserve funds at April 30, 2007 are comprised of the following:





April 30, 2007
            
            October 31,
              2006(Unaudited)
            
            (Audited)Statutory
                surplus reserve fund
            
            $
            1,308,539
            
            $
            564,756Public
                welfare fund
            
            
            654,269
            
            
            282,377$
            1,962,808
            
            $
            847,133





Pursuant
      to the relevant laws and regulations of the PRC, the profits of the Company,
      which are based on their PRC statutory financial statements, are available
      for
      distribution in the form of cash dividends after they have satisfied all the
      PRC
      tax liabilities, provided for losses of previous years, and made appropriations
      to reserve funds, as determined by the Board of Directors in accordance with
      the
      PRC accounting standards and regulations.





As
      stipulated by the relevant laws and regulations for enterprises operating in
      the
      PRC, companies are required to make annual appropriations to two reserve funds,
      consisting of the statutory surplus and public welfare funds. In accordance
      with
      the relevant PRC regulations and the articles of association of the respective
      companies, the companies are required to allocate a percentage of their profits
      after taxation, as determined in accordance with the PRC accounting standards
      applicable to the companies, to the statutory surplus reserve until such reserve
      reaches 50% of the registered capital of the companies.





Net
      income as reported in the US GAAP financial statements differs from that as
      reported in the PRC statutory financial statements. In accordance with the
      relevant laws and regulations in the PRC, the profits available for distribution
      are based on the statutory financial statements. If the Company has foreign
      currency available after meeting its operational needs, it may make its profit
      distributions in foreign currency to the extent foreign currency is available.
      Otherwise, it is necessary to obtain approval and convert such distributions
      at
      an authorized bank.





**14.**
            **WARRANTS**





At
      April
      30, 2007 (Unaudited), the following table summarizes the changes in warrants
      outstanding and the related prices for the shares of the company’s common stock
      issued to non-employees of the company. These warrants were granted in lieu
      of
      cash for compensation for services performed of a newly appointed
      director.





Warrants
                Outstanding
            
            Warrants
                ExercisableExercise
              Prices
            
            Number
              Outstanding
            
            Weighted Average
              Remaining
              Contractual Life
              (years)
            
            Weighted
              Average
              Exercise Price
            
            Number
              Exercisable
            
            Weighted
              Average
              Remaining
              Contractual Life
              (years)$
            3.02
            
            
            15,000
            
            
            2.96
            
            $
            3.02
            
            
            15,000
            
            
            2.96




21





Transactions
      involving warrants are summarized as follows:




Number of
              Shares
            
            Weighted
              Average Price
              Per ShareOutstanding
                at October 31, 2006
            
            
            0
            
            
            0Granted
            
            
            15,000
            
            $
            3.02Exercised
            
            
            —
            
            
            —Cancelled
                or expired
            
            
            —
            
            
            —Outstanding
                at April 30, 2007
            
            
            15,000
            
            $
            3.02





The
      estimated value of the compensatory warrants granted to Director in exchange
      for
      services was determined using the Black-Scholes pricing model and the following
      assumptions:





2007Significant
                assumptions (weighted-average)Risk-free
                interest rate at grant date
            
            
            4.74
            %Expected
                stock price volatility
            
            
            70.83
            %Expected
                dividend payout
            
            
            —Expected
                option life-years (a)
            
            
            3





The
      Company entered into a Director appointment agreement with Mr. Magnus Moliteus
      dated April 16, 2007, pursuant to which the Company issued Mr. Magnus Moliteus
      15,000 warrants, which terminates on April 16, 2010, to purchase 15,000 shares
      of Renhuang’s common stock at $3.02 per share. The Company valued the warrants
      using the Black-Scholes calculation model, and the warrants were deemed to
      have
      a combined value of $22,442. This amount was charged to expense on the Company’s
      financial statements for the three months ending April 30, 2007
      (Unaudited)





**15.**
            **RELATED
                PARTY TRANSACTIONS**





The
      Company had the following significant related party transactions during the
      period:





n
            Machinery
                and equipment of $2,700,062 was transferred from Harbin Renhuang
                Pharmaceutical Stock Co. Ltd., with which the Company is under the
                common
                control, as part of the paid - in capital of the Company. The machinery
                and equipment were transferred at the carrying amounts of the transferor.





n
            The
                Company rented property and plant from its Predecessor Harbin Renhuang
                Pharmaceutical Stock Co. Ltd. The lease term is from May 1, 2006
                to April
                30, 2007, with monthly rental payment of $44,722. The rental is fair
                value
                as appraised by a third party property company.





**16.**
            **COMMITMENTS
                AND CONTINGENCIES**





**A.**
            **CAPITAL
                AND LEASE COMMITMENTS**





As
      of
      April 30, 2007, the Company has the following significant capital and lease
      commitments outstanding: **





The
      Company rented property and plant from Hei Long Jiang Jiu San You Zhi Co.,
      Ltd. The lease term is from May 1, 2007 to April 30, 2010, with total
      rental payment $328,337.





22




April 30, 2007(Unaudited)within
                1 year
            
            $
            105,1191-2
                years
            
            
            111,6092
                -3 years
            
            
            111,609Total
            
            $
            328,337





**B.**
            **LEGAL
                PROCEEDINGS**





The
      Company is not currently involved in any litigation. There is no action, suit,
      proceeding, inquiry or investigation before or by any court, public board,
      government agency, self-regulatory organization or body pending or, to the
      knowledge of the executive officers of the Company.





**17.**
            **CURRENT
                VULNERABILITY DUE TO CERTAIN CONCENTRATIONS**





The
      Company faces a number of risks and challenges since its operations are in
      the
      PRC. The Company’s operations in the PRC are subject to special considerations
      and significant risks not typically associated with companies in North America
      and Western Europe. The Company’s results may be adversely affected by changes
      in the political and social conditions in the PRC, and by changes in
      governmental policies with respect to laws and regulations, anti-inflationary
      measures, currency conversion and remittance abroad, and rates and methods
      of
      taxation, among other things.





**18.**
            **SUBSEQUENT
                EVENT**





As
      further described in Note 1, Renhuang Pharmaceuticals, Inc., consummated a
      Reverse Merger on September 7, 2006. As a continuation thereof, the Company
      is
      currently in negotiations with various investors regarding financing and it
      is
      anticipated that the Company will consummate a finance transaction with one
      or
      more of them in the near future.





Pursuant
      to the appointment agreement discussed in Note 14, besides the 15,000 warrants
      issued upon acceptance to the newly appointed director as compensation, each
      July 31, commencing 2007, the Company issues additional 10,000 warrants to
      the
      Director to acquire 10,000 shares of common stock exercisable for three (3)
      years, at an exercise price equal to the fair market value of Renhuang’s stock
      as of the date of grant and $10,000.





**19.**
              **RESTATEMENT**





The
        Company has restated its previously issued consolidated financial statements
        for
        the quarter ended January 31, 2007 and for the quarter ended April 30, 2007.
        During the review for the quarter ended July 31, 2007, the Company discovered
        an
        accounting error occurring in the filed financial statements for the quarter
        ended January 31, 2007 and for the quarter ended April 30, 2007. Certain
        amounts
        of sales rebate payable were not accrued from sales.




23




The
        following table summarizes the impact of the restatement adjustments on the
        consolidated balance sheet as of April 30, 2007:


**As of April 30, 2007****As Previously**
                  **Reported**
                
                **Total**
                  **Adjustments**
                
                **As Restated****CURRENT
                    ASSETS**Cash
                    and cash equivalents
                
                $
                3,786,469
                
                
                
                
                $
                3,786,469Trade
                    receivables, net (Note 5)
                
                
                11,859,115
                
                
                
                
                
                11,859,115Inventories
                    (Note 6)
                
                
                1,352,302
                
                
                
                
                
                1,352,302Prepaid
                    expenses and deposits
                
                
                135,883
                
                
                
                
                
                135,883Other
                    receivables
                
                
                20,172
                
                
                
                
                
                20,172Deferred
                    expenses (Note 9)
                
                
                118,434
                
                
                
                
                
                118,434**TOTAL
                    CURRENT ASSETS**
                
                
                17,272,375
                
                
                
                
                
                17,272,375PROPERTY,
                    PLANT AND EQUIPMENT (Note 7)
                
                
                2,615,139
                
                
                
                
                
                2,615,139CONSTRUCTION
                    IN PROGRESS (Note 8)
                
                
                667,575
                
                
                
                
                
                667,575**TOTAL
                    ASSETS**
                
                $
                20,555,089
                
                
                
                
                $
                20,555,089**CURRENT
                    LIABILITIES**Accounts
                    payables and accruals (Note 10)-
                    due to related parties
                
                $
                -
                
                
                
                
                $
                --
                    due to third parties
                
                
                519,822
                
                
                
                
                
                519,822Total
                    accounts payables and accruals
                
                
                519,822
                
                
                
                
                
                519,822Other
                    payables (Note 11)
                
                
                891,257
                
                
                1,725,634
                
                
                2,616,891**TOTAL
                    CURRENT LIABILITIES**
                
                
                1,411,079
                
                
                
                
                
                3,136,713**TOTAL
                    LIABILITIES**
                
                
                1,411,079
                
                
                1,725,634
                
                
                3,136,713**STOCKHOLDERS’
                    EQUITY**Common
                    Stock - Authorized common shares 100,000,000, outstanding number
                    of shares
                    35,000,181 at par value of 0.001, authorized preferred shares
                    2,500,000
                
                
                35,000
                
                
                
                
                
                35,000Additional
                    paid in capital
                
                
                6,333,264
                
                
                
                
                
                6,333,264Reserves
                
                
                1,962,808
                
                
                
                
                
                1,962,808Retained
                    earnings
                
                
                10,420,513
                
                
                (1,712,961
                )
                
                8,707,552Accumulated
                    other comprehensive income
                
                
                392,425
                
                
                (12,673
                )
                
                379,752**TOTAL
                    STOCKHOLDERS’ EQUITY**
                
                
                19,144,010
                
                
                (1,725,634
                )
                
                17,418,376**TOTAL
                    LIABILITIES AND STOCKHOLDERS’ EQUITY**
                
                $
                20,555,089
                
                
                
                
                $
                20,555,089
  24


The
        following table summarizes the impact of the restatement adjustments on the
        consolidated statement of operations for the three months and six months
        ended
        April 30, 2007:





**Three Months Ended April 30,  2007**
              
              **Six Months Ended April 30, 2007****As**
                **Previously**
                **Reported**
              
              **Total**
                **Adjustments**
              
              **As
                  Restated**
              
              **As**
                **Previously**
                **Reported**
              
              **Total**
                **Adjustments**
              
              **As
                  Restated**SALES
              
              $
              6,964,700
              
              $
              (649,368
              )
              $
              6,315,332
              
              $
              17,532,286
              
              $
              (1,712,961
              )
              $
              15,819,325COST
                  OF SALES
              
              
              (3,120,081
              )
              
              
              
              
              (3,120,081
              )
              
              (7,693,017
              )
              
              
              
              
              (7,693,017
              )GROSS
                  PROFIT
              
              
              3,844,619
              
              
              (649,368
              )
              
              3,195,251
              
              
              9,839,269
              
              
              (1,712,961
              )
              
              8,126,308SELLING
                  AND DISTRIBUTION EXPENSES
              
              
              (16,871
              )
              
              
              
              
              (16,871
              )
              
              (122,446
              )
              
              
              
              
              (122,446
              )ADVERTISING
                  EXPENSE
              
              
              (163,532
              )
              
              
              
              
              (163,532
              )
              
              (172,681
              )
              
              
              
              
              (172,681
              )GENERAL
                  AND ADMINISTRATIVE EXPENSES
              
              
              (369,728
              )
              
              
              
              
              (369,728
              )
              
              (636,504
              )
              
              
              
              
              (636,504
              )PROVISION
                  FOR DOUBTFUL ACCOUNTS
              
              
              (568,113
              )
              
              
              
              
              (568,113
              )
              
              (621,122
              )
              
              
              
              
              (621,122
              )DEPRECIATION
                  AND AMORTIZATION
              
              
              (70,181
              )
              
              
              
              
              (70,181
              )
              
              (138,475
              )
              
              
              
              
              (138,475
              )INCOME
                  FROM OPERATIONS
              
              
              2,656,194
              
              
              (649,368
              )
              
              2,006,826
              
              
              8,148,041
              
              
              (1,712,961
              )
              
              6,435,080OTHER
                  INCOME
              
              
              6,732
              
              
              
              
              
              6,732
              
              
              10,066
              
              
              
              
              
              10,066INCOME
                  BEFORE INCOME TAXES
              
              
              2,662,926
              
              
              (649,368
              )
              
              2,013,558
              
              
              8,158,107
              
              
              (1,712,961
              )
              
              6,445,146INCOME
                  TAXES
              
              
              —
              
              
              
              
              
              —
              
              
              —
              
              
              
              
              
              —NET
                  INCOME
              
              $
              2,662,926
              
              
              (649,368
              )
              $
              2,013,558
              
              $
              8,158,107
              
              
              (1,712,961
              )
              $
              6,445,146BASIC
                  EARNINGS PER SHARE
              
              
              0.076
              
              
              (0.019
              )
              
              0.058
              
              
              0.233
              
              
              (0.049
              )
              
              0.184DILUTED
                  EARNING PER SHARE
              
              
              0.076
              
              
              (0.019
              )
              
              0.058
              
              
              0.233
              
              
              (0.049
              )
              
              0.184




25




The
        following table summarizes the impact of the restatement adjustments on the
        consolidated statement of cash flows for the six months ended April 30,
        2007:





**Six
                  Months Ended April 30, 2007****As Previously**
                **Reported**
              
              **Total**
                **Adjustments**
              
              **As Restated****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  income
              
              $
              8,158,107
              
              $
              (1,712,961
              )
              $
              6,445,146Adjustments
                  to reconcile net income to net cash fromoperating
                  activities :Depreciation
                  and amortization
              
              
              138,475
              
              
              
              
              
              138,475Fair
                  Value of Warrants Issued
              
              
              22,442
              
              
              
              
              
              22,442Changes
                  in operating assets and liabilities:Trade
                  receivables, net
              
              
              (4,293,019
              )
              
              
              
              
              (4,293,019
              )Inventories
              
              
              (730,158
              )
              
              
              
              
              (730,158
              )Other
                  receivables, net
              
              
              1,123,662
              
              
              
              
              
              1,123,662Deferred
                  expenses
              
              
              (2,610
              )
              
              
              
              
              (2,610
              )Prepaid
                  expenses and deposits
              
              
              (33,410
              )
              
              
              
              
              (33,410
              )Accounts
                  payable and accruals
              
              
              (266,893
              )
              
              
              
              
              (266,893
              )Other
                  Payable
              
              
              (985,785
              )
              
              1,725,634
              
              
              789,849**NET
                  CASH PROVIDED BY OPERATING ACTIVITIES**
              
              
              3,130,811
              
              
              12,673
              
              
              3,143,484**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Acquisition
                  of property, plant and equipment
              
              
              (143,330
              )
              
              
              
              
              (143,330
              )Construction
                  in Progress
              
              
              (560,965
              )
              
              
              
              
              (560,965
              )**NET
                  CASH USED IN INVESTING ACTIVITIES**
              
              $
              (704,295
              )
              
              
              
              $
              (704,295
              )**NET
                  CHANGE IN CASH AND CASH EQUIVALENTS**
              
              
              2,426,516
              
              
              12,673
              
              
              2,439,189EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
              
              
              338,686
              
              
              (12,673
              )
              
              326,013Cash
                  and cash equivalents, beginning of period
              
              
              1,021,267
              
              
              
              
              
              1,021,267Cash
                  and cash equivalents, end of period
              
              $
              3,786,469
              
              
              
              
              $
              3,786,469




**20.**
              **COMPARATIVE
                  FINANCIAL
                  INFORMATION**





As
      discussed in Note 1- reorganization transactions, the Company acquired Harbin
      Renhuang Pharmaceutical Company Limited and its wholly owned subsidiary, Harbin
      Renhuang Pharmaceutical Co., Ltd.





The
      comparative numbers are results of operations of Harbin Renhuang Pharmaceutical
      Stock Co. Ltd. for the three months and six months ended April 30, 2006.




26




**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN THE PRC)**





**BALANCE
      SHEETS**


**AS
      OF APRIL 30, 2006**


**(Amounts
      in United States Dollars)**




**ASSETS**





**April 30,**
              **2006****(Unaudited)****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            2,225,895Trade
                receivables, net
            
            
            5,383,233Inventories
            
            
            2,402,320Prepayments
            
            
            949,225Other
                receivables, net
            
            
            494,202Due
                from related parties, net
            
            
            278,050Due
                from a director
            
            
            1,157,668Deferred
                expenses
            
            
            694,211**TOTAL
                CURRENT ASSETS**
            
            
            13,584,804**LAND
                USE RIGHTS**
            
            
            138,509**PROPERTY,
                PLANT AND EQUIPMENT,****NET**
            
            
            10,465,187**TOTAL
                ASSETS**
            
            $
            24,188,500





27





**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN THE PRC)**





**BALANCE
      SHEETS**


**AS
      OF APRIL 30, 2006**





**(Amounts
      in United States Dollars)**





**LIABILITIES
      AND STOCKHOLDERS’ EQUITY**





**April 30,**
              **2006****(Unaudited)****CURRENT
                LIABILITIES**Accounts
                payables and accruals
            
            $
            1,332,885Advance
                from customers
            
            
            374,734Bank
                loans
            
            
            1,996,531Other
                payables
            
            
            4,678,858Due
                to a director
            
            
            997,853**TOTAL
                current LIABILITIES**
            
            
            9,380,861**NON-CURRENT
                LIABILITIES**Long-term
                bank loan
            
            
            3,743,496**TOTAL
                LIABILITIES**
            
            
            13,124,357**STOCKHOLDERS’
                EQUITY**Registered
                capital
            
            
            9,665,922Reserves
            
            
            1,245,374Retained
                earnings (Deficit)
            
            
            (137,608
            )Accumulated
                other comprehensive income
            
            
            290,455**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            11,064,143**TOTAL
                LIABILITIES AND****STOCKHOLDERS’
                EQUITY**
            
            $
            24,188,500




28




**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN THE PRC)**





**STATEMENT
      OF INCOME**


**FOR
      THE THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 2006**





**(Amounts
      in United States Dollars)**





**Three**
              **Months**
              **Ended**
              **April 30,**
              **2006**
            
            **Six Months**
              **Ended**
              **April 30,**
              **2006****(Unaudited)**
            
            **(Unaudited)**SALES
            
            $
            7,026,237
            
            
            16,427,921COST
                OF SALES
            
            
            (3,921,041
            )
            
            (8,863,227
            )GROSS
                PROFIT
            
            
            3,105,196
            
            
            7,564,694SELLING
                AND DISTRIBUTION EXPENSES
            
            
            (469,292
            )
            
            (577,370
            )ADVERTISING
            
            
            (963,479
            )
            
            (2,917,988
            )GENERAL
                AND ADMINISTRATIVE EXPENSES
            
            
            (1,057,561
            )
            
            (1,632,290
            )RESEARCH
                AND DEVELOPMENT
            
            
            (103,926
            )
            
            (817,547
            )AMORTIZATION
                AND DEPRECIATION
            
            
            (183,150
            )
            
            (328,051
            )PROVISION
                FOR DOUBTFUL ACCOUNTS
            
            
            (622,618
            )
            
            (622,618
            )INCOME/(LOSS)
                FROM OPERATIONS
            
            
            (294,830
            )
            
            668,830FINANCE
                COST
            
            
            (303,099
            )
            
            (359,465
            )OTHER
                EXPENSE
            
            
            (11,548
            )
            
            (6,781
            )GOVERNMENT
                GRANT
            
            
            1,022
            
            
            155,316INCOME/(LOSS)
                BEFORE INCOME TAXES
            
            
            (608,455
            )
            
            457,900INCOME
                TAXES
            
            
            —
            
            
            —NET
                INCOME/(LOSS)
            
            $
            (608,455
            )
            
            457,900




29




**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN THE PRC)**





**STATEMENT
      OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2006**


**(Amounts
      in United States Dollars)**





**(Unaudited)****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                income
            
            $
            457,900Adjustments
                  to reconcile net income to net cash from operating activities
                  :Depreciation
                and amortization
            
            
            328,051Changes
                in operating assets and liabilities:Trade
                receivables, net
            
            
            (1,327,585
            )Inventories
            
            
            1,111,003Prepayments
            
            
            (506,399
            )Other
                receivables, net
            
            
            (116,993
            )Deferred
                expenses
            
            
            (694,211
            )Advances
                from customers
            
            
            228,219Accounts
                payable and accruals
            
            
            (180,641
            )Other
                payables
            
            
            203,108**NET
                CASH USED IN OPERATING ACTIVITIES**
            
            
            (497,548
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Acquisition
                of property, plant and equipment
            
            
            (1,876,244
            )Disposition
                of property, plant and equipment
            
            
            2,739,663**NET
                CASH PROVIDED BY INVESTING ACTIVITIES**
            
            $
            863,419




30





**HARBIN
      RENHUANG PHARMACEUTICAL STOCK CO., LTD**


**(INCORPORATED
      IN THE PRC)**





**STATEMENT
      OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED APRIL 30, 2006**


**(Amounts
      in United States Dollars)**





**(Unaudited)****CASH
                FLOWS FROM FINANCING ACTIVITIES:**Repayment
                of bank loans, net
            
            
            (482,398
            )Due
                to a director
            
            
            (916,165
            )Due
                to related parties
            
            
            (278,050
            )**NET
                CASH USED IN FINANCING ACTIVITIES**
            
            
            (1,676,613
            )**NET
                CHANGE IN CASH AND CASH EQUIVALENTS**
            
            
            (1,310,742
            )EFFECT
                OF EXCHANGE RATE CHANGES ON CASH AND CASH
              EQUIVALENTS
            
            
            97,235Cash
                and cash equivalents, beginning of period
            
            
            3,439,402Cash
                and cash equivalents, end of period
            
            $
            2,225,895**SUPPLEMENTARY
                CASH FLOW DISCLOSURES**Interest
                paid
            
            $
            245,145Income
                taxes paid
            
            $
            —




31




**ITEM
                2**
              **Managements
                  Discussion and Analysis of Financial Condition and Results of
                  Operations.**





**Overview**





The
      following discussion of the financial condition and results of operation of
      Renhuang Pharmaceuticals, Inc. should be read in conjunction with the financial
      statements and the notes to those statements included in this Quarterly Report
      on Form 10-Q. This discussion includes forward-looking statements that involve
      risk and uncertainties. As a result of many factors, actual results may
      differ materially from those anticipated in the forward-looking
      statements.




As
      of
      March 3, 2006 we discontinued our previous operations as a company specializing
      in the providing of home financing through the brokerage of residential home
      loans. On September 7, 2006, we acquired 100% of the issued and outstanding
      shares of Harbin Renhuang Pharmaceutical Company Limited, a corporation
      incorporated under the laws of the British Virgin Islands, (“BVI’’), whose only
      assets are 100% of Harbin Renhuang Pharmaceutical Co. Ltd., incorporated under
      the laws of the People’s Republic of China (“Renhuang China”) mainly focused on
      the research, production and sales of traditional Chinese and Western medical
      and bio-pharmaceutical products in China.





On
      May 1,
      2006, Harbin Renhuang Pharmaceutical Stock Co. Ltd., (“Old Renhuang”)
      transferred the majority of its operating assets to Renhuang China, with the
      exception of the buildings Old Renhuang owns (including where we rent our office
      space and production facilities), and Old Renhuang’s account receivables,
      inventories and other assets with zero or insignificant value. The principal
      business activities of Renhuang remained unchanged. On March 3, 2006, Renhuang
      Medicine for Animals Co. Ltd. a company controlled by our President and Chief
      Executive Officer, Mr. Li Shaoming, invested 25 million RMB (about US $3.3
      million) in cash in Renhuang China.





Our
      pharmaceutical products are distributed through more than 60 sales offices
      with
      more than 2,000 commission-based sales people. Upon the effectiveness of the
      Merger, we adopted the business of Renhuang China, which we have continued
      as
      our sole line of business.





Upon
      closing of the Merger, BVI and its subsidiary Renhuang China
      became our wholly owned subsidiaries. The Former stockholders of BVI own
      approximately 85% of our issued and outstanding common stock.





Since
      we
      will operate Renhuang China as our sole line of business,
      the analysis of the pro forma financial statements for the three
      months and six months ended on April 30, 2006 is the operation of Harbin
      Renhuang Pharmaceutical Co, Ltd. (Renhuang China).





**Reverse
      Merger**





Our
      acquisition of the BVI company and its subsidiary Renhuang China was
      accounted for as a reverse merger, because, after giving effect to the
      share exchanges, the former stockholders of BVI hold a majority of our
      outstanding common stock on a voting and fully diluted basis. As a result of
      the
      share exchanges, Renhuang was deemed to be the acquirer for accounting purposes.
      Accordingly, the financial statements presented are those of Renhuang China
      for
      all periods prior to our acquisition of the BVI company on September 7, 2006,
      and the financial statements of the consolidated companies from the acquisition
      date forward.





32




**Change
      in Fiscal Year**





On
      December 5, 2006, our Board of Directors approved the change of our fiscal
      year end from April 30 to October 31. As a result we filed a Transitional
      Report for the six months ended October 31, 2006 on Form 10-K. For Old
      Renhuang’s three month comparative numbers for the same period in 2006, see Note
      18 to the financial statements filed attached hereto. For our numbers from
      the
      same period one year ago (when we were Anza Capital, Inc.) please see our
      Quarterly Report on Form 10-Q for the three months ended April 30,
      2006.





Since
      the
      change in our fiscal year occurred in conjunction with our shift from a shell
      company to a company specializing in the research, production and sales of
      traditional Chinese and Western medical and bio-pharmaceutical products in
      China
      our previous operations are not relevant to our current operations and our
      previous operations are covered in our previous Quarterly Reports on Form 10-Q,
      therefore, this discussion focuses on the three month and six months ended
      April
      30, 2007 and a comparison the Old Renhuang’s financial statements for the same
      period in 2006 (see Note 18 to the attached financial statements for Old
      Renhuang’s unaudited financial statements for the three months and six months
      ended April 30, 2006).





**Assets
      Acquisition**





On
      March
      3, 2007, the Company acquired all the assets and assumed a bank loan with
      accrued interest of Qingyang Extracting Factory, from Zhongfa Industrial Group
      Yerui Pharmaceutical Co., Ltd. for a total amount of RMB 3.7 million or
      approximately USD $480,000. The assets acquired included inventories, customer
      purchase orders, accounts receivables, corporate name, patents, trademarks,
      equipment, customer lists and records and other assets that are used or held
      for
      use in connection with Business of Qingyang Extracting Factory. The Company
      paid
      USD $310,000 in cash and assumed a bank loan with China Agriculture Bank in
      the
      principal amount of USD $140,000 and accrued interest of USD $30,000
      collateralized by the acquired assets. The transaction closed on March 3, 2007,
      and the Company has paid for the cash portion of the consideration USD $310,000
      (RMB 2,415,000).





**Three
      Months Ended April 30, 2007 Compared to Three Months Ended April 30,
      2006**





**Introduction**




For
        the
        three months ended April 30, 2007, we generated $6,315,332 in revenues on
        cost
        of sales of $3,120,081. With these revenues and cost of sales for the three
        months ended April 30, 2007, we had a net income from operations and a net
        income attributable to shareholders of $2,013,558. As noted above, we acquired
        the majority of our current operations from Old Renhuang. For the three months
        ended April 30, 2006, Old Renhuang had revenues of $7,026,237, on cost of
        sales
        of $3,921,041. With these revenues and costs of sales Old Renhuang had a
        net
        loss of $608,455.




33





**Revenues,
      Expenses and Profit from Operations**





**Three Months**
                **Ended**
                **April 30, 2007**
              
              **ThreeMonths**
                **Ended**
                **April 30, 2006**
                **(OldRenhuang))**Revenue
              
              $
              6,315,332
              
              $
              7,026,237Cost
                  of Sales
              
              
              (3,120,081
              )
              
              (3,921,041
              )Selling
                  and Distribution Expenses
              
              
              (16,871
              )
              
              (469,292
              )Advertising
                  Expenses
              
              
              (163,532
              )
              
              (963,479
              )General
                  and Administrative Expenses
              
              
              (369,728
              )
              
              (1,057,561
              )Research
                  and Development
              
              
              —
              
              
              (103,926
              )Provision
                  for doubtful Accounts
              
              
              (568,113
              )
              
              (622,618
              )Depreciation
                  and Amortization
              
              
              (70,181
              )
              
              (183,150
              )Finance
                  Cost
              
              
              —
              
              
              (303,099
              )Government
                  Grant
              
              
              —
              
              
              1,022Other
                  Income/(Expenses)
              
              
              6,732
              
              
              (11,548
              )Net
                  Income
              
              $
              2,013,558
              
              $
              (608,455
              )




*Revenues*





Our
        revenues of $6,315,332 decreased by 10% when compared to Old Renhuang’s revenues
        from the same period one year ago of $7,026,237. Our revenues for the three
        months ended April 30, 2007 consisted primarily of sales of the following
        products: Acanthopanax products, Shark Power Health Care products, and other
        Chinese traditional medical products. The value percentage on the sales of
        those
        products are 50%, 19% and 31%, respectively.





*Cost
      of Sales*





Our
        cost
        of sales for the three months ended April 30, 2007 were $3,120,081, representing
        49% of revenue and consisted primarily of raw material, labor and production
        costs, compared to Old Renhuang’s cost of sales for the same period one year ago
        of $3,921,041, representing approximately 56% of sales in that period. The
        improvement of the percentage of cost to revenue is due to the economy of
        scales
        resulted from the growth of the production and sales. Costs allocated to
        the
        aforementioned products, Acanthopanax products, Shark Power Health Care
        products, and other Chinese traditional medical products are 51%, 14% and
        35%
        respectively.





*Selling
      and Distribution Expenses*





Our
      selling and distribution expenses are those expenses we have related to the
      actual sales of our products and the costs we incur in distributing those
      products. For the three-month period ended April 30, 2007, our selling and
      distribution expenses were $16,871, decreased by $452,421 or 96% from Old
      Renhuang’s selling and distribution expenses of $469,292, for the same period
      one year ago largely due to lower traveling expense with improved management
      of
      marketing channels.


34





*Advertising
      Expenses*





For
      the
      three months ended April 30, 2007, we had advertising expenses of $163,532.
      These advertising expenses were primarily related to the advertising of
      Acanthopanax. Old Renhuang’s advertising expenses were $963,479 for the same
      period one year ago. This significant decrease was due to the fact Old Renhuang
      had a more aggressive advertising strategy a year ago in order to increase
      name
      recognition in the South of China.





*General
      and Administrative Expenses*





Our
      general and administrative expenses were $369,728 for the three-month period
      ended April 30, 2007, compared to $1,057,561 during the same period one
      year ago for Old Renhuang. The decrease is due mainly to the decrease of
      inventory obsolescence as a result of more efficient inventory management.
      Of
      our current $369,728 general and administrative expenses, the primary expenses
      were as follows: $97,521 for payroll, and $86,272 for professional fee, and
      $49,086 for accrual of social insurance.





*Research
      and Development*





For
      the
      three months ended April 30, 2007, we spent $0 on research and development
      compared to $103,926 for Old Renhuang during the same period one year ago.
      Our
      research and development expenses were less when compared to Old Renhuang during
      the same period one year ago because the majority of the costs related to
      R&D activities are upfront one time payments paid to universities and
      research institutions, and thus, R&D expenses were incurred and recorded by
      Old Renhuang. For the current period the Company does not have new significant
      R&D projects.





*Depreciation
      and Amortization*





We
      had
      depreciation and amortization expenses of $70,181 for the three months from
      February 1 to April 30, 2007, which related to property, plant and equipment.
      This is compared to $183,150 for Old Renhuang for the same period one year
      ago,
      which included depreciation on buildings that were not transferred to the
      Company.





*Provision
      for Doubtful Accounts*





Provision
      for doubtful accounts for the three months ended April 30, 2007 was $568,113,
      comparable to $622,618 for the same period last year, with a slight drop of
      $54,505 or 9%. The comparability of the two periods was consistent with the
      comparability of revenue between the two periods.





*Finance
      Cost*





Finance
      cost was zero for the three months ended April 30, 2007, dropped significantly
      from $303,099 for the same period last year, as the Company did not acquire
      any
      debt from the old Renhuang upon the reconstruction as described in Note 1 to
      the
      financial statements for Quarter 2, 2007.





*Net
      Income (Loss) from Operations*





Our
        net
        income for the three months ended April 30, 2007, was $2,013,558, while Old
        Renhuang incurred a net loss during the same period one year ago. This
        significant improvement in net income over Old Renhuang for the same period
        one
        year ago is primarily due to significant decreases in cost of sales and various
        expenses.





35





**Six
      Months Ended April 30, 2007 Compared to Six Months Ended April 30,
      2006**





**Introduction**




For
        the
        six months ended April 30, 2007, we generated $15,819,325 in revenues on
        cost of
        sales of $7,693,017. With these revenues and cost of sales for the three
        months
        ended April 30, 2007, we had a net income from operations and a net income
        attributable to shareholders of $6,445,146. As noted above, we acquired the
        majority of our current operations from Old Renhuang. For the six months
        ended
        April 30, 2006, Old Renhuang had revenues of $16,427,921, on cost of sales
        of
        $8,863,227. With these revenues and costs of sales Old Renhuang had a net
        income
        of $457,900.





**Revenues,
      Expenses and Profit from Operations**





**Six Months**
                **Ended**
                **April 30, 2007**
              
              **Six Months**
                **Ended**
                **April 30, 2006**
                **(OldRenhuang)**Revenue
              
              $
              15,819,325
              
              $
              16,427,921Cost
                  of Sales
              
              
              (7,693,017)
              )
              
              (8,863,227
              )Selling
                  and Distribution Expenses
              
              
              (122,446
              )
              
              (577,370
              )Advertising
                  Expenses
              
              
              (172,681
              )
              
              (2,917,988
              )General
                  and Administrative Expenses
              
              
              (636,504
              )
              
              (1,632,290
              )Research
                  and Development
              
              
              —
              
              
              (817,547
              )Provision
                  for doubtful Accounts
              
              
              (621,122
              )
              
              (622,618
              )Depreciation
                  and Amortization
              
              
              (138,475
              )
              
              (328,051
              )Finance
                  Cost
              
              
              —
              
              
              (359,465
              )Government
                  Grant
              
              
              —
              
              
              155,316Other
                  Income/(Expenses)
              
              
              10,066
              
              
              (6,781
              )Net
                  Income
              
              $
              6,445,146
              
              $
              (457,900
              )




*Revenues*





Our
        revenues of $15,819,325 decreased by 0.6 million or 3.7% when compared to
        Old
        Renhuang’s revenues from the same period one year ago of $16,427,921. Our
        revenues for the six months ended April 30, 2007 consisted primarily of sales
        of
        the following products: Acanthopanax products, Shark Power Health Care products,
        and other Chinese traditional medical products.





*Cost
      of Sales*





Our
        cost
        of sales for the six months ended April 30, 2007, were $7,693,017, representing
        49% of revenue and consisted primarily of raw material, labor and production
        costs, compared to Old Renhuang’s cost of sales for the same period one year ago
        of $8,863,227, representing approximately 54% of sales in that period. The
        improvement of the percentage of cost to revenue is due to the economy of
        scales
        resulted from the growth of the production and sales.


36





*Selling
      and Distribution Expenses*





Our
      selling and distribution expenses are those expenses we have related to the
      actual sales of our products and the costs we incur in distributing those
      products. For the six-month period ended April 30, 2007, our selling and
      distribution expenses were $122,446, decreased by $454,924 or 79% from Old
      Renhuang’s selling and distribution expenses of $577,370, for the same period
      one year ago largely due to lower traveling expense with improved management
      of
      marketing channels.





*Advertising
      Expenses*





For
      the
      six months ended April 30, 2007, we had advertising expenses of $172,681. These
      advertising expenses were primarily related to the advertising of Acanthopanax.
      Old Renhuang’s advertising expenses were $2,917,988 for the same period one year
      ago. This significant decrease was due to the fact Old Renhuang had a more
      aggressive advertising strategy a year ago in order to increase name recognition
      in the South of China.





*General
      and Administrative Expenses*





Our
      general and administrative expenses were $636,504 for the six-month period
      ended
      April 30, 2007, compared to $1,632,290 during the same period one year ago
      for Old Renhuang, largely due to the decrease of inventory obsolescence,
      traveling expense and office expense





*Research
      and Development*





For
      the
      six months ended April 30, 2007, we spent $0 on research and development
      compared to $817,547 for Old Renhuang during the same period one year ago.
      Our
      research and development expenses were less when compared to Old Renhuang during
      the same period one year ago because the majority of the costs related to
      R&D activities are upfront one time payments paid to universities and
      research institutions, and thus, R&D expenses were incurred and recorded by
      Old Renhuang. For the current period the Company does not have new significant
      R&D projects.





*Provision
      for Doubtful Accounts*





Provision
      for doubtful accounts for the six months ended April 30, 2007 was $621,122,
      comparable to $ 622,618 for the same period last year. The comparability of
      the
      two periods was consistent with the comparability of revenue between the two
      periods.





*Depreciation
      and Amortization*





We
      had
      depreciation and amortization expenses of $138,475 for the six months from
      November 1, 2006 to April 30, 2007, which related to property, plant and
      equipment. This is compared to $328,051 for Old Renhuang for the same period
      one
      year ago, which included depreciation on buildings that were not transferred
      to
      the Company.





*Finance
      Cost*





Finance
      cost was zero for the six months ended April 30, 2007, dropped significantly
      from $359,465 for the same period last year because the Company did not acquire
      any debt from the old Renhuang upon the reconstruction as described in Note
      1 to
      the financial statements for Quarter 2, 2007.




37





*Government
      Grant*





Government
      grant was 0 for the six months ended April 30, 2007, compared to $155,316 for
      the six months ended April 30, 2006. The Government Grant for the six months
      ended April 30, 2006 was related to the new products research development and
      production. There were no new products in the six months ended April 30,
      2007.





*Net
      Income (Loss) from Operations*





Our
        net
        income for the six months ended April 30, 2007, was $6,445,146, which increased
        by over 1308% when compared to $457,900 for Old Renhuang for the same period
        one
        year ago. This significant improvement in net income over Old Renhuang for
        the
        same period one year ago is primarily due to significant decreases in cost
        of
        sales and various expenses.





*Liquidity
      and Capital Resources*





**Introduction**




Our
      cash,
      current assets, total assets, current liabilities, and total liabilities as
      of
      April 30, 2007 and 2006 (Old Renhuang), respectively, are as
      follows:





April 30, 2007
              
              April 30, 2006
                (OldRenhuang)Cash
                  and Cash Equivalents
              
              $
              3,786,469
              
              $
              2,225,895Total
                  Current Assets
              
              
              17,272,375
              
              
              13,584,804Total
                  Assets
              
              
              20,555,089
              
              
              24,188,500Total
                  Current Liabilities
              
              
              3,136,713
              
              
              9,380,861Total
                  Liabilities
              
              $
              3,136,713
              
              $
              13,124,357





Sources
      and Uses of Cash





*Operations*





Net
        cash
        generated from operating activities was $3,143,984 for the six months ended
        April 30, 2007, compared to net cash used in operating activities of $(497,548)
        for Old Renhuang for the six months ended April 30, 2006. Our net cash used
        in
        operating activities for the current six month period was primarily $(4,293,019)
        in net accounts receivables, $(730,158) in inventories, $1,123,662 from
        reduction of other net receivables, ($266,893) in total accounts payable
        and
        accruals, and $739,849 from other payables.





*Investments*





Net
      cash
      used in investing activities was $704,295 for the six months ended April 30,
      2007, compared to $863,419 for Old Renhuang for the same period one year ago.
      For the six months ended April 30, 2007, our cash used in investing
      activities related to the acquisition of property, plant and equipment in the
      amount of $(143,330) and construction in progress in the amount of
      $(560,965).


38




*Financing*





Net
      cash
      from financing activities was $0 for the six months ended April 30, 2007,
      compared to net cash used in financing activities in the amount of $(1,676,613)
      for Old Renhuang for the six months ended April 30, 2006. The contributors
      to
      the cash used in financing activities during six months ended April 30, 2006
      included repayment of bank loans for $(482,398), payable to related parties
      of
      $(278,050), and payable to a director of $(916,165).





Debt
      Instruments, Guarantees, and Related Covenants





The
      Company does not have any long term debt and short term debt, and has not
      entered into any guarantee arrangements or other related covenants.





**Critical
      Accounting Policies**





The
      preparation of our financial statements in conformity with accounting principles
      generally accepted in the United States of America requires our management
      to
      make certain 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 revenues and
      expenses during the reporting period. As such, in accordance with the use of
      accounting principles generally accepted in the United States of America, our
      actual realized results may differ from management’s initial estimates as
      reported. A summary of our significant accounting policies are located in the
      notes to the financial statements which are an integral component of this
      filing.





**Off-balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements.





**Contractual
      Obligations**




Payments due by periodTotal
            
            1 Year
            
            1-2 Years
            
            2-3 Years
            
            3-5 YearsObligationsLong-Term
                Debt Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Capital
                Lease Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Operating
                Lease Obligations
            
            $
            328,337
            
            $
            105,119
            
            $$
            111,609
            
            $
            111,609
            
            
            -0-Purchase
                Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Other
                Long-Term Liabilities
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Total
                Contractual Obligations
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-





The
      lease
      obligation was pursuant to a lease of office space from a third party. The
      lease
      was classified as operational lease in accordance with GAAP.




**ITEM
                3**
              **Quantitative
                  and Qualitative Disclosures About Market
                  Risk**





Our
      primary operations are located in China. As a result we are exposed to gains
      and
      losses resulting from fluctuations in foreign currency exchange rates relating
      to certain sales and product purchases. We are also exposed to foreign currency
      gains and losses resulting from domestic transactions that are not denominated
      in U.S. dollars, and to fluctuations in interest rates related to our variable
      rate debt. Furthermore, we are exposed to gains and losses resulting from the
      effect that fluctuations in foreign currency exchange rates have on the reported
      results in our consolidated financial statements due to the translation of
      the
      operating results and financial position.


39





Our
      primary financial instruments are cash in banks and money market instruments.
      We
      do not believe that these instruments are subject to material potential
      near-term losses in future earnings from reasonably possible near-term changes
      in market rates or prices. We do not have derivative financial instruments
      for
      speculative or trading purposes. We are not currently exposed to any material
      currency exchange risk.




**ITEM
                4**
              **Controls
                  and Procedures**





We
        conducted an evaluation, with the participation of our Chief Executive Officer
        of the effectiveness of the design and operation of our disclosure controls
        and
        procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
        Exchange Act of 1934, as amended, or the Exchange Act, as of April 30, 2007,
        to
        ensure that information required to be disclosed by us in the reports filed
        or
        submitted by us under the Exchange Act is recorded, processed, summarized
        and
        reported, within the time periods specified in the Securities Exchange
        Commission’s rules and forms, including to ensure that information required to
        be disclosed by us in the reports filed or submitted by us under the Exchange
        Act is accumulated and communicated to our management, including our principal
        executive and principal financial officers, or persons performing similar
        functions, as appropriate to allow timely decisions regarding required
        disclosure. Based on that evaluation, our Chief Executive Officer have concluded
        that as of April 30, 2007, our disclosure controls and procedures were not
        effective at the reasonable assurance level due to the material weaknesses
        described below.
 
 In
        light
        of the material weaknesses described below, we performed additional analysis
        and
        other post-closing procedures to ensure our consolidated financial statements
        were prepared in accordance with generally accepted accounting principles.
        Accordingly, we believe that the consolidated financial statements included
        in
        this report fairly present, in all material respects, our financial condition,
        results of operations and cash flows for the periods presented.
 
 A
        material weakness is a control deficiency (within the meaning of the Public
        Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or
        combination of control deficiencies, that results in more than a remote
        likelihood that a material misstatement of the annual or interim financial
        statements will not be prevented or detected. Management has identified the
        following three material weaknesses which have caused management to conclude
        that, as of April 30, 2007, our disclosure controls and procedures were not
        effective at the reasonable assurance level:
 
 We
        were
        unable to meet our requirements to timely file our Transitional Report on
        Form
        10-K for the six months ended October 31, 2006. Management evaluated the
        impact
        of our inability to timely file periodic reports with the Securities and
        Exchange Commission on our assessment of our disclosure controls and procedures
        and has concluded that the control deficiency that resulted in the inability
        to
        timely make these filings represented a material weakness.
 
 We
        did
        not maintain a sufficient complement of finance and accounting personnel
        with
        adequate depth and skill in the application of generally accepted accounting
        principles. In addition, we did not maintain a sufficient complement of finance
        and accounting personnel to handle the matters necessary to timely file our
        Transitional Report Form 10-K for the six months ended October 31, 2006.
        Management evaluated the impact of our lack of sufficient finance and accounting
        personnel on our assessment of our disclosure controls and procedures and
        has
        concluded that the control deficiency that resulted in our lack of sufficient
        personnel represented a material weakness.
 
 During
        management’s review of our financial statements for the period ended July 31,
        2007, our management became aware that our previously reported unaudited
        consolidated financial statements filed with our originally-filed Quarterly
        Report on Form 10-Q for the period ended April 30, 2007, did not properly
        accrue
        certain sales rebate payables. The consolidated financial statements properly
        recorded revenues from its sales, but did not properly account for certain
        rebates some of its customers were entitled to receive after the sales. As
        a
        result, we have filed this amended filing to restate our consolidated financial
        statements for this period. The restated consolidated financial statements
        show
        an increase in our current liabilities and a decrease in our sales and net
        income. Based on management’s review of this error, management concluded this
        error was caused by our failure to maintain a sufficient complement of finance
        and accounting personnel with adequate depth and skill in the application
        of
        generally accepted accounting principles. Management evaluated the impact
        of our
        failure to properly detect this error on our assessment of our disclosure
        controls and procedures and has concluded that the control deficiency that
        resulted in our failure to detect this error in the review of our quarterly
        financial statements represented a material weakness.





To
          address these material weaknesses, management performed additional analyses
          and
          other procedures to ensure that the financial statements included herein
          fairly
          present, in all material respects, our financial position, results of operations
          and cash flows for the periods presented.
 
 *Remediation
          of Material Weaknesses*
 
 To
          remediate the material weaknesses in our disclosure controls and procedures
          identified above, subsequent to October 31, 2006, in addition to working
          with
          our independent auditors, we accepted the resignation of our Chief Financial
          Officer on January 25, 2007, appointed an interim Chief Financial Officer
          that
          is familiar with our operations and generally accepted accounting principals,
          and we are conducting a search for new permanent Chief Financial Officer.
          In
          conjunction with the hiring of a new Chief Financial Officer we will reassess
          our internal control structure and procedures for financial reporting to
          ensure
          they are sufficient.
 
 *Changes
          in Internal Control over Financial Reporting*
 
 Except
          as
          noted above, there were no changes in our internal control over financial
          reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
          Act,
          during our most recently completed fiscal six months that have materially
          affected, or are reasonably likely to materially affect, our internal control
          over financial reporting.


40





**PART
      II - OTHER INFORMATION**




**ITEM
                1**
              **Legal
                  Proceedings**





We
      are
      not a party to, or threatened by, any litigation or procedures.




**ITEM
                1A**
              **Risk
                  Factors**





There
      are
      no material changes to the risk factors in our most recent Transitional Report
      on Form 10-K/A for the fiscal year ended October 31, 2006.




**ITEM
                2**
              **Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds**


There
      have been no events that are required to be reported under this
      Item.




**ITEM
                3**
              **Defaults
                  Upon Senior Securities**


There
      have been no events that are required to be reported under this
      Item.




**ITEM
                4**
              **Submission
                  of Matters to a Vote of Security
                  Holders**





There
      have been no events that are required to be reported under this
      Item.


**ITEM
                5**
              **Other
                  Information**





*Departure
      of Directors or Principal Officers; Election of Directors; Appointment of
      Principal Officers*





On
      September 16, 2006, we entered into an oral agreement with Ms. Edith Kong under
      which she was hired to be our interim Chief Financial Officer and appointed
      to
      the Board of Directors. On January 25, 2007, Ms. Kong resigned from her
      positions as interim Chief Financial Officer and a Director. At the time of
      her
      resignation we agreed to pay Ms. Kong $32,000 in cash for her services. This
      is
      the only compensation we agreed to pay Ms. Kong for her services.





Effective
      on January 25, 2007, our Board of Directors hired Mr. Wang Zuoliang as our
      interim Chief Financial Officer to replace Ms. Kong. Mr. Wang has served as
      Chief Accounting Officer of Harbin Renhuang Pharmaceutical Co. Ltd., our
      wholly-owned subsidiary, since 2005. Mr. Wang has more than 10 years experience
      in accounting and is familiar with our financial condition and the internal
      preparation of our financial statements. From 2004 to 2005, Mr. Wang served
      as
      the Chief Financial Officer of Harbin Huijiabei Food Co. Ltd. From 2001 to
      2004,
      Mr. Wang served as the manager of the accounting department of China Resource
      Breweries Limited, Harbin Office. Mr. Wang Zuoliang graduated from Qiqihaer
      Mechanic Institute in 1994 with a bachelor degree in engineering
      management.





We
      are in
      the process of interviewing candidates for a permanent Chief Financial Officer
      and hope to have a new permanent Chief Financial Officer hired in the near
      future. Once a new Chief Financial Officer is hired we will file a Form 8-K
      with
      information regarding the Chief Financial Officer, as required.





Effective
      on January 25, 2007, Mr. Pi Dianjun resigned from his position as a
      Director.


41





Effective
      on January 25, 2007, our Board of Directors appointed Mr. Andy Wu to the Board
      of Directors as an independent Director and as Chairman of our Audit Committee.
      Mr. Wu is currently a Tax Manager at PWC Beijing responsible for the
      overall operations of the Dalian office, including IIT filing, tax health check,
      assistance on setting up new enterprise/RO, assistance in tax audit defense,
      tax
      due diligence, tax review for IPO projects, assistance in negotiation for deemed
      profit rates, and general tax and business consulting. Mr. Wu has held this
      position since January, 2006. During 2005, Mr. Wu was an Assistant Tax Manager
      at KPMG Shanghai, with his main responsibilities involving general tax and
      business consulting and due diligence work. From August 2004 to March 2005,
      Mr.
      Wu was a Senior Tax Consultant with Deloitte’s Suzhou Office, primarily
      responsible for tax review, Due Diligence, IIT compliance, and general tax
      advisory projects. From March 1998 to August 2001, Mr. Wu was the Chief Officer
      of the Collections Division for the Nangang Branch of Harbin State Tax Bureau,
      where he was responsible for managing the operations of the Collections
      Division. Mr. Wu received a Doctorate Finance and Taxation from Xiamen
      University in June 2004, a Master in Finance and Taxation from Dongbei
      University of Finance in January 2001, and his Bachelor in Taxation from Xiamen
      University in July 1992.





Effective
      on April 16, 2007, our Board of Directors appointed Mr. Magnus Moliteus to
      the
      Board of Directors as an independent Director. Since 2001, Mr. Moliteus has
      been a consultant to the healthcare industry and Chairman of COM Consulting,
      Inc., a privately held firm, which enhances Swedish-American relations
      particularly between health care companies. From 1995 to 2001, Mr. Moliteus
      served as Executive Director of Invest at Sweden Agency, U.S., a Swedish
      government agency. From 1977 to 1990, he was Chief Executive Officer of
      Pharmacia, Inc. (now owned by Pfizer, Inc.).





As
      compensation for his services as a Director, Mr. Moliteus will receive options
      to acquire 15,000 options at signing, plus an additional 10,000 options and
      $10,000 annually thereafter, with the first payment to be paid at the end of
      July, 2007. On May 17, 2007, Mr. Moliteus received his 15,000 options, at an
      exercise price of $3.02, in accordance with his agreement.





*Correction
      of Audit Fees in Annual Report on Form 10-K/A*





Our
      Annual Report on Form 10-K/A for the fiscal year ended October 31, 2006 filed
      with the Securities and Exchange Commission on February 22, 2007 reported the
      $125,000 in fees Schwartz Levitsky Feldman LLP billed us for the audit of our
      financial statements under “Audit-Related Fees.” These fees should have been
      listed under “Audit Fees” and not under “Audit-Related Fees.”





*Acquisition
      of Extracting Factory*





On
      March
      3, 2007, we acquired all the assets and assumed a bank loan with accrued
      interest of Qingyang Extracting Factory, from Zhongfa Industrial Group Yerui
      Pharmaceutical Co., Ltd. for a total amount of RMB 3.7 million or approximately
      USD $480,000. The assets acquired included inventories, customer purchase
      orders, accounts receivables, corporate name, patents, trademarks, equipment,
      customer lists and records and other assets that are used or held for use in
      connection with Business of Qingyang Extracting Factory. We paid USD $310,000
      in
      cash and assumed a bank loan with China Agriculture Bank in the principal amount
      of USD $140,000 and accrued interest of USD $30,000 collateralized by the
      acquired assets. The transaction closed on March 3, 2007, and we have paid
      the
      cash portion of the consideration USD $310,000 (RMB 2,415,000). The Qingyang
      Extracting Factor, located in Yanshou Township Harbin, China, is a manufacturing
      facility that processes raw herbal plants into extracts, which is the
      intermediate material for Chinese herbal medicine finished products. The factory
      is capable of processing approximately 18,000 tons of herbal raw materials
      into
      extract, doubling our current herbal extracting capacity.




42





**ITEM
              6**
            **Exhibits**




(a)
            Exhibits





3.1
                (1)
            
            Restated
                Articles of Incorporation, as filed with the Nevada Secretary of
                State on
                April 21, 2003.3.2
                (5)
            
            Amendment
                to Articles of Incorporation, as filed with the Nevada Secretary
                of State
                on July 28, 2006.3.3
                (1)
            
            Second
                Restated Bylaws10.1
                (2)
            
            Common
                Stock Purchase Agreement dated September 19, 2005.10.2
                (2)
            
            Securities
                Purchase Agreement dated September 16, 2005.10.3
                (3)
            
            Reorganization,
                Stock and Asset Purchase Agreement dated September 30,
                2005.10.4
                (3)
            
            Stock
                Purchase Agreement dated September 30, 2005.10.5
                (4)
            
            Securities
                Purchase Agreement dated September 16, 2005.10.6
                (5)
            
            Loan
                Agreement with Heilongjiang Yuejintiande Building and Installation
                Project
                Co.,Ltd10.7
                (6)
            
            Acquisition
                Agreement between Harbin Renhuang Pharmaceutical Co., Ltd. and Zhongfa
                Industrial Group Yerui Pharmaceutical Co., Ltd., dated February 28,
                200721.1
                (5)
            
            Subsidiaries
                of the Registrant31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Executive
                Officer31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial
                Officer32.1
            
            Chief
                Executive Officer Certification Pursuant to 18 USC, Section 1350,
                as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            
            Chief
                Financial Officer Certification Pursuant to 18 USC, Section 1350,
                as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





(1)
            Incorporated
                by reference to our Current Report on Form 8-K dated April 21, 2003,
                filed
                with the Commission on April 22, 2003.(2)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the Commission
                on September 23, 2005.(3)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the Commission
                on October 3, 2005.(4)
            Incorporated
                by reference from our Current Report on Form 8-K filed with the Commission
                on October 14, 2005.


43





(5)
            Incorporated
                by reference from our First Amended Transition Report on Form 10-K/A
                filed
                with the Commission on February 22, 2007.(6)
            Incorporated
                by reference from our Quarterly Report on Form 10-Q for the period
                ended
                January 31, 2007, filed with the Commission on March 19,
                2007.




44




**SIGNATURES**





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





**Renhuang
                  Pharmaceuticals, Inc.**Dated:
                  August 11, 2008
              
              /s/
                  Li ShaomingBy:
              Li
                  ShaomingPresident
                  andChief
                  Executive OfficerDated:
                  August 11, 2008
              
              /s/
                  Zuoliang WangBy:
              Zuoliang
                  WangInterim
                  Chief Financial Officer




45