U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x	ANNUAL REPORT UNDER PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, ~~2008~~2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________

Commission File Number: 0-16397

BENDA PHARMACEUTICAL, INC.

(Exact name of small business issuer as specified in its charter)

Delaware		41-2185030
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Taibei Mingju, 4th Floor,

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

(Address of principal executive offices)

+86 (27) 85494916

(Issuer’s telephone number)

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

Common Stock, Par Value $.001 Per Share

(Title of Class)

~~Check~~Indicate ~~whether the issuer: (1) filed all reports required to be filed~~ by ~~Section~~check 13mark ~~or 15(d)~~if of the ~~Exchange Act during the past 12 months (or for such shorter period that the~~ registrant ~~was~~is ~~required~~a towell-known ~~file~~seasoned ~~such reports)~~issuer, ~~and~~as ~~(2)~~defined ~~has been subject~~in toRule ~~such~~405 ~~filing~~of ~~requirements for~~ the ~~past~~Securities ~~90 days~~Act. ~~YES~~ Yes ¨ No x ~~NO o~~

~~Check if~~Indicate ~~there~~by ischeck nomark ~~disclosure~~if ofthe ~~delinquent~~registrant ~~filers~~is innot ~~response~~required to ~~Item~~file ~~405~~reports ~~of Regulation~~pursuant ~~S-B contained in this form, and no disclosure will be contained,~~ to ~~the~~Section ~~best~~13 ~~of registrant's knowledge, in definitive proxy~~ or ~~information statements~~Section ~~incorporated~~15(d) ~~by reference in Part III~~ of ~~this~~the ~~Form 10-K or any amendment to this Form 10-K~~Act. Yes ¨ No x

~~Indicate~~Check bywhether ~~check~~the ~~mark~~issuer: ~~whether~~(1) ~~the~~filed ~~registrant~~all isreports arequired ~~shell~~to ~~company~~be ~~(as~~filed ~~defined~~by inSection ~~Rule~~13 or ~~12b-2~~15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports)., ~~YES~~and o(2) NOhas been subject to such filing requirements for the past 90 days. YES x NO ¨

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large accelerated filer o¨ Accelerated filer o¨ Non-accelerated filer o(Do not check if a smaller reporting company) ¨ Smaller reporting company x

~~Issuer's~~Indicate ~~revenues~~by ~~for~~check ~~its~~mark ~~most~~whether ~~recent~~the ~~fiscal~~registrant ~~year:~~is ~~$25,037,427~~a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

As of ~~April~~ 9May 17, ~~2009~~2010, 105,155,355 shares of the registrant's Common Stock were outstanding. The aggregate market value of the voting common equity held by non-affiliates (based on the closing bid price of such stock as reported on ~~April~~ 8May 13, ~~2009~~2010 by the ~~NASD~~ Over-the-Counter Bulletin Board) was approximately $21,~~628~~525,~~884~~209.

Documents Incorporated by Reference:

None.

TABLE OF CONTENTS

Item Number and Caption		Page	~~Page~~
PART I
Item 1.	Description of Business	~~Description of Business~~1	1
Item 2.		Description of Properties	50
Item 1A.	Risk Factors
Item 3.		Legal Proceedings	52
Item 2.	Description of Properties	46
Item 4.		Submission of Matters to a Vote of Security Holders	55
Item 3.	Legal Proceedings	48
PART II
Item 4.	(Removed and Reserved)	49
Item 5.		Market for Common Equity and Related Stockholder Matters	55
PART II
Item 6.		Selected Financial Data	57
Item 5.	Market for Common Equity and Related Stockholder Matters	49
Item 7.		Management's Discussion and Analysis or Plan of Operations	57
Item 6.	Selected Financial Data
Item 8.		Financial Statements	71
Item 7.	Management's Discussion and Analysis or Plan of Operations	51
Item 9.		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	72
Item 7A	Quantitative and Qualitative Disclosures About Market Risk
Item 9A(T).		Controls and Procedures	73
Item 8.	Financial Statements	60
PART III
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	61
Item 10.		Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	73
Item 9A(T).	Controls and Procedures	62
Item 11.		Executive Compensation	77
PART III
Item 12.		Security Ownership of Certain Beneficial Owners and Management	78
Item 10.	Directors, Executive Officers, and Corporate Governance	62
Item 13.		Certain Relationships and Related Transactions and Director Independence	80
Item 11.	Executive Compensation	66
Item 14.		Exhibits and Reports on Form 8-K	85
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	67
Item 15.		Principal Accountant Fees and Services	88
Item 13.	Certain Relationships and Related Transactions and Director Independence	69
Item 14.	Principal Accountant Fees and Services	74
PART IV		77
Item 15.	Exhibits, Financial Statement Schedules

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Summary

Benda Pharmaceutical, Inc. (“we”, “us”, “our”, “Benda” or the “Company”), through our wholly owned subsidiary Ever Leader Holdings Limited (“Ever Leader”), is a pharmaceutical company that identifies, discovers, develops and manufactures both conventional medications and Traditional Chinese Medicines (“TCMs”) for the treatment of some of the largest common ailments and diseases (e.g., common cold, diabetes, cancer). We are also dedicated to the development, manufacturing and commercialization of gene therapy products.

Benda owns all of the capital stock of Ever Leader Holdings Limited, a holding company incorporated under the laws of Hong Kong SAR on October 29, 2005. Ever Leader owns 95% of the issued and outstanding capital stock of Hubei Tongji Benda Ebei Pharmaceutical Co., Ltd. (“Benda Ebei”), a Sino-Foreign Equity Joint Venture company incorporated under the laws of the PRC. Benda Ebei owns: (i) 95% of the issued and outstanding capital stock of Jiangling Benda Pharmaceutical Co., Ltd. (“Jiangling Benda”), a company formed under the laws of the PRC; (ii) 95% of the issued and outstanding capital stock of Yidu Benda Chemical Co., Ltd. (“Yidu Benda”), a company incorporated under the laws of the PRC; (iii) 75% of the issued and outstanding capital stock of Beijing Shusai Pharyngitis Research Co., Ltd. (“BJ Shusai”), a company incorporated under the laws of the PRC; and (iv) 60.13% of the issued and outstanding capital stock of Shenzhen SiBiono Gene Technology Co., Ltd. (“SiBiono”), a company incorporated under the laws of the PRC.

We distribute our high value, branded medicines, through agents who sell them to hospitals that administer them to patients. We sell generics to medical wholesalers for resale to hospitals. The company sells its Over the Counter (“OTC”) medicines to wholesalers specializing in selling to retail chain drug stores. Our “Active Pharmaceutical Ingredients” (“APIs”) are typically sold to large drug manufacturers under long-term supply contracts. The bulk chemicals are purchased by other Chinese drug companies.

History and Recent Developments

We were organized as a Minnesota corporation on February 17, 1982. The technology on which our original products were based, including Spread Spectrum Technology, permit data and telemetry to be transmitted simultaneously over telephone wire without interfering with normal voice service. Our products were known as data/voice multiplexing (“DVM”) equipment and were aimed at operating telephone companies in the telecommunications market. Our lack of financial resources caused us to pursue a plan of dissolution as approved by our Board of Directors and approved by our shareholders on November 30, 1993.

During fiscal 1994, we began implementing a plan of voluntary dissolution pursuant to Minnesota law that was approved by our shareholders at a Special Shareholders’ Meeting held on November 30, 1993. Under our plan of dissolution, most of our assets were sold during 1994 with some payments deferred into 1995 and beyond. The recovery period ran through 1997. During fiscal 1995, most of the tangible asset sales were collected and only technology licenses remained to be collected. During fiscal 1996, we continued to collect license fees and payments on one equipment lease. The results of the plan of dissolution were successful and all liabilities and expenses were either paid or were covered in reserves.

On November 17, 2000, a Special Meeting of the shareholders of the Company was held at which time the plan of dissolution was revoked. Pursuant to the proposal for revocation, a liquidating dividend of approximately $212,000 was paid pro-rata to our shareholders in August 2001. We have been inactive since 1994.

On October 7, 2005, we and Applied Spectrum Technologies, Inc., a Delaware corporation (“Applied - Delaware”) entered into a certain Agreement and Plan of Merger (“Plan of Merger”). Pursuant to the Plan of Merger, subject to stockholder approval, we were to merge with and into Applied - Delaware for the purposes of the redomestication from the State of Minnesota to the State of Delaware (the “Merger”). On October 24, 2005, we filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission for the purpose of voting on the Merger.

On November 14, 2005, the holders of a majority of our outstanding shares of common stock approved the Merger. The Merger was completed on November 17, 2005, and the Articles of Merger were filed with the States of Minnesota and Delaware on November 17, 2005.

On December 14, 2005, Norwood Venture Corp. (“Norwood”), a former shareholder of the Company and KI Equity Partners III, LLC (“KI Equity”) entered into a certain securities purchase agreement, as amended, under which KI Equity agreed to purchase and Norwood agreed to sell an aggregate of 2,281,302 shares of common stock of the Company, representing approximately 77.2% of the Company’s outstanding shares of common stock, to KI Equity at a price of $175,000. The closing of the transactions under the Purchase Agreement occurred on December 29, 2005.

Kevin R. Keating, our former President and sole officer and director who resigned on November 15, 2006, is the father of Timothy J. Keating, the majority member of Keating Investments, LLC. Keating Investments, LLC is the managing member of KI Equity Partners III, LLC, which is the party ~~acquiring~~that acquired the controlling ~~interest~~ interest in us pursuant to the Purchase Agreement. Keating Investments, LLC is also the managing member and 90% owner of Keating Securities, LLC, a registered broker-dealer. Kevin R. Keating is not affiliated with and has no equity interest in Keating Investments, LLC, KI Equity Partners III, LLC or Keating Securities, LLC and disclaims any beneficial interest in the shares of Applied Spectrum’s common stock to be acquired by KI Equity Partners III, LLC.

We did not become engaged in the pharmaceutical business until November of 2006. Before closing ~~our~~a ~~recent~~ share exchange transaction in November 2006, we were a shell ~~company~~ company with nominal assets and operations, whose sole business was to identify, evaluate and investigate various companies with the intent that, if such investigation warrants, a business combination be negotiated and completed pursuant to which we (formerly known as Applied Spectrum Technologies, Inc.) would acquire a target company with an operating business with the intent of continuing the acquired company's business as a publicly held entity. We entered in an Exchange Agreement dated September 7, 2006 (the “Exchange Agreement”) with KI Equity Partners II, LLC (“KI Equity”), Ever Leader, a company incorporated under the laws of Hong Kong, and the owners of 100% of the capital shares of of Ever Leader. The closing of the Exchange Agreement occurred on November 15, 2006. At the closing of the Exchange Agreement, we acquired all of Ever Leader's capital shares (the “Ever Leader Shares”) from the Ever Leader Shareholders, and the Ever Leader Shareholders transferred and contributed all of their Ever Leader Shares to us. In exchange, we issued 64,942,360 shares of our Common Stock to the Ever Leader Shareholders.

As a result of the closing of the Exchange Agreement, Ever Leader became our wholly owned subsidiary and we adopted Ever Leader’s main operational business. The Exchange transaction, for accounting and financial reporting purposes, is deemed to be a reverse acquisition, where we (the legal acquirer) are considered the accounting acquiree and Ever Leader (the legal acquiree) is considered the accounting acquirer, and thus the historical financial statements of Ever Leader are the financial statements of Benda.

~~Recent~~ Financing

The closing of the Exchange Agreement described above was contingent on a minimum of $10,000,000 (or such lesser amount as mutually agreed to by Ever Leader and the placement agent) being subscribed for, and funded into escrow, by certain accredited and institutional investors ("Investors") in a private placement offering for the purchase of Units, each Unit consisting of 54,087 shares of our Common Stock ("Common Stock") and 54,087 common stock purchase warrants promptly after the closing of the Exchange transaction under terms and conditions approved by our board of directors immediately following the Exchange (the “Financing”). The closing of the Financing was contingent on the closing of the Exchange transaction, and the Exchange transaction was contingent on the closing of the Financing. On November 15, 2006, we completed this private placement offering. We received gross proceeds of approximately $12 million in connection with the Financing from the Investors. Pursuant to Subscription Agreements entered into with these Investors, we sold 480 Units for a total of 25,961,760 shares of its Common Stock and warrants to purchase an additional 25,961,760 shares of our common stock to the Investors. The price per Unit in the Financing was $25,000.

Keating Securities, LLC (“Placement Agent”), an affiliate of Keating Investments, LLC, acted as placement agent in connection with the Financing. For their services, the Placement Agents received a commission equal to 7.5% of the gross proceeds from the offering and a non-accountable expense allowance equal to 1.5% of the gross proceeds. In addition, the Placement Agents received, for nominal consideration, warrants to purchase 10% of the number of shares of common stock sold in connection with the Financing, which in the aggregate totaled 2,596,176 shares of our common stock at an exercise price of $0.555 per share. The warrants are fully vested and have a term of five years. The Placement Agent warrants will have registration rights similar to the registration rights afforded to the holders of Common Stock and Warrants subscribed for in the Financing. We also paid for the out-of-pocket expenses incurred by the Placement Agent and all purchasers in the amount of $100,000.

In order to finance the acquisition of a majority of the shares of Shenzhen SiBiono GeneTech Co., Ltd. (“SiBiono”), on April 5, 2007, we entered into an Investment Agreement (“April Financing”) with certain accredited and institutional investors (“Investors”) who had also participated in the subscription for $12,000,000 of our common stock pursuant to certain Securities Purchase Agreements dated November 15, 2006 (“November Financing”). Pursuant to the Investment Agreement, the Investors purchased a total of 252 Units for $7,560,000 with each Unit consisting of (i) a convertible promissory note in the principal amount of Thirty Thousand Dollars ($30,000) which shall be convertible into 54,087 shares of the Company's common stock, par value $0.001 per share, and (ii) a warrant to acquire 54,087 shares of Common Stock at an exercise price of $0.555 per share. The Notes bear an interest rate of four percent per annum until the Buyer elects to exercise the right to convert, and matured on March 28, 2009. The Notes have reached the Maturity Date. We have not repaid the principal amounts of the Notes as of the date of this annual report.

In March 2007 the Company and the Investors entered into a Modification Agreement amending the November Financing Documents to allow for certain issuances of the Company's securities, including additional purchases of the Company's equity securities pursuant to the Investment Agreement; shares issuances required under the Equity Transfer Agreements; and issuances of options pursuant to an approved Qualified Employment Stock Option Plan. All of the investors in the November Financing had the right to participate in the purchase of additional units under the Investment Agreement and all of such investors either participated in the Investment Agreement or have waived their right to participate in such. In addition, those investors that did not participate in the Investment Agreement also waived their right to object to the changes to the Warrants, Registration Rights Agreement and Make Good Agreement which were set forth in the Modification Agreement.

On or prior to forty five (45) days from the Closing Date of the Investment Agreement, we were required to deliver to the Buyers our financial statements for the years ending December 31, 2005 and December 31, 2006, audited by Kempisty & Company Certified Public Accountants, P.C., prepared in accordance with GAAP, during each year involved and fairly presenting in all material respects our financial position as of the dates thereof and the results of our operations and cash flows for each such year then ended. Such financial statements for the years ending December 31, 2005 and December 31, 2006 were filed with our Form 10KSB for the year ending December 31, 2006 filed with the Securities and Exchange Commission on May 4, 2007. In addition, on or prior to seventy five (75) days from the Closing Date, we are also required to deliver to the Buyers audited financial statements for SiBiono for the required time periods for the Form 8-K filing required by the Securities and Exchange Commission. Such financial statements were filed with our Amendment No. 1 to Form 8K filed June 15, 2007.

Shenzhen SiBiono GeneTech Co., Ltd.

On April 5, 2007, Hubei Tongji Benda Ebei Pharmaceutical Co., Ltd., a Sino-Foreign Equity Joint Venture company incorporated under the laws of the PRC (“Benda Ebei”), of which Ever Leader Holdings Limited, a company incorporated under the laws of Hong Kong SAR ("Ever Leader") and a wholly owned subsidiary of Benda Pharmaceutical, Inc. (the “Company”), owns 95% of the outstanding common stock, has entered into Equity Transfer Agreements with certain shareholders of Shenzhen SiBiono Gene Technology Co., Ltd. (“SiBiono”), a corporation established and validly existing under the law of the PRC, to purchase a total of approximately 57.57% of the shares of SiBiono's common stock for total consideration of RMB60,000,000 due and payable on or before April 30, 2007.

In connection with the Equity Transfer Agreements, we entered into a Financial Consultancy Agreement with Super Pioneer International Limited (“Super Pioneer”) for financial consultancy services rendered by Super Pioneer. Pursuant to the Financial Consultancy Agreement, we agreed to issue 2,100,000 shares of our common stock to Super Pioneer within three months from the date of the agreement. Super Pioneer agreed to lock up the shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.6 per share and we are not listed in the capital market of NASDAQ or AMEX, Super Pioneer shall have the option to require us to redeem 1,960,000 shares of the stock owned by Super Pioneer at a price of $3.6 per share. Such option shall expire within one month from the last date of the three month period.

On June 11, 2007, Benda Ebei entered into Equity Transfer Agreements with Yaojin Wang and Huimin Zhang, shareholders of SiBiono, for the purchase of an additional 2.56% of the shares of SiBiono's common stock for total consideration of RMB2,560,000 due and payable on or before June 30, 2007. Accordingly, Benda Ebei holds a total of 60.13% of the shares of SiBiono's common stock.

In connection with the Equity Transfer Agreements, we entered into Technical Consultancy Agreements with Yaojin Wang and Huimin Zhang for technical consultancy services rendered by Yaojin Wang and Huimin Zhang. Pursuant to the Technical Consultancy Agreements, we agreed to issue 33,585 shares of our ~~common~~ common stock to Yaojin Wang and 55,975 shares of our common stock to Huimin ~~Zhang~~ Zhang within three months from the date of the agreement. Yaojin Wang and Huimin ~~Zhang~~ Zhang agreed to lock up their shares for a period of twelve months from the date of of the issuance of the shares (the “Lock-up Period”). Within three months from ~~the~~ the Lock-up Period, in the event that the public trading price of our shares did ~~not~~ not reach $3.6 per share and we are not listed in the capital market of NASDAQ or or AMEX, Yaojin Wang and Huimin Zhang shall have the option to require us to ~~redeem~~ redeem the shares of the stock owned by Yaojin Wang and Huimin Zhang at a price of $3.6 per share. Such option shall expire within one month from the last date of the three month period. ~~According~~ toThe ~~the signed agreements, the~~ redemption ~~would~~requests ~~have~~were ~~been~~made ~~required~~ to bethe ~~performed~~Company in ~~September~~ January 2008. ~~However, we~~and ~~have~~the ~~obtained~~company anhas already obtained oral consent from Super Pioneer, Wang and Zhang that the ~~redemption~~ ~~shall~~payment would be deferred to the ~~end~~year of ~~2009~~2010.

Business

Our operations are headquartered in Wuhan, Hubei Province, China. We are a mid-sized Chinese pharmaceutical company that identifies, discovers, develops and manufactures both conventional medications, Traditional Chinese Medicines (“TCMs”) for the treatment of some of the largest common ailments and diseases (e.g., common cold, diabetes, cancer), gene therapy product for the treatment of cancer and Herbal TCM Oral Liquid for the treatment of anti-respiratory tract infections.

We currently have five core operating companies:

Yidu Benda develops, manufactures and sells bulk chemicals (or pharmaceutical intermediated), which are the raw materials used to make “Active Pharmaceutical Ingredients” (“APIs”).

Jiangling Benda develops, manufactures and sells APIs, which are one of the two components of any capsules, tablets and fluids that are pharmaceutically active. An API is the substance in a drug that produces the desired medicinal effect. The “excipient” is the inert material that holds the API (such as gelatin or water).

· Benda Ebei develops, manufactures and sells (a) conventional finished medicines, which are non-patented, branded, proprietary small volume injection solutions (vials) used for a variety of treatments including hepatitis; and (b) Traditional Chinese Medicines (“TCMs”), which are herb-based and natural medicines used in TCM therapies (via our newly formed subsidiary Beijing Shusai). Some of the medicines we produce are of our own origination and protected from competition by certificates issued by China’s State Food and Drug Administration (“SFDA”). There are no differences between the regulatory processes for conventional medicines and Traditional Chinese Medicines. Traditional Chinese Medicines are ready-make medicines, which are produced according certain curing principles and prescriptions and can be used immediately, such as pills, medicinal granules and capsules. · BJ Shusai develops, manufactures and sell herbal TCM oral liquid for the treatment of anti-respiration tract infections. However due to the fact that the SFDA experienced an overhaul in its policies and regulatory systems in an effort to fight against corruption in Chinese pharmaceutical industry, thus BJ Shusai’s operation has been adversely affected by this recent policy changes which prohibits some state-owned hospitals from forming alliances with private companies. The management could not estimate that such situation could be resolved in the coming future.

BJ Shusai develops, manufactures and sell herbal TCM oral liquid for the treatment of anti-respiration tract infections. However due to the fact that the SFDA experienced an overhaul in its policies and regulatory systems in an effort to fight against corruption in Chinese pharmaceutical industry, thus BJ Shusai’s operation has been adversely affected by this recent policy changes which prohibits some state-owned hospitals from forming alliances with private companies. The management could not estimate that such situation could be resolved in the coming future.

SiBiono develops, manufactures and sells gene therapy products. As a pioneer in gene therapy in China, SiBiono's mission is to develop innovative gene therapy products for the improvement of human health and life quality. The Company has developed two core technology platforms: Viral Vector Gene Delivery System and Non-Viral Vector Gene Delivery System focusing on development of gene therapy product for cancer and cardiovascular diseases. SiBiono’s flagship product, Gendicine is the commercialized gene therapy for the treatment of cancer.

The Chinese government agency, SFDA, provides approval for drugs released into the market in China. Unlike the Food and Drug Administration (“FDA”) in the United States, however, the SFDA provides intellectual property and competitive protection to certain classes of approved drugs.

Each core Benda operating company has its own manufacturing facility located near Wuhan, in Hubei Province and Shenzhen, in Guangdong Province. Good Manufacturing Practices (“GMP”) certification was first issued to Benda Ebei on November 11, 2003 and renew on December 3, 2008 for the production of injection vials. On November 26, 2007, Benda Ebei received a GMP certificate for the production of tablets. Benda Ebei was designated a High and New Technology Enterprise by the Science and Technology Bureau of Hubei Province on July 6, 2005 for a period of two years. This designation represents formal recognition by the provincial government that a company has developed or acquired new technology of significance, and triggers a number of government support and incentive policies, including availability of land for expansion, research grants and discounts on bank loan interest. The designation expired on July 6, 2007; however, we have passed the re-examination and the new designation was received on August 2007. Although we have not received any support from the government to date, such a designation may be useful in obtaining incentives in the future.

Each core Benda operating company has its own manufacturing facility located near Wuhan, in Hubei Province and Shenzhen, in Guangdong Province. Good Manufacturing Practices (“GMP”) certification was first issued to Benda Ebei on November 11, 2003 and renew on December 3, 2009 for the production of injection vials. On November 26, 2007, Benda Ebei received a GMP certificate for the production of tablets. Benda Ebei was designated a High and New Technology Enterprise by the Science and Technology Bureau of Hubei Province on July 6, 2005 for a period of two years. This designation represents formal recognition by the provincial government that a company has developed or acquired new technology of significance, and triggers a number of government support and incentive policies, including availability of land for expansion, research grants and discounts on bank loan interest. The designation expired on July 6, 2007; however, we have passed the re-examination and the new designation was received on August 2007. Although we have not received any support from the government to date, such a designation may be useful in obtaining incentives in the future.

Our Yidu Benda facility produces bulk chemical intermediates for raw material medicine and does not require GMP certification. Yidu Benda was temporarily closed mid January to upgrade its waste water treatment system to comply with new environmental standards enforced by PRC local government. Yidu Benda has completed its upgrading of the waste water system and passed the government’s verification and testing of equipments in October 2007. It is now permitted for the testing on actual production process. Once the actual products are produced, then the environmental government bodies will re-test the production results. The management could not estimate the exact timing for obtaining the final approval on the actual production process. Furthermore, the management is searching for new products to be produced in Yidu Benda which with higher profit margin.

Our Jiangling Benda facility was closed for renovation in July 2004 to comply with GMP standards. The Jiangling Benda plant reopened on August 10, 2007 and has been producing Ribose, the only product that does not require GMP approval. Jiangling Benda also plans to produce three other types of active pharmaceutical ingredients and they are Ribavirin, Asarin and Levofloxacin which need to have GMP Certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate which authorizing the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still under the stage of GMP certificate approving process. The management could not estimate the exact timing for obtaining those certificates.

On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 4, 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in in China. Gendicine ® is the commercialized gene therapy product approved in the PRC government agency. On On May 19, 2008, SiBiono received an official notice from the PRC State of SFDA in which it mentioned that during the random inspection performed by the PRC State of SFDA on April 8 to April 10, 2008, the PRC State of SFDA discovered there were several production procedures that did not meet the requirement stated in GMP, thus it required SiBiono to perform necessary improvements in order to fulfill the GMP requirements and the PRC State of SFDA collected back the distributed GMP certificate until the necessary improvements being carried out and passed the examination that conducted by SFDA. On June 10, 2008, SiBiono received another official notice from Guangdong Province SFDA and they demanded the same requirements as stated in the official notice which issued by the PRC State of SFDA dated on May 19, 2008. On November 24, 2008, SiBiono received another official notice from Guangdong Province SFDA which mentioned that after the examination conducted by Shenzhen City SFDA, the Guangdong Province SFDA consent SiBiono to carry out production on a trial basis. It further required ~~SiBiono~~ SiBiono strictly to follow the requirements of GMP to organize trail production ~~and~~ and follow the procedures to apply for GMP Certificate verification. ~~The management~~ ~~could~~On ~~not~~July ~~estimate~~14, 2009, SiBiono obtained the ~~exact~~final ~~timing~~approved ~~for~~GMP ~~obtaining~~Certificate, ~~the~~in ~~final~~order ~~approval on~~words, the SFDA ~~GMP~~allows ~~Certificate~~SiBiono to resume its production and sales.

Good Manufacturing Practices (“GMP”) is an internationally-recognized standard for pharmaceutical plant design and construction. GMP has been defined as “that part of quality assurance which ensures that products are consistently produced and controlled to the quality standards appropriate for their intended use and as required by the marketing authorization” (World Health Organization). GMP covers all aspects of the manufacturing process: defined manufacturing process; validated critical manufacturing steps; suitable premises, storage, transport; qualified and trained production and quality control personnel; adequate laboratory facilities; approved written procedures and instructions; records to show all steps of defined procedures taken; full traceability of a product through batch processing records and distribution records; and systems for recall and investigation of complaints. The validity of the GMP approval lasts for five years upon the issuing date and when the expiration date is approaching, the manufacturing company needs to make an application for the renewal.

We distribute our high value, branded medicines, through agents who sell them to hospitals that administer them to patients. We sell generics to medical wholesalers for resale to hospitals. We sell our Over the Counter (“OTC”) medicines to wholesalers specializing in selling to retail chain drug stores. Our APIs are typically sold to large drug manufacturers under long-term supply contracts. Our bulk chemicals are purchased by other Chinese drug companies.

History and Corporate Organization

Ever Leader was incorporated in Hong Kong on October 29, 2005 for the purpose of functioning as an off-shore holding company to obtain ownership interests in various entities (collectively “Benda”) that were previously owned, either directly or indirectly, by Mr. Yiqing Wan (“Wan”) and his wife, Ms. Wei Xu (“Xu”).

The following paragraphs summarize the original ownership structure of various entities owned by Wan and Xu and the subsequent reorganization and transfer of ownership interests in these entities, either directly or indirectly, to Ever Leader.

Ownership Structure Prior to Reorganization

Hubei Benda Science and Technology Development Co., Ltd. (“Benda Science”) was incorporated in the Province of Hubei, PRC in October of 2002, primarily functioning as a holding company with ownership interests in various entities operated by Wan and Xu. Wan and Xu are the sole owners of Benda Science, with ownership interests of 10% and 90%, respectively.

Benda Ebei was incorporated in the Province of Hubei, PRC in April of 2001. Benda Ebei has registered capital of $2,419,404 which is fully paid up. Prior to the reorganization of Benda as further described in the paragraphs below, Benda Science, Wan, and Xu were the sole owners of Benda Ebei, with ownership interests of 60%, 20%, and 20%, respectively. Benda Ebei develops, manufactures, and sells small volume injection solutions (vials) and other conventional medicines.

Jiangling Benda was incorporated in the Province of Hubei, PRC in October of 2001. Jiangling Benda has registered capital of $967,738 which is fully paid. Prior to the reorganization of Benda, Benda Science and Wan were the sole owners of Jiangling Benda, with ownership interests of 90% and 10%, respectively. Jiangling Benda develops, manufactures and sells active pharmaceutical ingredients (“APIs”). Jiangling Benda’s primary production facility was closed for upgrades and renovations in July 2004 in order to secure a GMP certification from the Chinese SFDA. ~~This~~The ~~facility~~Jiangling isBenda ~~expected~~plant reopened on August 10, 2007 and has been producing Ribose, the only product that does not require GMP approval. Jiangling Benda also plans to ~~reopen~~produce three other types of active pharmaceutical ingredients and ~~resume~~they ~~production~~are Ribavirin, Asarin and Levofloxacin which need to have inGMP ~~August~~Certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate which authorizes the production of ~~2007~~Ribavrin. The other two products, Asarin and Levolfozacin, are still undergoing the GMP certificate approving process. The management cannot estimate the exact timing for obtaining those certificates.

Yidu Benda was incorporated in the Province of Hubei, PRC in March of 2002. Yidu Benda has registered capital of $4,233,854 which is fully paid. Prior to the reorganization of Benda, Benda Science and Wan were the sole owners of Yidu Benda, with ownership interests of 90% and 10%, respectively. Yidu Benda develops, manufactures and sells bulk chemicals (or pharmaceutical intermediates) for use in the production of APIs. The organization and ownership structure of Benda prior to reorganization is as follows:

Reorganization and Revised Ownership Structure

As previously stated in the paragraphs above, Ever Leader was incorporated in Hong Kong on October 29, 2005 for the purpose of functioning as an off-shore holding company to obtain ownership interests in various Benda entities that were previously owned, either directly or indirectly, by Wan and Xu. Ms. Mo Mo Hon (“Hon”), a Hong Kong SAR resident, was the sole registered shareholder of Ever Leader, holding the single issued and outstanding share of Ever Leader in trust for Xu.

Pursuant to three separate Equity Transfer Agreements entered into in November of 2005 among Ever Leader, Benda Science, Xu, and Wan, Ever Leader obtained a 95% ownership interest in Benda Ebei in exchange for a commitment to pay $2,298,434 in aggregate consideration to Benda Science, Wan, and Xu. The $2,298,434 acquisition price represented 95% of the $2,419,404 of registered capital of Benda Ebei, but was not representative of the fair value of the assets acquired or liabilities assumed. Specifically, as transfers of ownership interests in PRC entities to offshore holding companies for zero or nominal consideration is prohibited by the Chinese Government (regardless of whether these PRC entities and offshore holding companies are directly or indirectly owned and controlled by the same individual or individuals), an amount equal to 95% of the value of the registered capital of Benda Ebei was established for purposes of the transfer of the 95% ownership interest in Benda Ebei (directly and indirectly 100% owned and controlled by Wan and Xu) to Ever Leader (beneficially 100% owned and controlled by Xu). As a result of each of these entities being 100% directly and indirectly controlled by Wan and Xu, this transaction has been accounted for as a combination of entities under common control (see additional discussion of accounting treatment in the paragraphs that follow), with Ever Leader’s commitment to pay $2,298,434 in aggregate consideration to Benda Science, Wan and Xu being reflected as a current liability at both December 31,2005 and 2004, with corresponding reductions to paid-in capital.

Pursuant to an Equity Transfer Agreement entered into on December 3, 2005 among Benda Ebei, Benda Science, and Wan, Benda Science transferred and assigned its 90% ownership interest in Jiangling Benda to Benda Ebei and Wan transferred and assigned a 5% ownership interest in Jiangling Benda to Benda Ebei (for zero consideration as Benda Ebei and Jiangling Benda were both directly and indirectly 100% owned and controlled by Wan and Xu).

Pursuant to a second Equity Transfer Agreement entered into on December 4, 2005 among Benda Ebei, Benda Science, and Wan, Benda Science transferred and assigned its 90% ownership interest in Yidu Benda to Benda Ebei and Wan transferred and assigned a 5% ownership interest in Yidu Benda to Benda Ebei (for zero consideration as Benda Ebei and Yidu Benda were both directly and indirectly 100% owned and controlled by Wan and Xu).

The organization and ownership structure of the Company subsequent to the consummation of the reorganization as summarized in the paragraphs above is as follows:

In July of 2006, Benda Ebei invested approximately $112,500 for a 75% ownership interest in Beijing Shusai, with the remaining 25% owned by an unrelated PRC individual. Beijing Shusai, a PRC limited liability company, was incorporated on June 15, 2006 and commenced primary operations in July 2006. Benda Ebei is setting up self-operated and franchised Pharyngitis Clinics in leading hospitals throughout major cities in China. It is currently operating two clinics for the Pharyngitis Killer therapy in Beijing, PRC.

On September 5, 2006, Ever Leader increased its number of authorized shares of common stock from 10,000 to 1,000,000 and effected a 100 to 1 stock split, resulting in Hon (the original sole registered shareholder of Ever Leader holding one share in trust for Xu) receiving 99 additional shares in the Company.

On September 5, 2006, Ever Leader transferred and assigned 711,202 shares of common stock to Xia Pharmaceutical, Inc. (“XIA”), an offshore holding company incorporated in the British Virgin Islands (“BVI”) that is 100% owned and controlled by Wan and Xu.

On September 5, 2006, Ever Leader issued 288,698 shares of common stock to 19 entities (some of whom are considered related parties) at par value. Additionally, Hon transferred and assigned her ownership interest in her 100 shares of Ever Leader to one of these entities.

The organization and ownership structure of the Company subsequent to the consummation of the reorganization as summarized in the paragraphs above is as follows:

The organizational chart after the acquisition of SiBiono would be stated as follows:

PRINCIPAL PRODUCTS

In ~~2008,~~ ~~our~~2009, our revenues were principally derived from sales of products listed in Figure 1. We have SFDA approval for all medicines and active pharmaceutical ingredients that we market. Sales of herbal TCM’s and bulk chemicals do not require SFDA approval. Our medicines have undergone pharmacological experiments in order to research the medicines’ effect and mechanism on organisms. On the other side, the experiments also research the organisms’ effect on the medicine. It includes pharmacodynamics and pharmacokinetics. Pharmacological experiments and clinical trials have similarities. Clinical trials are part of pharmacological experiments. However, pharmacological experiments mainly use animals as research subjects, while clinical trials generally utilize patients as research subjects. ~~Pharmacological~~ Pharmacological experiments are carried out by regulations of non-clinical medicine research and quality control issued by SFDA.

Main Products

Manufacturer	Product	Type	Function
Benda Ebei	Jixuening injection vial	Generic	Haemostatic (stops bleeding)
Benda Ebei	Xujing injection vial	Generic	Haemostatic
Benda Ebei	Nokeqing injection vial	Generic	Used to treat hepatitis
Benda Ebei	Yidingshu injection vial	Generic	Vitamin to treat lack of Riboflavin
Benda Ebei	Shusai-A injection vial	Generic	Anti-inflammatory analgesic
Benda Ebei	Suzheng-B injection vial	Generic	Vitamin; complementary medicine used to treat hepatitis
Benda Ebei	Ribavirin injection vial利巴韦林	Generic	Anti-virus, to treat acute upper respiratory tract infection
Benda Ebei	Gentamycin Sulfate Injection vial	Generic	Broad spectrum antibiotic
Benda Ebei	Vitamin B6 injection vial	Generic	Vitamin; complementary medicine used to treat hepatitis
Benda Ebei	Inosine injection vial	Generic	Nutrition, complementary medicine used to treat hepatitis
Benda Ebei	Vitamin C injection vial	Generic	To treat deficiency of vitamin C
Jiangling Benda	Ribavirin API (1)	API	Ribavirin drug manufacture.
Jiangling Benda	Asarin API (1)	API	Asarin manufacture to treat acute upper respiratory system infection
Jiangling Benda	Levofloxacin Mesylate API (1)	API	Broad spectrum antibiotic drug manufacture
Jiangling Benda	Ribose	API	Used to manufacture antibiotic drug
Yidu Benda	Triazol carboxylic acid methyl ester (“TCA”)	Bulk chemical	Ribavirin manufacture, anti-virus
SiBiono	Gendicine	Gene Therapy	Treatment of cancer

(1) Jiangling Benda facility was closed for renovation in July 2004 to comply with GMP standards. The Jiangling Benda plant reopened on August 10, 2007 and has been producing Ribose, the only product that does not require GMP approval. Jiangling Benda also plans to produce three other types of active pharmaceutical ingredients and they are Ribavirin, Asarin and Levofloxacin which need to have GMP Certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate which authorizes the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still undergoing the GMP certificate approving process. The management cannot estimate the exact timing for obtaining those certificates.

(1)

Jiangling Benda facility was closed for renovation in July 2004 to comply with GMP standards. The Jiangling Benda plant reopened on August 10, 2007 and has been producing Ribose, the only product that does not require GMP approval. Jiangling Benda also plans to produce three other types of active pharmaceutical ingredients and they are Ribavirin, Asarin and Levofloxacin which need to have GMP Certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate which authorizes the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still undergoing the GMP certificate approving process. The management cannot estimate the exact timing for obtaining those certificates.

SFDA Compared to the FDA

The SFDA approval process is similar to the FDA approval process. They both require three phases of clinical trials.

Phase I: Test the safety of drugs. 20-80 cases are required by FDA, while 20-30 cases are required by SFDA.

Phase II: Test the efficacy of drugs. Several hundred cases are required by FDA, while 100 cases are required by SFDA.

Phase III: Expand the sample group and further test the safety and effectiveness of drugs. Several hundreds, even thousands are required by FDA, while 300 hundred cases are required by SFDA.

Before a drug can be sold in China, the drug needs to undergo the above three phases, namely pre-clinical trial, clinical trial and finally, GMP approval. The approval of a drug by SFDA does not guarantee the approval by FDA. However, drugs approved by SFDA can be exempted from certain steps in US clinical trials before applying for FDA.

Benda Ebei Products

Of our branded medicines, the Shusai-A Nefopam Hydrochloride solution, sold in injection vials, is particularly noteworthy. According to a pharmacological experiment, Nefopam Hydrochloride has an analgesic effect 10.4 times greater than that of aspirin. Furthermore, it is not addictive and causes no known side effects.

Pharmacological experiments research the medicines’ effect and mechanism on organisms. On the other side, the experiments also research the organisms’ effect on the medicine. It includes pharmacodynamics and pharmacokinetics. Pharmacological experiments and clinical trials have similarities. Clinical trials are part of pharmacological experiments. However, pharmacological experiments mainly use animals as research subjects, while clinical trials generally utilize patients as research subjects. Pharmacological experiments are carried out by regulations of non-clinical medicine research and quality control issued by SFDA.

The chemical name of this product is Nefopam hydrochloride. It mainly contains: 5-Methyl-1-Phenyl-3,4,5,6-Tetrahydrocannabinol-1H-2,5-benzoxazocine, fenazoxine hydrochloride. It is a new type of Non-narcotic analgesics which has the function of low-grade Antipyretic and muscle relaxants. Its chemical structure belongs to O-methyl benzene ring of diphenhydramine, so it does not have the attribute of Non-steroidal anti-inflammatory drugs, nor Opioid receptor agonist. It is effective for middle-grade and heavy-grade pain. Intramuscular injecting 20mg of Nefopam hydrochloride equals to intramuscular injecting 12mg morphine. It has light effectiveness on respiration inhibition. It has no inhibition on circulatory system. It has no tolerance or dependence. It can be rapidly oral absorbed, Tmax 1-3 hours, and it has obvious effect while first pass. T1/2 4-8 hours, the binding rate of plasma protein is 71%-76%. It is metabolized by liver to lose its pharmacological activities. Most of it will be excreted through kidney. The prototype drug will be less than 5% and only a little will be excreted along with excretion. It is used for pain-killing after operation, cancer pain, and acute pain. It is also used for visceral smooth muscle cramps such as acute gastritis, in-biliary ascariasis, ureterolithiasis.

The clinical trials were conducted in 1993, instructed by Doctor Guozhong, Peng. Ebei plant paid for all clinical trial expenses. It passed the clinical trials in 6 clinical institutes including the provincial hospital of Hebei, the second and the forth hospital attached Hebei School of Medicine, Bethune international peace hospital and etc. The efficacy rate is around 80% for all 374 cases examined. There is no follow up results.

Generics are common, low-cost, medicines used by doctors in hospitals nationwide. Our generics have been marketed for more than 10 years and are generally used by low-income patients in rural and country districts. The profit margins for our generics, which constitute about 3 per cent of Benda Ebei’s current sales volume, are lower than those of our branded products. However, our generic products are an effective means for promoting our corporate name, image and brands nationwide.

Jiangling Benda Products

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

· Ribavirin has been used to produce antivirus medicine to treat SARS and SARS-like illnesses. Ribavirin is also used to treat severe virus pneumonia in infants and young children and a viral liver infection known as hepatitis C. It can be used in patients who have hepatitis C or human immunodeficiency virus (“HIV”) infection. Alliance Pharm, Inc. is advising us on modifications to our production processes in our effort to achieve U.S. FDA certification. Currently, there is only one other pharmaceutical company in PRC that has received U.S. FDA certification to produce Ribavirin API. On April 9, 2008, Jiangling Benda received the approved GMP Certificate from the SFDA which authorizing the production of Ribavrin.

Ribavirin has been used to produce antivirus medicine to treat SARS and SARS-like illnesses. Ribavirin is also used to treat severe virus pneumonia in infants and young children and a viral liver infection known as hepatitis C. It can be used in patients who have hepatitis C or human immunodeficiency virus (“HIV”) infection. Alliance Pharm, Inc. is advising us on modifications to our production processes in our effort to achieve U.S. FDA certification. Currently, there is only one other pharmaceutical company in PRC that has received U.S. FDA certification to produce Ribavirin API. On April 9, 2008, Jiangling Benda received the approved GMP Certificate from the SFDA which authorizing the production of Ribavrin.

Asarin is used to treat infections of the upper respiratory system. Our Asarin API is synthesized chemically rather than being extracted from natural raw materials, making it a cost effective and price competitive product. Benda’s Asarin received SFDA approval as a new API on December 27, 2005. We plan to extend our reach further down the value chain and manufacture consumer-ready Asarin medicines, in injection, vial and pill form, from our Asarin API. We have already filed for SFDA approval for these three types of finished Asarin products.

·	Levofloxacin Mesylate is a synthetic broad spectrum antibacterial agent for oral and intravenous administration. Benda’s Levofloxacin received SFDA approval as new drug ingredient on March 5, 2006.

·	Ribose is a kind of active pharmaceutical ingredient and which is used to manufacture antibiotic drug and which does not the approval from SFDA.

Yidu Benda Product

Yidu plans to produce one type of bulk chemicals:

·	Triazol carboxylic acid methyl ester (“TCA”). This is our main bulk chemical product.

Due to a government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the middle of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007. On September 25, and October 1, 2007, Yidu Benda had passed the environmental assessment and safety assessment by the Yichang Environmental Protection Bureau and Yichang Safety Supervision Bureau These two bureaus have issued “Environmental Influence Report” and “Safety Assessment Report” in November and December of 2007, respectively. Yichang Environmental Protection Bureau issued an approval document, (Document Number: Yichang Environmental Audit [2007] No. 111) and permitted the trial production of Yidu Benda on December 28, 2007, at which time Yidu Benda resumed full production. The related government agencies through trial production physically inspect the products produced by the newly installed production facilities. The main purpose for doing so is to ensure that the quality of the products is such that there will be no harm to the environment. In addition, Yidu Benda had also passed the examinations conducted by Yichang Public Security Bureau, Yichang Lightning Protection Institute and Yichang Special Equipment Inspection and Test Institute, in terms of the fire apparatus and facilities, lightning protection and static proof facilities etc. It is now permitted for the testing on actual production process. Once the actual products are produced, then the environmental government bodies will re-test the production results. The management could not estimate the exact timing for obtaining the final approval on the actual production process. Furthermore, the management is searching for new products to be produced in Yidu Benda which with higher profit margin.

SiBiono Product

SiBiono is a gene therapy company dedicated to the development, manufacturing and commercialization of gene therapy products. As a pioneer in gene therapy in China, SiBiono's mission is to develop innovative gene therapy products for the improvement of human health and life quality. The Company has developed two core technology platforms: Viral Vector Gene Delivery System and Non-Viral Vector Gene Delivery System focusing on development of gene therapy product for cancer and cardiovascular diseases.

MARKETING AND DISTRIBUTION METHODS OF PRODUCTS AND SERVICES

Prescription Medicines

Two types of distribution channels exist in the Chinese medicine industry.

For high value branded medicines: Pharmaceutical Manufacturers à Agents à Sub Agents à Medicine Representatives à Hospitals or Pharmacies à Patients

For low value generics: Pharmaceutical Manufacturers à Wholesalers à Secondary Wholesalers à Hospitals or Pharmacies à Patients

The major difference between an agent and a wholesaler is that the agent has exclusive product sales rights from each manufacturer in each region, which is generally a province. Sometimes manufacturers have several wholesalers in a region.

The table below illustrates price markups along the distribution channel for a typical Benda Ebei branded drug, Shusai-A.

Shusai-A Price Markup Pattern

	Purchase Price per piece in RMB			~~Price Markup~~	Price Markup
Patients		40.00		~~54%~~		54	%
Retail/Hospitals		26.00		~~622%~~		622	%
Medicine Reps		[3.60	]	~~29%~~		29	%
Sub-agents		2.80		~~56%~~		56	%
Agents		1.80
Benda Ebei		n/a

The highest price markup along the distribution channel is on sales by medicine reps to hospitals because such markups finance kick-backs paid by the reps to doctors. This unfortunate, but common, practice is condemned by PRC’s patients and medical industry regulators, but no effective method has been found to stamp it out. In reality, there are “kick-backs” phenomena which are paid by the reps to doctors, not by our company to doctors. However, in the normal course of business, sales commission would be incurred between our company and clients, such as agents or wholesalers etc., in order to have a sense of incentive to them. This sales commission scheme is fully disclosed in the sales contracts and is also allowed by the relevant PRC regulations.

Benda Ebei sells its products to agents or wholesalers. This method minimizes the need for a direct sales force and distances Benda Ebei from questionable kick-backs and potential legal consequences.

Active Pharmaceutical Ingredients (“APIs”)

Our APIs are purchased by other Chinese drug companies on an order-by-order basis. The domestic industry is tight-knit and API marketing still relies on word-of-mouth, reputation, and personal contacts. Although we have temporarily closed the Jiangling plant to complete renovation and obtain GMP certification, we have maintained relationships with all our former clients and expect to bring on other drug companies as new customers.

Jiangling Plant is primarily engaged in producing Ribose, a bulk chemical which does not require GMP approval and Active Pharmaceutical Ingredients (API) which need GMP approval.

Jiangling Benda was re-opened in August 2007. The products that are planned to be produced in Jiangling Benda are as follows:

a) Ribavirin API (Anti-virus)

b) Asarin API (Antibiotic)

c) Levofloxacin (Antibiotic)

d) Ribose

These four products are classified as API whereas the production of Ribavirin, Asarin and Levofloxacin need to obtain GMP approval, however the production of Ribose does not need the GMP approval. Currently, Jiangling Benda only produces Ribose and which is a kind of API.

Bulk chemicals

We market our bulk chemicals by cultivating strong, long-term relationships with loyal customers. We usually supply customers pursuant to annual renewable contracts. Customers usually start by buying small quantities and gradually increasing order sizes. We also enjoy long-standing relationships with a number of important exporters. These sales contracts are signed annually.

Beijing Shusai Pharyngitis Research Co., Ltd.

Beijing Shusai Pharyngitis Research Co., Ltd, a recently established subsidiary of Benda Ebei, handles our Pharyngitis Killer therapy operation, promotion, and distribution. Key functional departments are as follows:

· Training. Trains doctors, doctor assistants, and medical workers. ~~· Advisory. Advises each clinic on how best to apply the Pharyngitis Killer treatment.~~

· ~~Business Development~~Advisory. ~~Extend~~Advises ~~the~~each ~~footprint~~clinic ofon ~~Pharyngitis~~how ~~clinics~~best ~~and~~to ~~implement~~apply ~~patient~~the ~~outreach~~Pharyngitis ~~programs.~~Killer ~~· Marketing~~treatment. ~~Formulate and execute marketing plans.~~

·	Business Development. Extend the footprint of Pharyngitis clinics and implement patient outreach programs.

·	Marketing. Formulate and execute marketing plans.

·	Finance. Provide internal financial services to support business operations.

·	Logistics. Ensure no bottlenecks or shortages in product supply to the clinics.

Special Marketing Initiatives

(1)	Qiweiben Capsule Initiative. Benda Ebei intends to develop a series of products based on the Qiweiben Capsule and designed to treat diabetes. They will be sold through diabetes recovery centers and regional distributors.

(2)	Jixuening Initiative. We plan to develop a group of haemostatic medicines based on our core Jixuening brand. Benda Ebei’s Jixuening has been listed in the Catalog of Basic Medicines Covered by Social Medical Security.

(3)

Analgesic Initiative. The treatment of pain attracts more attention from PRC’s medical community and hospitals around the country that are setting up pain clinics. Our Shusai-A and Lappaconitine Hydrobromide products are uniquely powerful pain killers and are not addictive. We plan to leverage their popularity to promote our other pain killers and thereby build a series of pain killer medicines.

(4)	Asarin Initiative. We intend to form a group of medicines, based on Asarin, which will be designed to cure upper respiratory tract infection.

STATUS OF PUBLICLY ANNOUNCED NEW PRODUCTS/SERVICES

We expect that the following products in our development pipeline will generate growth in our revenues in the next few years. We expect to begin mass production for products once we receive SFDA’s approval.

The registration of a medicine must first be undertaken at the provincial level. First, you need to make an application in the provincial Food and Drug administration, then you must pass the on-the-spot examination of the provincial registration office and the initial inspection of information experts. After that, you can apply for the experts’ technological evaluation of National Medicine Analysis and Judgment center. Only after you received the technological evaluation, your registration can be transferred to SFDA to have administrative ratification. After the ratification, you will be issued new license and ratification number. In most situations, after the application and record of provincial Food and Drug administration, the company’s products will not be examined again by National Medicine Analysis and Judgment center, which is similar to the first step of technological check.

Due to the restructuring of SFDA, the process of approval new drug has been on hold since the beginning of 2007. We do not know how long it will take to resume the approval process.

The Company can only obtain the license for the new medicine and the production license after the completion of the clinical experiments. The procedures of obtaining new drug certificate with the SFDA are as follows:

1. Submit the application to the Province SFDA;

2. Then the Province SFDA will perform the physical inspection;

3. If we pass the physical inspection, the related application would be transferred to the State SFDA;

4. After ratification, the new drug license and ratification number would be issued.

Development Status of Key Products in Our Pipeline

Name of Product	Type	Main Function	Status
Pharyngitis Killer	Herbal TCM Oral Liquid and Treatment	Anti-respiratory tract infections	Market launch underway; SFDA Certificate not necessary
Qiweiben Capsule	Branded TCM	Diabetes treatment	New Medicine Application is accepted by SFDA; awaiting for SFDA approval and production permit。
Yan Long Anti-cancer Oral Liquid	Branded TCM	Treatment of cancers of the digestive tract	Awaiting for SFDA approval (1)
500mg:5ml Tranexamic Acid Injection vial	Generic	Haemostatic	SFDA production approval H20044601 received; Put in production line.
200mg:2ml Ribavirin Injection vial	Generic	Antibiotic	SFDA production approval H42021048 received; Put in production line.

1000mg:2.5mlVitamin C Injection vial	Generic	Vitamin	Achieved State acceptance and hearing Y0405945; SFDA production approval H20067577 received; Put in production line.

0.1g:2ml Lomefloxacin Aspartate Injection vial	Generic	Antibiotic	SFDA production approval H20056701 received; Put in production line.

0.2g:5ml Lomefloxacin Aspartate Injection vial	Generic	Antibiotic	SFDA production approval H20056702 received; Put in production line.

Lappaconitine Hydrobromide Injection vial	Branded Medicine	Analgesic	SFDA production approval H20055966 received; Put in production line.

Asarin Injection vial	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filed with SFDA in May 2006

Asarin pill	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filed with SFDA in August 2006; Need further bio-clinical trial.

Asarin granular medicine	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filing with SFDA in September 2006

Asarin oral liquid	Generic	Treatment of upper respiratory infection	Filing completed at provincial bureau level; filing with SFDA in September 2006; Need further bio-clinical trial.

Lysine Hydrochloride Injection vial	Generic	Amino acid	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

Arginine Monohydrochloride Injection vial	Generic	Amino acid	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

100mg:5ml Levofloxacin Hydrochloride Injection vial	Generic	Antibiotic	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

500mg:5ml Levofloxacin Hydrochloride Injection vial	Generic	Antibiotic	Filing completed at provincial bureau level; filed with SFDA in July 2006; Need further bio-clinical trial.

a-Asarin raw medicines	API	Upper respiratory infection	SFDA production approval H20059540 received; prepare for production.

Levofloxacin mesylate API	API	Antivirus	Filing completed at provincial bureau level; SFDA approval received; prepare for production.

GCLE	Bulk chemical	Production of Antibiotics	As it is a chemical product, it does not need SFDA approval.

(1) Yanlong oral solution has finished its earlier stage of research, and the Company is in the process of applying for SFDA’s permission of clinical trials. The new drug certificate will only be issued after the clinical trials.

New Branded Medicines

Our upcoming branded medicines include Qiweiben capsule and Yanlong anti-cancer oral liquid, which are proprietary traditional Chinese medicines, and Pharyngitis Killer Therapy, which is a combination of herb-based traditional Chinese medicine and treatments. We expect these products to have a significant positive impact on our future operational results.

Our New Branded Traditional Chinese Medicines

Features	Pharyngitis Killer ~~Therapy~~	Qiweiben Capsule	~~Yanlong~~Yan Long Anti-cancer ~~oral~~Oral ~~liquid~~Liquid
Targeted IP/ Formula Protection Period (1)	Not Applicable (2)	7+7 years (7)	7+7 years (7)
Our Ownership	75% (3)	100%	100% with reservation (4)
Completion Date Of Clinical Tests	Not Applicable	Pening (6)	Pending (6)
New Medicine Certification Date	Not Applicable	Pening (6)	Pending (6)
Expected installation of GMP quality production line (5)	Not Applicable	Pending (6)	Pending (6)
Expected SFDA Production Certification	Not Applicable	Pending (6)	Pending (6)
Expected Commencement of Production	Launched June 2006	Pending (6)	Pending (6)

(1) The first protection period will commence when the proprietary TCM protection application is approved. The second protection period can be applied for when the first protection period is expired.

(2) TCM therapies do not require SFDA approval. We chose not to apply for patent protection for this product’s formula due to our concerns about disclosures required in the patent application process.

(3) Benda owns 75% of Beijing Shusai Pharyngitis Research Co., Ltd., a company that owns all product and market exploitation rights to Pharyngitis Killer Therapy.

(4) The inventor of Yanlong Anti-cancer oral liquid, Mr. Yan Li, has reserved the right to sell the product to one hospital in Hong Kong, one hospital in Taiwan and one hospital in Shenzhen province.

(5) GMP certification is expected once the facility installation for the products below referenced products and examination by the related local government agency is completed.

In order to produce Qiwweiben, the following table shows the production facilities are purchased and installed, and they are all located in Benda Ebei and waiting for the government agency for inspection:

No.	Equipment	Model No.	Quantity
1	Muller	300A	2
2	powder shifter	ZS-350	2
3	powder shifter	XS-650	1
4	3D mixer blender	HD-1000	1
5	Ultrasonic spray drier	FL-120	1
6	Wet mixer granulator	GHL-250	1
7	Slot shape Mixer	CHL-150	2
8	granule drier	TC-Z-Ⅱ	1
9	Capsule filling machine	NJP-1200	1
10	Capsule polishing machine	YPJ-Ⅱ	1
11	fast packing machine	DPH-250D	1

In order to produce Yanlong Anti-cancer Oral Liquid, the following table shows the production facilities are purchased and installed, and they are all located in Benda Ebei and waiting for the government agency for inspection:

No.	Equipment	Model No.	Category
1	Solution Preparation Reservoir	PLG-1.0
2	Fluid Storage Reservoir	ZYG-1.0
3	High Level Reservoir	N/A, general machinery	Liquefy
4	Micro-filters	N/A, general machinery	System
5	Filters for Sugar Syrup	N/A, general machinery
6	Sugar Dissolving Reservoir	HTG-0.5
7	Bottle Filling Machine	QCX60
8	Sterilization System	AQS1.2	Bottling
9	Labeling Machine	TWJA	System
10	Light Examine Workstations	N/A

(6) Due to recent restructuring within SFDA, the approval process for new medicines has been ceased since November 2006, except for the first class new medicines which are drugs that have never been sold or appeared in the market in China. The management expects that such situation would still last for an indefinite period.

(7) According to the relevant Chinese patent drug policies of SFDA, all national protective Chinese patent drugs can apply for a seven-year protective period. During the period, other pharmaceutical enterprises cannot produce imitation products. After the first seven years, the company can apply for another seven years’ protective period.

Pharyngitis Killer Therapy (Anti-Respiratory Tract Infections)

Product Description: This is an entirely natural Chinese medicine and treatment containing no hormones or antibiotics, which cures a wide range of upper respiratory tract infections, ranging from the common cough to more advanced respiratory illnesses, such as acute and chronic pharyngitis, tracheitis and bronchitis which has already been proven by clinical trails which are conducted by the company together with the co-operated hospitals.

The clinical trials were conducted by the company together with co-operated hospitals which was based on the sample size 50 chronic respiratory patients who either had the symptom pharyngoxerosis throat itch, chest distress and feeling suffocated or oppressed, throat swelling and sore or vocal cord weary and hoarseness. The medical products used as a comparison were Pharyngitis Killer Therapy (in form of herb drink) alone and chronic comprehensive therapy.

We believe the oral liquid taken alone has a success rate of up to 80% in treating chronic pharyngitis; however, if accompanied by further treatment, success rates of up to 98% can be achieved.

This medicine, in the form of herbal drink, was developed and kept secret over many generations by the Wang family of Beijing. The formula and treatment was initially invented in 682 A.D. by Wang Zhaojing, a famous doctor in Chinese medical history. We believe the oral liquid taken alone has a success rate of up to 80% in treating chronic pharyngitis; however, if accompanied by further treatment, success rates of up to 98% can be achieved.

However, the above data was only conducted by the company together with co-operated hospitals which was based on the sample size 50 chronic respiratory patients. In order words, such clinical trials were not performed by the formal requirement of SFDA.

Our Pharyngitis Killer therapy:

·	Swiftly smoothes away throat itching and coughing

·	Controls the development of disease in the mucus of the mouth

· Rebuilds the immune function of the throat area ~~· Provides a natural therapy, which is without side effects and free of antibiotics~~

·	Provides a natural therapy, which is without side effects and free of antibiotics

Market Outlook: With the recent urbanization and industrialization of PRC, pollution has become a big problem. Air pollution in particular causes several diseases of the pharynx. Researchers believe that approximately 10% of the people who live in cities suffer from pharynx disease, while in some rural areas, the ratio is a lower, though still significant, 5.5%. Until now treatments for upper respiratory tract infections have relied on antibiotics to control acute pharyngitis temporarily. However, no medicine in the market has thus far been effective at treating chronic pharyngitis. Pharyngitis Killer therapy overcomes the deficiencies of other treatments and eradicates the disease.

Purchase: The operating company for the Pharyngitis Killer therapy is Beijing Shusai. The total registered capital is 1.2 million RMB. As part of the joint venture, Mr. Wang contributed the Pharyngitis Killer formula and treatment as intangible assets, valued at 300,000 RMB, in return for 25% of Benda Shusai’s equity. Benda Ebei invested 900,000 RMB in cash for 75% equity.

IP protection/ technology confidentiality: Pharyngitis Killer is a traditional Chinese medicine and as such does not require SFDA approval. Benda Ebei has chosen not to file for patent protection on the formula in order to avoid disclosing the product formula. It believes that the formula and treatment are effectively protected by: (a) the separation of auxiliary ingredients with a proprietary catalyst powder called Yao Yin; (b) a proprietary production method for the oral liquid; and (3) by proprietary treatment techniques. We plan to apply for patent protection for both the processing method used to make the oral liquid and the treatment method applied on patients.

Promotion: We plan to market Pharyngitis Killer as a stand alone oral liquid medicine that can be combined with surgery-like treatment to achieve results. In August 2006, the PRC State Administration of Traditional Chinese Medicine (“SATCM”) issued an official promotional document to provincial SATCM’s, in which Pharyngitis Killer therapy is categorized as a recommended TCM and treatment. This official promotional document was issued on August 18, 2006 based on an expert panel review of Pharyngitis Killer conducted in August 2006.

Marketing and Distribution: We are setting up self-operated and franchised Pharyngitis Clinics. Benda Ebei currently has two clinics in full operation in Beijing. Benda Ebei has prepared advertising and marketing campaigns to support the rapid expansion of the franchise, which will begin after the closing of this offering. Our self-operated clinics will be located inside hospitals. A proportion of the gross revenues will be paid to the host hospitals in lieu of rent and as compensation for any marketing efforts made on our behalf. Franchised Pharyngitis Killer clinics will be operated by franchisees, which will buy the medicine from us and pay us a franchising fee. We plan to open franchising clinics only at the beginning of the roll-out period in order to accelerate the revenue growth and minimize start-up costs. At a later stage, we plan to open self operated clinics only because we expect that they will be comparatively more profitable and easier to manage.

Status of Planned Pharyngitis Clinics

Due to the restructuring of SFDA, the related policies of SFDA have changed such that the local hospitals are not allowed to co-operate with third parties. These changes have caused us to discontinue our plans of setting of Pharyngitis Clinics. The management of the company is seeking and considering other alternatives to launch this particular drug, however up to now there is no definite plan yet.

Qiweiben Capsule (alleviates symptoms of diabetes)

Product Description: Benda Ebei has the exclusive right to produce a new, effective, herbal medicine against diabetes, which was developed in cooperation with Shandong Haiyang Biotech Co., Ltd. (“Haiyang”). Qiweiben capsule is a medicine used to reduce symptoms of patients suffering from type II diabetes and improve their sexual ability. It contains 7 active pharmaceutical ingredients (“APIs”) extracted from animals and plants; its major API is an extract from virgin male silk moths. This medicine has the following key benefits:

(1)	Reduces blood glucose.

(2)	Cures erectile dysfunction and reduces sexual dysfunction caused by diabetes. The Qiweiben capsule is unique amongst diabetic medicines in this regard.

(3)	As it is a complementary medicine based on natural ingredients, the patient reduces intake of chemical medicines.

Market Outlook: Diabetes has become a common and frequently occurring disease that threatens the health of an increasing portion of the population. According to the 5 th International Diabetes Union conference held in Beijing in 2002, there are 130 million type II diabetes patients around the world, over 40 million of which are in PRC. In the 21 st century, type II diabetes is expected to be epidemic in developing countries such as PRC and India. Such a large patient group provides a significant market opportunity for Qiweiben Capsule. Artificial insulin is currently the most widely used medicine for the treatment of diabetes. Patients using artificial insulin can become addicted to it and also suffer the discomfort of needle injections. These disadvantages can be reduced by using our Qiweiben capsule as a complement to artificial insulin. Pilot studies conducted by Haiyang in 2001 have shown that the Qiweiben capsule significantly reduces one or more symptoms of diabetes in 88% of cases.

Rights Purchase: Qiweiben is the brand name of this medicine. The registered drug name is Qiwei Xiaoke capsule. The SFDA production permit (SFDA Z200110150) was held by Shandong Leaf Pharmaceutical Co., Ltd. On March 14, 2004, Benda Ebei agreed to pay Haiyang RMB 5 million ($625,000) for the technology required for the extraction of virgin male silk moth essence, the SFDA production permit (SFDA Z200110150) and the New Medicine Certificate (SFDA Z20010134). The purchase agreement provided for the immediate transfer of the production permit and the deferred payment of the RMB 5 million ($625,000) within three years after Benda Ebei begins to sell the product.

IP protection/ technology confidentiality: Benda Ebei will apply for TCM protection for Qiweiben and expects a reply from the SFDA no later than 6 months thereafter. According to new regulations, protected TCM status is granted for 7 years from the registration date, during which period no other party may produce it. Thereafter, a further 7 year protection may be granted to the right holder depending on factors such as the effectiveness, production standards, quality and safety of the product. Benda Ebei also has pending patents for the protection of technological and manufacturing processes used to produce this medicine.

Production: We have been building Qiweiben production facilities. In order to produce qiwweiben, the following table shows the production facilities or equipment which have been purchased and installed. The equipment are all located in Benda Ebei and waiting for the government agency for inspection:

No.	Equipment	Model No.	Quantity
1	Muller	300A	2
2	powder shifter	ZS-350	2
3	powder shifter	XS-650	1
4	3D mixer blender	HD-1000	1
5	Ultrasonic spray drier	FL-120	1
6	Wet mixer granulator	GHL-250	1
7	Slot shape Mixer	CHL-150	2
8	granule drier	TC-Z-Ⅱ	1
9	Capsule filling machine	NJP-1200	1
10	Capsule polishing machine	YPJ-Ⅱ	1
11	fast packing machine	DPH-250D	1

We intend to start manufacturing and marketing the product immediately after receiving GMP certification. However, due to recent restructuring within SFDA, the approval process for new medicines has been ceased since November 2006, except for the first class new medicines. The management expects that such situation would still last for an indefinite period.

Clinical Experiments:

Qi Wei Xiao Ke capsule is a Chinese traditional medicine capsule whose main raw material is male Sangcan moth of no copulation. Biochemistry engineering technique is used to extract its useful components, which are produced to traditional Chinese medicine capsule preparation by adding six additional kinds of traditional Chinese medicinal materials.

Experiments with animals have shown that it can lower the blood glucose of streptozotocin diabetes big mouse and ALX diabetes little mouse and can increase the big mouse’s glucose tolerance content of ALX and prolong the submerged weight swimming time of ALX diabetes little mouse.

The male Sangcan moth is rich in brain hormone, ecdysone, male hormone, etc. and contains many amino acid, vitamins and microelement that are needed by the human body. The biological extracts of the male Sangcan moth which are added with milk veteh, the extracts of root of yellow kudzuvine and sealwort, and the extracts of medlar, and then mixed with trichosanthes and rhubarb micro mist, are adequate for traditional medicine’s curing for deficiency of both yin and yang, II diabetes of Qi deficiency and blood silt. It is tested for 420 clinical researches in Beijing Guang An Men Hospital-a subordinate hospital of China Academy of Chinese Medical Sciences and Shandong traditional Chinese medicine hospital, Liaoning traditional Chinese medicine hospital, and Jiangsu traditional Chinese medicine hospital which are four clinical experiment base of new drug. The total effective rate is 88.67% regardless of whether the disease history is long or short, and it has no poisonous side effect to human body.

The medicine was conferred patent of invention by National Patent Bureau in 1996 (patent No. Z96105259·7). Qi Wei Xiao Ke capsule received the new drug license (SFDA No.: Z20010134) and production approval license (SFDA No.: Z200110150) issued by SFDA in October, 2001.

Up to date, we have already submitted the related documents and awaiting for the approval of SFDA.

Yan Long Anti-cancer Oral Liquid

Product Description: The Yan Long Anti-Cancer Oral Liquid (“Yan Long”) is a conventional Chinese patent drug effective against cancers of the digestive tract such as anal, bile duct, colon, esophageal, gallbladder, liver, pancreatic, rectal, and gastric cancers. It is especially effective in helping patients withstand chemotherapy treatment. Yan Long has successfully completed first and second phase clinical trials and Benda Ebei plans to begin the third phase.

Yanlong Anti-cancer Oral Liquid is a kind of pure mixture contains Chinese traditional medicine such as: Baiying, Morel, Salvia, Gentiana, Angelica, etc.

Starting in 1989, Yanlong anti-cancer oral liquid was given to 30 patients with primary liver cancer for the clinical trails. The number of the survivals for the year of 1990, 1991, 1992 and 1993 were 23, 17, 11 and 8 respectively. By March 2004, among the eight surviving patients, two do not have any signs of recurrence, three take care of themselves but are still physically weak, three regressed and returned to the hospital for treatment. I n this clinical research, the survival rate of the patients observed for over 14 years reached 26.67%.

Inventor: The development of Yan Long has been the life work of Dr. Yan Li, one of the nation’s most well-recognized experts in cancer studies. Dr. Li has been an oncology specialist for over 40 years and has held various prestigious positions in the cancer research field in PRC. He was born in 1931. In 1956, he went to study in Beijing College of TCM and graduated in 1962. After that, he worked in the Beijing TCM Hospital Oncology Department for 12 years. In 1970, he was promoted to physician in charge. In 1974, he transferred to the institute of oncology of Beijing Medical University. In 1984, he was appointed as vice president of Beijing Sino-Japan Friendship Hospital. He developed an anti-cancer oral liquid based on his decades of research and experience and named it Yan Long Anti-Cancer Oral Liquid.

Rights Purchase: Benda Ebei and Dr. Yan Li (“Li”) signed an agreement regarding the production, marketing, and sales of Yan Long. Benda Ebei signed agreement to buy all rights to Yan Long from Mr. Li for RMB 5 million ($625,000). Once sales of Yan Long commence a monthly payment of RMB 150,000 ($18,750) per month for the first six months and RMB 300,000 ($37,500) thereafter will be paid. Benda Ebei will cease payment when the accumulated monthly payments reach the RMB 5 million ($625,000) agreed purchase price. Li and Benda Ebei are obliged to keep the Yan Long formula secret. Li retains the right to produce and sell Yan Long in his own clinic. Benda Ebei management believes that this will not significantly impact Benda Ebei’s revenue from Yan Long.

IP protection/ technology confidentiality: Benda Ebei has applied for patent protection for Yan Long and expects to receive a 10 year patent when the registration process is completed

Production: The production facilities and equipment for Yan Long were installed and implemented in July 2007. We intend to start manufacturing and marketing the product immediately after receiving GMP certification. Due to recent restructuring within SFDA, the approval process for new medicines has been ceased since November 2006, except for the first class new medicines. The management expects that such situation would still last for an indefinite period. The process of third phase clinic trail of Yang Long, application for IP protection and the application of certificate are pending.

New Bulk Chemicals

We are in the process of developing and bringing to market 7-Phenylacetamido-3-chloromethyl cephalosporanic acid P-Metoxy Benzyl Ester (“GCLE”), which is a medicine intermediate, chemical name which is used for cephalotin antibiotics. Japan Otsuka Chemical Industry Company originally developed the process to produce GCLE and held the worldwide patent on the GCLE production process. The PRC patent protection period expired in 2005. Since then Benda’s research center and the Wuhan Institute of Chemical Technology have jointly mastered this process of GCLE production. We have completed small-scale and mid-scale trial productions, and expect to be able to produce 200 tons of GCLE in 2007 and 500 tons in 2008. Domestic demand for this product is expected to increase by 28% in 2006 to 1,200 metric tons 3. This demand is currently met by imports.

This new product will be produced in our Yidu plant. Due to a government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the middle of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007.

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

3	Source: China National Medical Information Center Southern Sub center

INDUSTRY AND COMPETITIVE FACTORS

There is certain industry and competitive factors which we believe will be critical to achieving our growth:

· Rapidly growing Chinese pharmaceutical market. In 2005, China was the 9th largest and fastest growing pharmaceutical market in the world. The Chinese currently spend about $12 per capita on pharmaceuticals compared to $340 per capital in the U.S. As the Chinese population ages and becomes wealthier, the already large Chinese pharmaceutical market is poised for continued explosive growth. According to IMS Health, Inc., a research firm, the Chinese pharmaceutical market grew by over 28% and 20% in 2004 and 2005, respectively. According to Boston Consulting Group, China’s pharmaceutical market will become the 5 th largest in the world by 2010. Further, a recent report by McKinsey & Co. reported that Chinese healthcare spending will grow from $21 billion in 2000 to approximately $323 billion by 2025, or at a compounded growth rate of 11.6%. (Farrell D., Gersch U., Stephenson E., (2006) The Value of China’s Emerging Middle Class, McKinsey Quarterly) · Benda is uniquely positioned to capture market share. Our growth potential will be largely driven by the gene therapy product which is known as Gendicine and used for the treatment of cancer. On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 4, 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in China. Gendicine ® is the first ever commercialized gene therapy product approved in the world by a government agency. Gendicine is recognized by the world's first class journals as a major milestone in the field of gene research and biotechnology and is expect to make important contribution to mankind's endeavor for improving human health. · Low cost producer. Our continuing success in optimizing our manufacturing processes and minimizing our production costs provides us with a competitive advantage. For example, we have recently developed innovative processes that achieve Ribavirin (an API in common anti-viral injections) yield rates 4.5 per cent higher than the competition, while at the same time reducing Ribavirin manufacturing costs by 9 per cent. · Government sponsored industry consolidation presents opportunities for acquisitions. According to Business China magazine, China’s thousands of domestic companies account for 70 percent of the pharmaceutical market. Anticipating the effects of WTO entry and in an effort to compete with foreign firms, the Chinese government has decided to nurture its own large pharmaceutical companies, by encouraging the consolidation of its government-owned companies. To this end, the Chinese State Economic and Trade Commission (SETC) announced plans to consolidate the industry and support the development of 10 to 15 largest pharmaceutical firms. According to government statistics China currently has about 3,500 drug companies, down from over 5,000 in 2004. The number is expected to drop further. As the industry undergoes further consolidation, Benda will have the opportunity to grow by acquisition.

Benda is uniquely positioned to capture market share. Our growth potential will be largely driven by the gene therapy product which is known as Gendicine and used for the treatment of cancer. On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 4, 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in China. Gendicine ® is the first ever commercialized gene therapy product approved in the world by a government agency. Gendicine is recognized by the world's first class journals as a major milestone in the field of gene research and biotechnology and is expect to make important contribution to mankind's endeavor for improving human health.

Low cost producer. Our continuing success in optimizing our manufacturing processes and minimizing our production costs provides us with a competitive advantage. For example, we have recently developed innovative processes that achieve Ribavirin (an API in common anti-viral injections) yield rates 4.5 per cent higher than the competition, while at the same time reducing Ribavirin manufacturing costs by 9 per cent.

Government sponsored industry consolidation presents opportunities for acquisitions. According to Business China magazine, China’s thousands of domestic companies account for 70 percent of the pharmaceutical market. Anticipating the effects of WTO entry and in an effort to compete with foreign firms, the Chinese government has decided to nurture its own large pharmaceutical companies, by encouraging the consolidation of its government-owned companies. To this end, the Chinese State Economic and Trade Commission (SETC) announced plans to consolidate the industry and support the development of 10 to 15 largest pharmaceutical firms. According to government statistics China currently has about 3,500 drug companies, down from over 5,000 in 2004. The number is expected to drop further. As the industry undergoes further consolidation, Benda will have the opportunity to grow by acquisition.

Benda’s GMP compliant manufacturing processes provide us with a strong competitive advantage in the Chinese healthcare market. The government has formulated an Action Plan for the Modernization of Chinese Medicine to boost the quality of Chinese medicine and enhance China's ability to compete in world markets. As such, all domestic producers of APIs were required to be GMP compliant by the end of 2004. Since the end of June 2004, the SFDA has been closing down manufacturers that do not meet the new GMP standards. In contrast to many of its competitors, Benda has made significant investments in refitting our manufacturing systems to comply with GMP standards. Our Benda Ebei plant received GMP certificate from SFDA on November 11, 2003 and renew on December 3, 2008 for the production of injection vials; while on November 26, 2007, Benda Ebei received a GMP for the production of tablets. Our Jiangling Benda plants received GMP certificate on April 9, 2008 which authorizing the production of Ribavrin. Our SiBiono received GMP certificate on October 16, 2003. Our Yidu Benda facilities, which produce bulk chemicals, are not subject to GMP certification requirement.

RAW MATERIALS AND PRINCIPAL SUPPLIERS

Benda Ebei Suppliers

Benda Ebei plant manufactures injection vials from APIs. Benda Ebei’s largest supplier of APIs was Hubei Fourth Ring Pharmaceutical Co., Ltd. In ~~2007~~2008, Benda Ebei’s largest supplier of APIs was Nan Yang Re Gong Co. Ltd and Benda Ebei purchased ~~approximately~~approximatel $42.329 million, worth of Tranexamic Acid from this supplier, equivalent to 1428 per cent of Benda Ebei’s raw materials purchases by ~~value.~~ value。In ~~2008~~ 2009, Benda Ebei’s largest supplier of APIs was ~~Nan~~Hubei Sihuan ~~Yang~~Pharmaceutical ~~Re Gong~~ Co. ,Ltd and Benda Ebei purchased approximately $23.~~9 MM~~ 4 million, worth of Tranexamic Acid ~~from this supplier,~~ equivalent to 28 38 per cent of Benda Ebei’s raw materials purchases by value.

Jiangling Benda Suppliers

Our Jiangling Benda plant manufactures APIs from bulk chemicals. Jiangling Benda’s largest supplier of bulk chemicals is Wuhan Zhongnan Supplying Co., Ltd. In 2004, Jiangling Benda purchased $400,000 worth of Acetic Anhydride from this supplier, equivalent to 26.2 per cent of Jiangling Benda’s raw materials purchases by value. The Jiangling Benda plant has made no further raw materials purchases since its closure for renovation.

Jiangling Benda re-opened on August 10, 2007 and started producing Ribose. In year of 2008, the largest supplier was Hubei Zhijiang Shanyau Chemical Co. Ltd., and approximately $74 K worth of raw materials was purchased from this suppliers, equivalent to 13.16% of total the raw materials purchases by value. In year of 2009, the largest supplier was Xinxiang Weide Chemical Co. Ltd., and approximately $556,000 worth of raw materials was purchased from this suppliers, equivalent to 29% of total the raw materials purchases by value.

Yidu Benda Suppliers

Our Yidu Benda plant manufactures bulk chemicals from other bulk chemicals.

Due to an government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the middle of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007.

Packaging Material Suppliers

Our packaging materials are purchased from two main suppliers. In 2007, we purchased approximately $0.9 MM worth of plastic packaging material from Anlu ZhongYa Plastics Package Factory, equivalent to 11 per cent of our packaging supplies by value. In 2008, we purchased approximately $0.62 MM worth of plastic packaging material from Anlu ZhongYa Plastics Package Factory and Anlu Zhong’Ao Printing Factory, equivalent to 20 per cent of our packaging supplies by value.

The standardized purchasing contract, which is designed by the PRC government agency, is being adopted. The major terms (or components) of the purchasing contracts are stated are as follows:

1.	payment schedule which is based on the negotiation;

2.	the goods are inspected and received according to the PRC regulations for materials of producing drug;

3.	breach contract, then parties have the right to sue in the PRC local civil courts;

As there were many transaction contracts during the years, since the company formed purchasing contract with the suppliers for lots of material purchased, therefore we just listed three of those and shown as a sample for reference.

However, our company does not depend on any sole source suppliers, since the raw materials market is opened in the sense that we could have plenty of choices of the suppliers (each category of materials purchased may have three to five suppliers in the market). We only choose those suppliers who could offer better terms to us and having a long term co-operation relationship.

OUR INTELLECTUAL PROPERTY

We regard our service marks, trademarks, trade secrets, patents and similar intellectual property as critical factors to our success. We rely on patent, trademark and trade secret law, as well as confidentiality and license agreements with certain of our employees, customers and others to protect our proprietary rights.

Pursuant to the PRC TCM Protection Regulation, certain ready-made TCM products which have received SFDA approval have automatic protected intellectual property rights for a seven-year period from the date of grant of such approval. An application can subsequently be made to extend such protection for up to three consecutive seven-year periods. Once this protection period has expired, a company may apply for patent protection.

To a large extent, we rely on such protection regulation to protect our intellectual property rights with respect to such products. In addition, as of December 31, 2005, we filed four patents for manufacturing technologies, primarily relating to our medicine products and manufacturing techniques and the applications are still in the approval process

Our Patents

Two types of medicine-related patents exist in PRC: the medicine production technique patent and medicine invention formula patent. In PRC, illegal infringements of production technique patents are widespread. A tiny modification to a filed medicine production technique might be construed as a new one and argued as not violating the patent laws. Therefore, Benda Ebei has historically tried to avoid applying for this kind of patent in order to protect its technological secrets.

Invention formula patents are as easily imitated as production technique patents. However, since only one SFDA production certificate can be issued on new branded medicine based on the major pharmaceutical ingredients used, a minor modification to the formula would not warrant a new SFDA production certificate. This means that, even if another manufacturer gets to know a patented formula, it won’t be able to produce it, at least in PRC, without the proper SFDA production certificate.

SiBiono patents

Our company has already applied for 6 patents and they are shown in the following table:

Item

Patent name

Countries / Date

Application Number (1)

Publication Number (2)

Approved Patent Number (3)

Name of Patent Inventor (6)

Name of Applicant (6)

Patent Assignees

A new method for manufacturing recombinant adenovirus

China

98123346.5

CN1228474A

ZL98123346.5

Peng

SiBiono

Date

12/14/1998

9/15/1999

7/3/2002

A recombinant constructed by a virus vector and a human tumor suppressor gene and its use

China

02115228.4

CN1401778A

ZL02115228.4

Peng / Zhang

Date

5/8/2002

3/12/2003

11/24/2004

PCT (4)

WO2004/078987A1

Not Approved

Peng / Zhang

N/A

Date

3/8/2004

9/16/2004

N/A

Recombinant gene medicine of adenovirus vector and and gene p54 for treating proloferative diseases

China

03125129.3

CN1471977A

ZL03125129.3

Peng / Zhang

Date

5/10/2003

2/4/2004

7/25/2007

PCT (4)

WO2004/104204A1

Not Approved

Peng / Zhang

N/A

Date

5/9/2004

12/2/2004

N/A

The application of recombinant adenoviral p53 as cancer vaccine (tentative title)

China

200510002779.1

CN1679641A

ZL200510002779.1

Peng / Zhang

Date

1/26/2005

10/12/2005

8/29/2007

PCT (4)

WO2006/079244A1

Not Approved

Peng / Zhang

N/A

Date

1/26/2005

8/3/2006

N/A

US (5)

11/075035

2005/0281785A1

Not Approved

Peng / Zhang

Unidentified Yet

N/A

Date

3/7/2005

12/22/2005

N/A

Human Embryonic Kidney (HEK) sub-clone cell line

China

03126889.7

CN1513985A

Not Approved

Peng / Zhang

N/A

Date

6/13/2003

7/21/2004

N/A

PCT (4)

WO2004/111239

Not Approved

Peng / Zhang

N/A

Date

5/9/2004

12/23/2004

N/A

Item

Patent name

Countries / Date

Application Number (1)

Publication Number (2)

Approved Patent Number (3)

Name of Patent Inventor (6)

Name of Applicant (6)

Patent Assignees

A new method for manufacturing recombinant adenovirus

China

98123346.5

CN1228474A

ZL98123346.5

Peng

SiBiono

Date

12/14/1998

9/15/1999

7/3/2002

A recombinant constructed by a virus vector and a human tumor suppressor gene and its use

China

02115228.4

CN1401778A

ZL02115228.4

Peng / Zhang

Date

5/8/2002

3/12/2003

11/24/2004

PCT (4)

WO2004/078987A1

Not Approved

Peng / Zhang

N/A

Date

3/8/2004

9/16/2004

N/A

Recombinant gene medicine of adenovirus vector and and gene p54 for treating proloferative diseases

China

03125129.3

CN1471977A

ZL03125129.3

Peng / Zhang

Date

5/10/2003

2/4/2004

7/25/2007

PCT (4)

WO2004/104204A1

Not Approved

Peng / Zhang

N/A

Date

5/9/2004

12/2/2004

N/A

The application of recombinant adenoviral p53 as cancer vaccine (tentative title)

China

200510002779.1

CN1679641A

ZL200510002779.1

Peng / Zhang

Date

1/26/2005

10/12/2005

8/29/2007

PCT (4)

WO2006/079244A1

Not Approved

Peng / Zhang

N/A

Date

1/26/2005

8/3/2006

N/A

US (5)

11/075035

2005/0281785A1

Not Approved

Peng / Zhang

Unidentified Yet

N/A

Date

3/7/2005

12/22/2005

N/A

Human Embryonic Kidney (HEK) sub-clone cell line

China

03126889.7

CN1513985A

Not Approved

Peng / Zhang

N/A

Date

6/13/2003

7/21/2004

N/A

PCT (4)

WO2004/111239

Not Approved

Peng / Zhang

N/A

Date

5/9/2004

12/23/2004

N/A

The complex of polypeptide liposome and human VGEF gene, and its use and human VGEF gene, and its use

China

02134321.7

CN1389269A

Not Approved

Peng / Zhang / Zhu

N/A

Date

7/4/2002

1/8/2003

N/A

Note:

(1) Application number is obtained when application is submitted;

(2) Publication number is obtained after the first phase examination;

(3) Approved patent number is obtained after the final examination;

(4) PCT is referred to an International Patent Organization in Paris;

(5) US is referred to the application is made in United States of America alone;

(6) Peng is referred to Zhaohui Peng; Zhang is referred to Xiaozhi Zhang; Zhu is referred to Jinya Zhu.

The validity of the patent is 20 years since the application date.

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

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

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

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

On August 27, 2008, the Group through its subsidiary, SiBiono filed an application to the Guongdong Province Shenzhen City (Middle) Peoples’ Court to demand Zhaozhu Peng to transfer back all the above mentioned patents to SiBiono. ~~The~~This case has been ~~accepted~~brought byto the ~~Court~~court twice, and is ~~waiting~~we ~~for~~are ~~its~~still ~~further~~waiting ~~investigation~~for the judgment.

Our Trademarks

Benda currently owns four trademarks: Jixuening, Benda, Suzheng-B, and Shusai-A. Benda has filed trademark applications, the approvals of which are pending, for other 13 medicine names or general trademarks and the applications are still in the approval process.

WORK SAFETY ISSUES

On November 10, 2005, there was a small explosion in the Yidu plant resulting in the deaths of two of our workers. This tragic accident resulted from the violation of our operating procedures by one of the workers killed in the explosion. We paid RMB 260,000 ($32,000) to each of the victims’ families in settlement of any compensation issues. On November 11, 2005, there was another explosion in the same factory resulting from a chemical reaction triggered by the prior explosion. Fortunately management had anticipated this incident and the plant had already been temporally sealed so nobody was killed.

Following the events of November 10 and 11, 2005 we have put in place very strict work safety procedures and revised the design of the relevant production process in order to avoid similar incidents in the future. We believe Benda is not liable for any further material liabilities arising from these explosions.

RESEARCH AND DEVELOPMENT ACTIVITIES DURING THE PRIOR TWO FISCAL YEARS

We spent $1349,~~461,951~~361 and $~~553~~1,~~962~~461,951 on direct research and development (“R&D”) efforts in ~~2008~~2009 and ~~2007,~~2008 respectively. Rather than spend considerable sums internally on on R&D in a market where we cannot easily protect our results of development, we prefer to leverage our management team’s extensive industrial network and knowledge in finding new drugs and treatments that may be potentially very successful but which have not yet been brought to market. We carefully evaluate each of these drugs before making a purchase decision. We believe each of our new products will enjoy considerable success in the market.

We also leverage our network of leading research institutions and universities to optimize the effectiveness of our investment in production R&D. We allocate and fund research projects to these institutions. Our in-house scientists coordinate and supervise the outsourced R&D processes. We have the rights to all results of the R&D efforts including IP rights. In order to protect our interests we usually divide each project into several sections and assign each section to a different research institution. Each research ally therefore only works on a limited part of each project. Some universities and institutes that work with us are:

Life Science College of Wuhan University.

Biochemical College of Sanxia University

· Jilin Medical University ~~· Shanghai Institute of Pharmacy of Chinese Academy of Sciences.~~

Shanghai Institute of Pharmacy of Chinese Academy of Sciences.

Wuhan University of Chemical Technology.

The science and technology cooperation agreement between College of Chemistry and Life Science of China Three Gorges University and Yidu Benda:

Party A: China Three Gorges University (Party A for short in the following)

Party B: Yidu Benda Chemical Co.Ltd. (Party B for short in the following)

To increase the science and technology progress of Yidu Benda Chemical Engineering, Inc. (“Yidu Benda”), to improve the quality of its products and its production efficiency, and to fully make use of scientific intelligence, technologies and experimental equipments of College of Chemistry and Life Science of China Three Gorges University (“University”), after negotiation, the two parties decided to cooperatively build a “drug raw material research and development group”. The concrete agreements are as follows:

The “drug raw material research and development group” is consist of members of both parties, including one group leader, two assistant group leaders and five science and technology workers. The group leader is assigned by University, while the two assistant leaders are assigned by the two parties, one for each party. The remaining five workers are decided by negotiation according to the demands of project research.

2.	The research and development projects are put forward by Yidu Benda, and are decided after the demonstration of the two parties.

The research funds are supported by Yidu Benda, and University shall supply all the experimental equipment and the related condition according to needs, in which including: University provide certain number of chemistry and chemical engineering apparatus and equipment for common usage and help Yidu Benda to build a basic laboratory and assist Yidu Benda to build a pilot laboratory.

4.	The expense of the research and development projects includes: drug reagent, low priced and easily worn detecting fees, the transportation fees between school and company and allowance of research workers.

5.	University can directly send relative researchers to Yidu Benda to organize and guide project task research according to needs.

6.	The property rights and interests of the project achievements will be appointed by Project Contract.

COMPLIANCE WITH ENVIRONMENTAL LAW

We comply with the Environmental Protection Law of PRC as well as applicable local regulations. In addition to statutory and regulatory compliance, we actively ensure the environmental sustainability of our operations. Penalties would be levied upon us if we fail to adhere to and maintain certain standards. Such failure has not occurred in the past, and we generally do not anticipate that it will occur in the future, but no assurance can be given in this regard.

Our Yidu Benda facility produces bulk chemical intermediates for raw material medicine and does not require GMP certification. Yidu Benda was temporarily closed since mid January to upgrade its waste water treatment system to comply with new environmental standards enforced by PRC local government.

Due to an government order issued by the local government on January 10, 2007, our Yidu Benda plant has been shut down since the mid of January 2007 for improvement of our waste water treatment systems. The order requires us to finish the improvement and be compliant by June 30, 2007. Up to date, the company had spent approximately $0.2 MM to re-design and improve the existing system. Nowadays, Yidu Benda has completed its upgrading of the waste water system and passed the government’s verification and testing of equipments in October 2007. It is now permitted for the testing on actual production process. Once the actual products are produced, then the environmental government bodies will re-test the production results. The management could not estimate the exact timing for obtaining the final approval on the actual production process. Furthermore, the management is searching for new products to be produced in Yidu Benda which with higher profit margin.

SHENZHEN SIBIONO GENE TECHNOLOGY CO., LTD.

On April 5, 2007, Hubei Tongji Benda Ebei Pharmaceutical Co., Ltd., a Sino-Foreign Equity Joint Venture company incorporated under the laws of the PRC (“Benda Ebei”), of which Ever Leader Holdings Limited, a company incorporated under the laws of Hong Kong SAR ("Ever Leader") and a wholly owned subsidiary of Benda Pharmaceutical, Inc. (the “Company”), owns 95% of the outstanding common stock, has entered into Equity Transfer Agreements with certain shareholders of Shenzhen SiBiono Gene Technology Co., Ltd. (“SiBiono”), a corporation established and validly existing under the law of the PRC, to purchase a total of approximately 57.57% of the shares of SiBiono’s common stock for total consideration of RMB60,000,000 due and payable on or before April 30, 2007.

In connection with the Equity Transfer Agreements, we entered into a Financial Consultancy Agreement with Super Pioneer International Limited (“Super Pioneer”) for financial consultancy services rendered by Super Pioneer. Pursuant to the Financial Consultancy Agreement, we agreed to issue 2,100,000 shares of our common stock to Super Pioneer within three months from the date of the agreement. Super Pioneer agreed to lock up the shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.6 per share and we are not listed in the capital market of NASDAQ or AMEX, Super Pioneer shall have the option to require us to redeem 1,960,000 shares of the stock owned by Super Pioneer at a price of $3.6 per share. Such option ~~shall~~expired ~~expire~~ within one month from the last ~~date~~ date of the three month period. The redemption requests were made to the Company in January 2008 and the company has already obtained oral consent from Super Pioneer that the payment would be deferred to the year of 2010.

On June 11, 2007, Benda Ebei entered into Equity Transfer Agreements with Yaojin Wang and Huimin Zhang, shareholders of SiBiono, for the purchase of an additional 2.56% of the shares of SiBiono’s common stock for total consideration of RMB2,560,000 due and payable on or before June 30, 2007. Accordingly, Benda Ebei holds a total of 60.13% of the shares of SiBiono’s common stock.

In connection with the Equity Transfer Agreements, we entered into Technical Consultancy Agreements with Yaojin Wang and Huimin Zhang for technical consultancy services rendered by Yaojin Wang and Huimin Zhang. Pursuant to the Technical Consultancy Agreements, we agreed to issue 33,585 shares of our common stock to Yaojin Wang and 55,975 shares of our common stock to Huimin Zhang within three months from the date of the agreement. Yaojin Wang and Huimin Zhang agreed to lock up their shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.6 per share and we are not listed in the capital market of NASDAQ or AMEX, Yaojin Wang and Huimin Zhang shall have the option to require us to redeem the shares of the stock owned by Yaojin Wang and Huimin Zhang at a price of $3.6 per share. Such option ~~shall~~expired ~~expire~~ within one month from the last date of the three month period. The redemption requests were made to the Company in January 2008 and the company has already obtained oral consent from Wang and Zhang that the payment would be deferred to the year of 2010.

Business of SiBiono

Shenzhen SiBiono GeneTech Co., Ltd. (hereinafter referred to as SiBiono) is a gene therapy company dedicated to the development, manufacturing and commercialization of gene therapy products. The Company was founded in early 1998 and is located in Shenzhen Hi-Tech Industrial Park, Shenzhen, China. As a pioneer in gene therapy in China, SiBiono’s mission is to develop innovative gene therapy products for the improvement of human health and life quality. The Company has developed two core technology platforms: Viral Vector Gene Delivery System and Non-Viral Vector Gene Delivery System focusing on development of gene therapy product for cancer and cardiovascular diseases.

On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in China. Gendicine ® is the first ever commercialized gene therapy product approved in the world by a government agency. It is only approved and commercialized in PRC alone; however there is no other gene therapy product like Gendicine has been approved and commercialized in other countries. One of the factor causing this situation may be due to the fact that China’s lack of regulatory obstacles in conducting gene therapy trails.

SiBiono has established the validated GMP manufacturing plant for the production of gene therapy drugs. A complete set of quality-control assays and large-scale production processes were implemented in SiBiono in accordance with international regulations and standards for consistent manufacture of high quality gene therapy products. Based on SiBiono’s QC procedures and standards, the SFDA constituted and issued the national technological guideline - “Points to Consider for Human Gene Therapy and Product Quality Control” in May 2004. This document was also published in the magazine of Biopharm International for reference and peer review.

SiBiono has undertaken a number of national and provincial research and development projects, including biotechnology projects of “National 863 Plan”, projects of “National 973 Plan”, key research project of “National Tenth Five-Year-Plan”, projects funded by “National Innovation Fund”, projects of “National Key Scientific Development Plan”, National Hi-tech Industrialization Projects, Key Platform Technology Development Projects in Guangdong Province, as well as Hi-Tech Industrialization Projects of Shenzhen Municipality. By participating in those national projects, the reputation of SiBiono could be raised in China and also it allows us to apply for the funding from the local government agencies to support our gene therapy research activities.

The Company has 60.19 million RMB as its registered capital and currently has about 80 full-time employees.

Milestones of SiBiono

Since its establishment in March of 1998, SiBiono has evolved from a small start-up company to an internationally recognized gene therapy company with its successful launch of the world’s first approved gene therapy product “Gendicine”. The Company has achieved the following major milestones in the past (Table 1):

Table 1. Milestones of SiBiono’s Development

Time		Events
October 2006		SiBiono was awarded with “Global Entrepolis @ Singapore” Innovation Award. The GES Award, honoring the “Technopreneur of the Year” in the Asia-Pacific region, was presented by the President of Singapore, SR Nathan at the Opening Ceremony of Global Entrepolis@Singapore 2006. A record-breaking 224 entries from applicants in 14 countries and territories in the Asia-Pacific region submitted the application for competition.

		Wall Street Journal Asia presented the story of SiBiono in 2 separate issues.

December 2005		Dr. Zhaohui Peng was awarded a Special Recognition Award by ISCGT (International Society for Cell and Gene Therapy of Cancer) in recognition for SiBiono GeneTech, Co., Ltd.'s great contribution to the gene therapy field.

June 2005		Recombinant Human Ad-p53 Injection (Gendicine) was granted the “State Key-New product Certificate” issued jointly by the Ministry of Science and Technology, the Ministry of Commerce, the General Administration of Quality Supervision, Inspection and Quarantine and the State Environmental Protection Administration of the People’s Republic of China.

April 2004		Gendicine was launched into market

March 2004		SiBiono’s Gendicine manufacturing facility is granted with “Certificate of GMP for Pharmaceutical Product” by SFDA.

January 20, 2004		SiBiono was granted “Manufacture Certificate” for Gendicine by the SFDA

October 16, 2003		Gendicine was granted “New Drug License” by the SFDA, and became the first gene therapy product ever approved by a government agency in the world.

September 2003		Mr. Zeng Qinghong, Vice President of P.R.China, visited SiBiono GeneTech and gave the Chinese Brand name (今又生) for Gendicine.

September 2003		Completion of the clinical trials, defense and assessment of “recombinant human p53 adenoviral injection” product

July 2003		Corporate restructuring was finished, the registration capital increased to be 48.19 million RMB

November 2002		SiBiono was granted the Pharmaceutical Manufacture Permission by the Guangdong Drug Administration.

September 1998		SiBiono obtained SFDA’s permission to initiate Gendicine clinical trials.

March 1998		Shenzhen SiBiono GeneTech Co., Ltd. was established.

Dr. Zhaohui Peng is the founder and Chairman of SiBiono. He graduated from a medical university in China, served as director of a research institute at the South Medical University in Guangzhou and as a visiting professor at both the University of Chiba in Japan and the University of California. He also conducted research at two US biotech companies. Dr. Peng has devoted more than fifteen years to gene therapy research, development and commercialization. He led the research, development, industrialization and commercialization of Gendicine. He is also the main inventor of all patents in SiBiono.

Attribute to his great contribution to the gene therapy field by developing and launching the world's first gene medicine product - Gendicine®, Dr. Peng was honored with the “Gene Therapy Achievement Award” at the 2005 ISCGT Annual Conference in December 2005, the person of cover story on Forbes (Chinese Edition) entitled with the “Technology Pioneer in China” in October 2006, the “Certificate of Recognition” for outstanding achievement and innovative contribution to bioscience research and development by California State Assembly in November 2006, and the nominee of “CCTV 2006 People of the Year in China’s Economy” in November 2006.

On September 9, 2007, Benda achieved a great success in the national forum on "Gene Therapy for Tumors" sponsored by the Chinese Academy of Medical Sciences and the China Pharmaceutical Biotechnology Association. The forum is China’s large annual medical biotechnology conference run from September 7 - 10 in Qing Dao, Shandong Province. In conjunction with the national conference, SiBiono held a national forum discussing “Gene Therapy for Tumors”. Approximately 600 leading Chinese doctors attended SiBiono’s forum, representing 26 different provinces and over 200 Tier I Chinese hospitals (Tier I hospitals offer the best medical services in China; there are currently 775 Tier I hospitals in China).

The main purpose of the forum was to allow 15 national renowned medical experts to share their experiences in the effective application of Gendicine ® to maximize its treatment efficacy.

As of December 31, 2007, SiBiono shipped 10,652 of the 16,000 vials ordered. From January 1 to February 25, 2008, another 733 vials out of the 16,000 vials order had shipped. From February 26 to July 10, 2008, an additional 2,412 vials shipped. Accordingly, we have shipped and received payment for a total of 13,797 vials of the 16,000 vial order. The 16,000 vial order for Gendicine was ordered by various selling agents with average selling price RMB2,500 per vial.

In January 2008, our quality control department recognized that during the process of purification, one of the components of Gendicine did not fulfill the requirements of the internal quality control; therefore further purification was necessary. Gendicine is a gene therapy product which needs to undergo a series of internal quality control processes. Once the problem was located, our quality control and production department solved the issue immediately.

On May 19, 2008, SiBiono received an official notice from the PRC State of SFDA in which it mentioned that during the random inspection performed by the PRC State of SFDA on April 8 to April 10, 2008, the PRC State of SFDA discovered there were several production procedures that did not meet the requirement stated in GMP, thus it required SiBiono to perform necessary improvements in order to fulfill the GMP requirements and the PRC State of SFDA collected back the distributed GMP certificate until the necessary improvements being carried out and passed the examination that conducted by SFDA. On June 10, 2008, SiBiono received another official notice from Guangdong Province SFDA and they demanded the same requirements as stated in the official notice which issued by the PRC State of SFDA dated on May 19, 2008. On November 24, 2008, SiBiono received another official notice from Guangdong Province SFDA which mentioned that after the examination conducted by Shenzhen City SFDA, the Guangdong Province SFDA consent SiBiono to carry out production on a trial basis. It further required SiBiono to strictly follow the requirements of GMP to organize trail production and follow the procedures to apply for GMP Certificate verification. The management could not estimate the exact timing for obtaining the final approval on the GMP Certificate.

On May 19, 2008, SiBiono received an official notice from the PRC State of SFDA in which it mentioned that during the random inspection performed by the PRC State of SFDA on April 8 to April 10, 2008, the PRC State of SFDA discovered there were several production procedures that did not meet the requirement stated in GMP, thus it required SiBiono to perform necessary improvements in order to fulfill the GMP requirements and the PRC State of SFDA collected back the distributed GMP certificate until the necessary improvements being carried out and passed the examination that conducted by SFDA. On June 10, 2008, SiBiono received another official notice from Guangdong Province SFDA and they demanded the same requirements as stated in the official notice which issued by the PRC State of SFDA dated on May 19, 2008. On November 24, 2008, SiBiono received another official notice from Guangdong Province SFDA which mentioned that after the examination conducted by Shenzhen City SFDA, the Guangdong Province SFDA consent SiBiono to carry out production on a trial basis. It further required SiBiono to strictly follow the requirements of GMP to organize trial production and follow the procedures to apply for GMP Certificate verification. On July 14, 2009, SiBiono obtained the final approved GMP Certificate, in order words, the SFDA allows SiBiono to resume its production and sales.

Commercial Bank Note

On August 14, 2007, Benda Ebei entered into a three year non-interest bearing commercial bank note issuable agreement with Shanghai Pudong Development Bank. The total commercial note issuable limit is Rmb 60 million; however 50% of the deposit has to be made to the bank in order to secure the issuance of the commercial bank note, thus the net available amount is Rmb 30 million. The repayment period of each commercial note payable is six months. If the net amount of each commercial bank note payable is not settled on the due date, the penalty will be the penalty rate of the PRC bank loan on a daily and compound basis.

The credit facility was originally guaranteed by SiBiono and secured by the buildings, machinery and equipment of Benda Ebei. The Sibiono guarantee may have been a violation of the terms of the convertible promissory notes entered into with certain accredited and institutional investors on April 5, 2007. However, on December 15, 2007, Benda Ebei received a consent letter from Pudong Bank that Pudong Bank agreed to cancel SiBiono’s guarantee toward this credit facility.

As of December 31, ~~2008~~2009, Benda Ebei and Jiangling Benda deposited an amount of $4,~~859~~409,~~346~~334 in Shanghai Pudong Development Bank as deposit for the issuance of commercial bank notes. Such deposits will be released when the commercial bank notes are cleared. As of December 31, ~~2008~~2009, the balance of the commercial bank notes payable was $98,~~297~~160,~~169~~503. Thus the net commercial bank notes payable was $43,~~437~~751,~~823~~169 as of December 31, ~~2008~~2009.

On January 21, 2008, Benda Ebei entered into a supplementary agreement with Shanghai Pudong Development Bank, to supplement the commercial bank note issuance agreement dated on August 14, 2007. According to this supplementary agreement, the credit facility is further secured by the buildings, machinery and equipment of Jiangling Benda. As of December 31, ~~2008~~2009, the net book value of secured property and equipment was approximately ~~Rmb132.19~~Rmb121 million (or $1917.397 million) in total.

EMPLOYEES

As of December 31, ~~2008~~2009, we had approximately 400 full-time employees, including 48 sales people, 19 technology and R&D staff, and 333 production staff and no part-time employees. Among our current employees are two Ph.D.s and 17 holders of master’s degrees. All executives have received master-degree level executive training and all members of our staff have undertaken GMP training.

We have a sales office in each of three cities that promote our branded medicines. As of December 31, ~~2008~~2009, approximately 18 people in our Central China Sales Office were located in Wuhan, and 16 people were in our Southern China Sales Office located in Shenzhen.

RISK FACTORS

An investment in our common stock involves investment risks and the possibility of the loss of an investor’s entire investment. A prospective investor should evaluate all information about us and the risk factors discussed below in relation to his financial circumstances before investing in us.

Risks Relating to Our Business

WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE.

In order to maximize potential growth in our current and potential markets, we believe that we must expand our manufacturing and marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

In order to achieve the above mentioned targets, the general strategies of our company are to maintain and search for hard-working employees who have innovative initiatives; on the other hands, our company will also keep a close eye on expanding opportunities, for example, acquisition of state-owned enterprises.

WE CANNOT ASSURE YOU THAT OUR ORGANIC GROWTH STRATEGY WILL BE SUCCESSFUL WHICH MAY RESULT IN A NEGATIVE IMPACT ON OUR GROWTH, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOW.

One of our strategies is to grow organically through increasing the distribution and sales of our products by penetrating existing markets in PRC and entering new geographic markets in PRC as well as other parts of Asia and the United States. However, many obstacles to entering such new markets exist, including, but not limited to, international trade and tariff barriers, shipping and delivery costs, costs associated with marketing efforts abroad and maintaining attractive foreign exchange ratios. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products in any additional markets. Our inability to implement this organic growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.

WE CANNOT ASSURE YOU THAT OUR ACQUISITION GROWTH STRATEGY WILL BE SUCCESSFUL RESULTING IN OUR FAILURE TO MEET GROWTH AND REVENUE EXPECTATIONS.

In addition to our organic growth strategy, we also expect to grow through strategic acquisitions. We intend to pursue opportunities to acquire businesses in PRC that are complementary or related in product lines and business structure to us. We may not be able to locate suitable acquisition candidates at prices that we consider appropriate or to finance acquisitions on terms that are satisfactory to us. If we do identify an appropriate acquisition candidate, we may not be able to negotiate successfully the terms of an acquisition, or, if the acquisition occurs, integrate the acquired business into our existing business. Acquisitions of businesses or other material operations may require debt financing or additional equity financing, resulting in leverage or dilution of ownership. Integration of acquired business operations could disrupt our business by diverting management away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. We also may not be able to maintain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits we anticipated when selecting our acquisition candidates. In addition, we may need to record write-downs from future impairments of intangible assets, which could reduce our future reported earnings. At times, acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition. In addition to the above, acquisitions in PRC, including of state owned businesses, will be required to comply with laws of the People's Republic of China ("PRC"), to the extent applicable. There can be no assurance that any given proposed acquisition will be able to comply with PRC requirements, rules and/or regulations, or that we will successfully obtain governmental approvals which are necessary to consummate such acquisitions, to the extent required. If our acquisition strategy is unsuccessful, we will not grow our operations and revenues at the rate that we anticipate. If our acquisition strategy is not successful, our revenues and profit will be solely dependent upon our organic growth.

WE HAVE PREVIOUSLY HAD AN EXPLOSION AT OUR YIDU PLANT THAT RESULTED IN TWO DEATHS AND ANY SUCH OCURRENCE IN THE FUTURE CAN EXPOSE US TO LIABILITY FOR SUCH AN EVENT

On November 10, 2005, there was a small explosion in the Yidu plant resulting in the deaths of two of our workers. This tragic accident resulted from the violation of our operating procedures by one of the workers killed in the explosion. We paid RMB 260,000 (or $32,500) to each of the victims’ families in settlement of any compensation issues. On November 11, 2005, there was another explosion in the same factory resulting from a chemical reaction triggered by the prior explosion. Fortunately management had anticipated this incident and the plant had already been temporarily sealed so that no further injury occurred.

Following the events of November 10 and 11, 2005, Yidu plant was temporarily closed for approximately one month; during the one month plant shut down, we put in place very strict work safety procedures and revised the design of the relevant production process in order to avoid similar incidents in the future. We believe Benda is not liable for any further material liabilities arising from these explosions. Notwithstanding this fact, there can be a future explosion that may result in death or serious injury. If this occurs and in light of the fact that it previously occurred, may result in exposure to extensive liability to us.

Currently, we do not have any insurance policy for Yidu Benda due to the fact that it has been closed since January 2007 for improvement of our waste water treatment systems. However, once Yidu Benda resumes to its production, we will deploy appropriate insurance policy for the workers.

IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.

If adequate additional financing is not available on reasonable terms, we may not be able to undertake plant expansion, purchase additional machinery and purchase equipment for our operations and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us.

In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If we need additional funding, the market fluctuations affect on our stock price could limit our ability to obtain equity financing.

If we cannot obtain additional funding, we may be required to: (i) limit our investments in research and development; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures.

Such reductions could materially adversely affect our business and our ability to compete.

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

WE MAY BE REQUIRED TO REPURCHASE SHARES OF OUR COMMON STOCK IN CONNECTION WITH THE FINANCIAL CONSULTANCY AGREEMENT AND TECHNICAL CONSULTANCY AGREEMENTS. THE REPURCHASE OF THESE SHARES MAY HAVE A NEGATIVE IMPACT ON OUR PROFITABILITY.

In connection with the Equity Transfer Agreements, we entered into a Financial Consultancy Agreement on April 5, 2007 with Super Pioneer for financial consultancy services rendered by Super Pioneer, and Technical Consultancy Agreements on June 11, 2007 with Yaojin Wang and Huimin Zhang for technical consultancy services rendered. Pursuant to these Agreements, we agreed to issue 2,100,000 shares of our common stock to Super Pioneer, 33,585 shares of our common stock to Yaojin Wang, and 55,975 shares of our common stock to Huimin Zhang within three months from the date of the agreements. The parties to the agreements agreed to lock up the shares for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from the Lock-up Period, in the event that the public trading price of our shares did not reach $3.60 per share and we are not listed in the capital market of NASDAQ or AMEX, Super Pioneer shall have the option to require us to redeem 1,960,000 shares of the stock owned by Super Pioneer and Yaojin Wang and Huimin Zhang shall have the option to require us to redeem the shares of the stock owned by Yaojin Wang and Huimin Zhang at a price of $3.60 per share. Such option shall expire within one month from the last date of the three month period. Therefore, as of July 5, 2008, we may be required to redeem 1,960,000 shares of common stock held by Super Pioneer at a price of $3.60 per share for a total of $7,560,000. As of September 11, 2008, we may be required to redeem the 33,585 shares of our common stock held by Yaojin Wang at $3.60 per share for a total of $120,906 and the 55,975 shares held by Huimin Zhang at $3.60 per share for a total of $201,510.. According to the signed agreements, the redemption would have been required to be performed in September 2008. ~~However,~~The weredemption ~~have~~requests were ~~obtained~~made anto ~~oral~~the ~~consent~~Company ~~from~~in ~~Super~~January ~~Pioneer,~~2008 ~~Wang~~ and ~~Zhang that~~ the ~~redemption shall~~company behas ~~deferred~~already toobtained ~~the~~oral consent ~~end~~from ofSuper ~~2009. As~~Pioneer, ofWang ~~April~~and ~~14,~~Zhang ~~2009,~~that the ~~last closing~~payment ~~bid price of our common stock was $.025. If we~~ would be ~~required~~ todeferred ~~redeem~~ to the ~~shares~~year of ~~our common stock a price of $3~~2010.~~60 per share, we will not have these funds to devote to our operations and could have a negative impact on our profitability.~~

As of May 17, 2010, the last closing bid price of our common stock was $.04. If we would be required to make payment for the shares of our common stock a price of $3.60 per share, we will not have these funds to devote to our operations and could have a negative impact on our profitability.

JIANGLING BENDA AND YIDU BENDA CURRENTLY ARE ENTITLED TO A BENEFICIAL TAX EXEMPTION FOR A FIVE YEAR PERIOD; HOWEVER, SUCH TAX EXEMPTION MAY BE INTERPRETED TO BE NOT IN COMPLIANCE WITH PRC TAX LAWS IN THE FUTURE CAUSING US TO SET ASIDE CERTAIN CONTINGENCY FUNDS FOR DEALING WITH POTENTIAL RETROSPECTIVE TAX LIABILITIES.

Jiangling Benda and Yidu Benda are entitled to enjoy the “Two exemption Three half” tax holiday based on the local government’s policy to encourage outside investment into the locality. However, the definition of the “Two exemption Three half” policy defined by Yidu City and Jiangling County’s governments is different from the usual understanding of the term. According to PRC tax laws, “Two exemption Three half” policy means foreign investment enterprises including Benda Ebei may enjoy an exemption from corporate income tax for 2 years starting from its first profitable year, followed by 3 years at a rate that is one half of the regular rate for corporate income tax. However, in the documents issued by Yidu City and Jiangling County’s governments, the term means that an outside enterprise can enjoy the “two exemption three half” privilege treatment only with respect to the part allotted to the local government . According to our Chinese legal counsel, under current PRC tax laws, most enterprises are required to pay corporate income tax at a rate of 33% of its income before tax, of which, about 90.91% (30% of the corporate income) is paid over to the Central government, only about 9.09% (3% of the corporate incomes) is reserved for the local government. Accordingly, there is a risk that the local government may only be able to dispose of the “9.09% (3%)” reserved for the local government and Jiangling Benda and Yidu Benda actually would receive much less preferential treatment than a foreign investment enterprise could enjoy.

The beneficial tax exemption of Jiangling Benda and Yidu Benda was started in the year of 2005, and they would subject to corporate income tax rate 18% starting from the year of 2007 and they would subject to corporate income tax at 25%, full income tax rate, according to the new PRC corporate income tax with the effective date January 1, 2008.

If Jiangling Benda and Yidu Benda could not have any beneficial tax exemption, the tax contingency, at full rate 25%, would be as follows:

a) For the year of ~~2008~~2009: Jiangling Benda: Nil; Yidu Benda: Nil;

b) For the year of ~~2007~~2008: Jiangling Benda: Nil; Yidu Benda: Nil.

As to the tax treatment promised by local governments to purely domestic enterprises, i.e., Jiangling Benda and Yidu Benda, invested by non-local (but not foreign) investors under the so called preferential policy announced by local governments, our consultation with PRC certified public accountants and lawyers, is that the above policy is not compliant with the PRC laws. Even though such practice exists in many areas across the country, the policy faces the risk of being ruled illegal at any time for non-compliance with relevant laws. In this event, there is a risk that we might be assessed retrospective tax liabilities.

WE MAY HAVE DIFFICULTY DEFENDING OUR INTELLECTUAL PROPERTY RIGHTS FROM INFRINGEMENT RESULTING IN LAWSUITS REQUIRING US TO DEVOTE FINANCIAL AND MANAGEMENT RESOURCES THAT WOULD HAVE A NEGATIVE IMPACT ON OUR OPERATING RESULTS.

We regard our service marks, trademarks, trade secrets, patents and similar intellectual property as critical to our success. We rely on trademark, patent and trade secret law, as well as confidentiality and license agreements with certain of our employees, customers and others to protect our proprietary rights. We have received trademark and patent protection for certain of our products in the People's Republic of China. No assurance can be given that our patents and licenses will not be challenged, invalidated, infringed or circumvented, or that our intellectual property rights will provide competitive advantages to us. There can be no assurance that we will be able to obtain a license from a third-party technology that we may need to conduct our business or that such technology can be licensed at a reasonable cost.

Presently, all of our products are sold to clients in PRC. To date, no trademark or patent filings have been made other than in PRC. To the extent that we market our products in other countries, we may have to take additional action to protect our intellectual property. The measures we take to protect our proprietary rights may be inadequate and we cannot give you any assurance that our competitors will not independently develop formulations and processes that are substantially equivalent or superior to our own or copy our products.

Currently, the State Food and Drug Administration (“SFDA”) does not automatically stay drug registration approval upon initiation of an infringement lawsuit by a third party. At present, we must wait until a copycat manufacturer has received marketing approval from SFDA before we can bring an infringement lawsuit. Furthermore, Chinese courts have been hesitant to issue preliminary injunctions to suspend sales until a final judgment is issued in the lawsuit. Our sales could be lowered were a competitor to infringe our intellectual property rights by marketing one or more versions of SFDA-approved drugs proprietary to us, such as the Qiweiben capsule, until we can curtail such infringement through legal action. Pursuing infringement lawsuits would require us to devote financial and management resources that could impact the results of our operations.

WE DEPEND ON THE SUPPLY OF RAW MATERIALS, AND ANY ADVERSE CHANGES IN SUCH INTENSE COMPETITION FROM EXISTING AND NEW ENTITIES MAY ADVERSELY AFFECT OUR REVENUES AND PROFITABILITY.

We compete with other companies, many of whom are developing or can be expected to develop products similar to ours. Our markets are large with many competitors. The market for pharmaceutical raw materials manufacturing is particularly competitive. In this market, our competitors include a number of contract manufacturers and, from time to time, demand for particular products may be greatly exceeded by production capacity. Many of our competitors are more established than we are, and have significantly greater financial, technical, marketing and other resources than us. Some of our competitors may have greater name recognition and a larger customer base. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. We intend to create greater brand awareness for our brand name so that we can successfully compete with our competitors. We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business.

Our company does not depend on any sole source suppliers, since the raw materials market is opened in the sense that we could have plenty of choices of the suppliers. We only choose those suppliers who could offer better terms to us and having a long term co-operation relationship.

OUR PRODUCTS AND THE PROCESSES COULD EXPOSE US TO SUBSTANTIAL PRODUCT LIABILITY CLAIMS WHICH WILL NEGATIVELY IMPACT OUR PROFITABILITY.

We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in adverse side effects. Side effects or marketing or manufacturing problems pertaining to any of our products could result in product liability claims or adverse publicity. These risks will exist for those products in clinical development and with respect to those products that have received regulatory approval for commercial sale. We do not have insurance to cover any potential product liability claims. To date, we have not experienced any product liability claims. However, that does not mean that we will not have any such claims with respect to our products in the future which will negatively impact our profitability.

WE DEPEND ON OUR KEY MANAGEMENT PERSONNEL AND THE LOSS OF THEIR SERVICES COULD ADVERSELY AFFECT OUR BUSINESS.

We place substantial reliance upon the efforts and abilities of our executive officers, Yiqing Wan, our Chairman and Chief Executive Officer, Wei Xu, our Vice President of Operations, Hui Long, our Vice President of Technology. We have entered into a five year employment contract with Mr. Wan and three year contracts with Ms. Xu. As per his contract, Mr. Wan is to receive salary of $160,000 per year, Ms. Xu is to receive $100,000, with the possibility of a discretionary bonus as determined by the Board of Directors. Each employment contract immediately terminates upon death or disability, and may be terminated by the Company either with or without cause after 30 days notice, or terminated by the officer for good reason with 60 days notice. We are not currently aware of the plans of any key employees to retire or leave the Company. However, the loss of the services of any of our executive officers could have a material adverse effect on our business, operations, revenues or prospects. We do not maintain key man life insurance on the lives of these individuals.

MR. YIQING WAN AND MS. WEI XU ARE HUSBAND AND WIFE. THE SEPARATION OR DIVORCE OF THE COUPLE IN THE FUTURE COULD ADVERSELY AFFECT OUR BUSINESS.

Mr. Yiqing Wan, our Chairman and Chief Executive Officer, and Ms. Wei Xu, Vice President of Operations, are married. They are two of our principal executives and are a vital part of our operations. If they were to become separated or divorced and could not amicably work with each other, one of them may decide to cease his or her employment with us. Alternatively, their work performance may not be satisfactory if they become preoccupied with such negative situation. In both cases, our operations could be negatively affected by our production resulting in a decrease in revenues.

MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER MATTERS REQUIRING SHAREHOLDER APPROVAL WHICH MAY RESULT IN THE DELAY OR PREVENTION OF A CHANGE IN OUR CONTROL.

Mr. Yiqing Wan, our Chairman and Chief Executive Officer, and Ms. Wei Xu, our Vice President of Operations, each have a 50% equity ownership in XIA Pharmaceutical Inc. Through their joint ownership in XIA Pharmaceutical, Inc., Mr. Wan and Ms. Xu currently share voting power equal to approximately 2742.9150% of our voting securities. When combined with the common stock ownership of our other officers and directors, management has combined voting power in our Company equal to approximately 2942.4550% of our voting securities. As a result, management through such stock ownership exercises significant control over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership in management may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by shareholders other than management.

INTERNATIONAL OPERATIONS REQUIRE US TO COMPLY WITH A NUMBER OF UNITED STATES AND INTERNATIONAL REGULATIONS WHICH MAY HAVE A NEGATIVE IMPACT ON OUR GROWTH.

We are required to comply with a number of international regulations in countries outside of the United States. In addition, we must comply with the Foreign Corrupt Practices Act, or FCPA, which prohibits U.S. companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. Any failure by us to adopt appropriate compliance procedures and ensure that our employees and agents comply with the FCPA and applicable laws and regulations in foreign jurisdictions could result in substantial penalties and/or restrictions in our ability to conduct business in certain foreign jurisdictions. We believe we are currently in compliance with such regulations. The U.S. Department of The Treasury's Office of Foreign Asset Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries, entities and individuals based on U.S. foreign policy and national security goals. As a result, we are restricted from entering into transactions with certain targeted foreign countries, entities and individuals except as permitted by OFAC which may reduce our future growth.

WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

WE MAY NOT BE ABLE TO MEET THE ACCELERATED FILING AND INTERNAL CONTROL REPORTING REQUIREMENTS IMPOSED BY THE SECURITIES AND EXCHANGE COMMISSION RESULTING IN A POSSIBLE DECLINE IN THE PRICE OF OUR COMMON STOCK AND OUR INABILITY TO OBTAIN FUTURE FINANCING.

As directed by Section 404 of the Sarbanes-Oxley Act, the Securities and Exchange Commission adopted rules requiring each public company to include a report of management on the company's internal controls over financial reporting in its annual reports. In addition, the independent registered public accounting firm auditing a company's financial statements must also attest to and report on management's assessment of the effectiveness of the company's internal controls over financial reporting as well as the operating effectiveness of the company's internal controls. We will not be subject to these requirements for the fiscal year ended December 31, ~~2007~~2009.

While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. In the event that we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.

In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the Securities and Exchange Commission, which could also adversely affect the market price of our common stock and our ability to secure additional financing as needed.

Risks Relating to the People's Republic of China

THE SALES PRICES OF SOME MEDICINES ARE CURRENTLY CONTROLLED BY THE CHINESE GOVERNMENT AND THAT MAY ADVERSELY AFFECT OUR BUSINESS.

Prices paid by end consumers for many of our medicines are regulated by PRC's State Development and Reform Commission. PRC justifies its need to control the drug prices on the basis that, at present, only workers at state or private companies have health insurance. About 900 million rural Chinese people and 35 million urban unemployed Chinese people lack insurance coverage and cannot afford expensive drugs. Our future profitability might suffer if a significant portion of our revenues were to be derived from products whose final selling prices were state-controlled and if those prices were held at levels close to or below our cost of sales.

SALES OF OUR PRODUCTS COULD BE HARMED BY THE WIDESPREAD PRESENCE OF COUNTERFEIT MEDICATION IN PRC NEGATIVELY IMPACTING OUR PROFITABILITY.

Chinese counterfeiting of pharmaceuticals and other products affecting public health has grown in tandem with counterfeiting and piracy of goods such as brand-name clothing, compact discs and computer software. Exact data are impossible to collect, but the FBI believes that more than half of the pharmaceuticals sold in PRC are counterfeit. Examples of the seriousness of the problem include: six months after Viagra was introduced in 2002, state media reported that some 90 percent of little blue pills sold in Shanghai were counterfeit; and 192,000 Chinese patients were reported to have died in 2001 from fake drugs. Counterfeit products shrink markets for legitimate goods. This situation affects Benda and other major domestic and foreign drug manufacturers in PRC, especially for products marketed through the OTC rather than hospital channel. However, we believe the Chinese authorities are becoming increasingly vigilant against counterfeiting because in 2001 the authorities closed 1,300 factories while investigating 480,000 cases of counterfeit drugs. Currently, active pharmaceutical ingredients are governed only by chemical regulations. We believe that a major step towards controlling the problem would be taken should the SFDA be given oversight over PRC’s bulk chemicals producers. However, our ability to increase sales as rapidly as we would like, and our profitability, could be affected if this problem persists or worsens.

THERE COULD BE CHANGES IN GOVERNMENT REGULATIONS TOWARDS THE PHARMACEUTICAL AND HEALTH SUPPLEMENT INDUSTRIES THAT MAY ADVERSELY AFFECT OUR GROWTH AND PROFITABILITY.

The manufacture and sale of APIs in the PRC is heavily regulated by many state, provincial and local authorities. These regulations have significantly increased the difficulty and costs involved in obtaining and maintaining regulatory approvals for marketing new and existing products. Our future growth and profitability depend to a large extent on our ability to obtain regulatory approvals.

The SFDA of PRC recently implemented new guidelines for licensing of APIs. All existing manufacturers with licenses were required to apply for GMP certifications by June 30, 2004, and to receive approvals by December 31, 2004. We have received certification for our Benda Ebei injection vial production facilities and expect to receive certifications for the remaining plant that require such certification in 2008. However, should we fail to receive or maintain the GMP certifications under the new guidelines in the future; our businesses would be materially and adversely affected.

Moreover, the laws and regulations regarding acquisitions of the pharmaceutical industry in the PRC may also change and may significantly impact our ability to grow through acquisitions.

CERTAIN POLITICAL AND ECONOMIC CONSIDERATIONS RELATING TO THE PRC COULD ADVERSELY AFFECT OUR COMPANY.

The PRC is transitioning from a planned economy to a market economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms carried out by the PRC government are unprecedented or experimental, and are expected to be refined and improved. Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC's economic and social conditions as well as by changes in the policies of the PRC government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the interest rate or method of taxation, and the imposition of additional restrictions on currency conversion.

THE RECENT NATURE AND UNCERTAIN APPLICATION OF MANY PRC LAWS APPLICABLE TO US CREATE AN UNCERTAIN ENVIRONMENT FOR BUSINESS OPERATIONS AND THEY COULD HAVE A NEGATIVE EFFECT ON US.

The PRC legal system is a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects.

Since all the Company’s operation plants are all located in China, therefore we have to comply with those relevant PRC laws and regulations. The changes of those relevant PRC laws and regulations do affect our operation, for example, due to the changes of the relevant regulations of SFDA in PRC, it may take more time to approve the application of new drug certificate so that the forecasted operation plan for such particular drug product would be delayed and thus the potential earning of revenue and net profit would be affectee. In this aspect, the new drug certificate application progresses of Qiweiben Capsule and Yan Long Anti-cancer Oral Liquid are delayed. Furthermore, due to the changes of the requirements of the Environmental PRC agencies, Yidu Benda’s operation was ceased since January 2007, therefore the company needs to re-design the production facilities so the process of re-opening is also delayed. As these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty.

THE APPROVAL OF THE CHINESE SECURITIES REGULATORY COMMISSION (“CRSC”) MAY BE REQUIRED IN CONNECTION WITH THIS OFFERING UNDER A RECENTLY ADOPTED PRC REGULATION; SINCE THIS OFFERING DID NOT COMMENCE PRIOR TO THE EFFECTIVE DATE OF THE REGULATION, WE MAY BE REQUIRED TO OBTAIN CRSC APPROVAL FOR THIS OFFERING AND WE CAN NOT CURRENTLY PREDICT THE CONSEQUENCES OF ANY FAILURE TO OBTAIN SUCH APPROVAL.

On August 8, 2006, six PRC regulatory agencies, including the Chinese Securities Regulatory Commission, or CSRC, promulgated a regulation that became effective on September 8, 2006. This regulation, among other things, purports to require offshore special purpose vehicles, or SPVs, formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC individuals, such as our company, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. While the application of this new regulation is not yet clear, we believe, based on the advice of our PRC counsel, that CSRC approval is not required if trading of our shares of common stock commenced prior to the effective date of the regulation. Although the CSRC is expected to promulgate formal implementing rules and/or regulations and possibly other clarifications, the procedures, criteria and timing for obtaining any required CSRC approval have not been established and it is unclear when these will be established. Therefore, since this offering did not commence prior to the effective date of the regulation and our shares of common stock did not commence trading prior to the effective date of the regulation, we may be required to obtain CSRC approval for this offering and we cannot currently predict the criteria, timing or procedures for obtaining the CSRC approval or the consequences of any failure to obtain such approval.

RECENT PRC REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT SHAREHOLDERS TO PERSONAL LIABILITY AND LIMIT OUR ABILITY TO INJECT CAPITAL INTO OUR PRC SUBSIDIARIES, LIMIT OUR PRC SUBSIDIARIES’ ABILITY TO DISTRIBUTE PROFITS TO US, OR OTHERWISE ADVERSELY AFFECT US.

The State Administration of Foreign Exchange (“SAFE”) was one of six PRC regulatory agencies promulgating a regulation that became effective on September 8, 2006 requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as an “offshore special purpose company.” PRC residents that are shareholders of offshore special purpose companies established before November 1, 2005 were required to register with the local SAFE branch before March 31, 2006. Our current beneficial owners who are PRC residents have registered with the local SAFE branch as required under the SAFE notice. The failure of these beneficial owners to timely amend their SAFE registrations pursuant to the SAFE notice or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to our company or otherwise adversely affect our business.

Other Risks

CURRENCY CONVERSION AND EXCHANGE RATE VOLATILITY COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.

The PRC government imposes control over the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People's Bank of China publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the previous day's dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC exchange rate according to market conditions.

Pursuant to the Foreign Exchange Control Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs, for use on current account items, including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their after-tax dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in the PRC. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on recurring international payments and transfers under current account items.

Enterprises in the PRC (including FIEs) which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks by providing valid receipts and proofs.

Convertibility of foreign exchange in respect of capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior approval from the SAFE or its relevant branches must be sought.

Furthermore, the Renminbi is not freely convertible into foreign currencies nor can freely remitted abroad. Under the PRC’s Foreign Exchange Control Regulations and the Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, foreign invested enterprises are permitted either to repatriate or distribute its profits or dividends in foreign currencies out of its foreign exchange accounts, or exchange Renminbi for foreign currencies through banks authorized to conduct foreign exchange business. The conversion of Renminbi into foreign exchange by foreign invested enterprises for recurring items, including the distribution of dividends to foreign investors, is permissible. The conversion of Reminbi into foreign currencies for capital items, such as direct investment, loans and security investment, is subject, however, to more stringent controls.

Since 1994, the exchange rate for Renminbi against the United States dollar has remained relatively stable, most of the time in the region of approximately RMB8.28 to $1.00. However, in 2005, the Chinese government announced that it would begin pegging the exchange rate of the Chinese Renminbi against a number of currencies, rather than just the U.S. dollar and, the exchange rate for the Renminbi against the U.S. dollar became RMB8.02 to $1.00. As our operations are primarily in PRC, any significant revaluation or devaluation of the Chinese Renminbi may materially and adversely affect our cash flows, revenues and financial condition. We may not be able to hedge effectively against in any such case. For example, to the extent that we need to convert United States dollars into Chinese Renminbi for our operations, appreciation of this currency against the United States dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert Chinese Renminbi into United States dollars for other business purposes and the United States dollar appreciates against this currency, the United States dollar equivalent of the Chinese Renminbi we convert would be reduced. There can be no assurance that future movements in the exchange rate of Renminbi and other currencies will not have an adverse effect on our financial condition. Benda’s operating companies are FIEs to which the Foreign Exchange Control Regulations are applicable. There can be no assurance that we will be able to obtain sufficient foreign exchange to pay dividends or satisfy other foreign exchange requirements in the future.

IT MAY BE DIFFICULT TO AFFECT SERVICE OF PROCESS AND ENFORCEMENT OF LEGAL JUDGMENTS UPON OUR COMPANY AND OUR OFFICERS AND DIRECTORS BECAUSE THEY RESIDE OUTSIDE THE UNITED STATES.

As our operations are presently based in PRC and a majority of our directors and all of our officers reside in PRC, service of process on our company and such directors and officers may be difficult to effect within the United States. Also, our main assets are located in PRC and any judgment obtained in the United States against us may not be enforceable outside the United States.

ANY FUTURE OUTBREAK OF AVIAN INFLUENZA, OR THE ASIAN BIRD FLU, OR ANY OTHER EPIDEMIC IN PRC COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS OPERATIONS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Since mid-December 2003, a number of Asian countries have reported outbreaks of highly pathogenic avian influenza in chickens and ducks. Since all of our operations are in PRC, an outbreak of the Asian Bird Flu in PRC in the future may disrupt our business operations and have a material adverse effect on our financial condition and results of operations. For example, a new outbreak of Asian Bird Flu, or any other epidemic, may reduce the level of economic activity in affected areas, which may lead to a reduction in our revenue if our clients cancel existing contracts or defer future expenditures. In addition, health or other government regulations may require temporary closure of our offices, or the offices of our customers or partners, which will severely disrupt our business operations and have a material adverse effect on our financial condition and results of operations.

OUR BUSINESS MAY BE AFFECTED BY UNEXPECTED CHANGES IN REGULATORY REQUIREMENTS IN THE JURISDICTIONS IN WHICH WE OPERATE.

We are subject to many general regulations governing business entities and their behavior in PRC and in other jurisdictions in which we have, or plan to have, operations and market our products. In particular, we are subject to laws and regulations covering food, dietary supplements and APIs. Such regulations typically deal with licensing, approvals and permits. Any change in product licensing may make our products more or less available on the market. Such changes may have a positive or negative impact on the sale of our products and may directly impact the associated costs in compliance and our operational and financial viability. Such regulatory environment also covers any existing or potential trade barriers in the form of import tariff and taxes that may make it difficult for us to import our products to certain countries and regions, such as Hong Kong, which would limit our international expansion.

WE MAY EXPERIENCE CURRENCY FLUCTUATION AND LONGER EXCHANGE RATE PAYMENT CYCLES WHICH WILL NEGATIVELY AFFECT THE COSTS OF OUR PRODUCTS SOLD AND THE VALUE OF OUR LOCAL CURRENCY PROFITS.

The local currencies in the countries in which we sell our products may fluctuate in value in relation to other currencies. Such fluctuations may affect the costs of our products sold and the value of our local currency profits. While we are not conducting any meaningful operations in countries other than PRC at the present time, we may expand to other countries and may then have an increased risk of exposure of our business to currency fluctuation.

SINCE MOST OF OUR ASSETS ARE LOCATED IN PRC, ANY DIVIDENDS OF PROCEEDS FROM LIQUIDATION IS SUBJECT TO THE APPROVAL OF THE RELEVANT CHINESE GOVERNMENT AGENCIES.

Our assets are predominantly located inside PRC. Under the laws governing foreign invested enterprises in PRC, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to the relevant government agency's approval and supervision as well as the foreign exchange control. This may generate additional risk for our investors in case of dividend payment and liquidation.

Risks Associated with Our Shares of Common Stock

OUR SHARES OF COMMON STOCK ARE VERY THINLY TRADED, AND THE PRICE MAY NOT REFLECT OUR VALUE AND THERE CAN BE NO ASSURANCE THAT THERE WILL BE AN ACTIVE MARKET FOR OUR SHARES OF COMMON STOCK EITHER NOW OR IN THE FUTURE.

Our shares of common stock are very thinly traded, and the price if traded may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for any loans.

Certain of our stockholders have been granted registration rights which entitle them to require us to register their shares of our common stock at the same time that the shares of our common stock are being registered. The inclusion of this additional stock in the registration may negatively affect the resale price that may be obtained for the shares of our common stock when they are registered.

WE ARE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE THE SHARES OF OUR COMMON STOCK MORE DIFFICULT TO SELL.

We are subject to the SEC’s “penny stock” rules as our shares of common stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer's confirmation.

In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our common stock. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their securities.

· SALES OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK MAY BECOME FREELY TRADABLE PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR YOUR SHARES AND HAVE A DEPRESSIVE EFFECT ON THE PRICE OF THE SHARES OF OUR COMMON STOCK.

A substantial majority of our outstanding shares of common stock are "restricted securities" within the meaning of Rule 144 under the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that a non-affiliate person who has held restricted securities for a period of at least six months may, under certain conditions, sell, in brokerage transactions, their shares of common stock. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.

THERE CAN BE NO ASSURANCE THAT THE PRICE OF OUR SHARES OF COMMON STOCK WILL MEET OR EXCEED THE EXERCISE PRICE OF THE WARRANTS DURING THE EXERCISE PERIOD OR AT ANY TIME THEREAFTER.

Unless the price of our shares of Common Stock equals or exceeds the exercise price of the Warrants at the time of such exercise, an Investor may not be able to exercise his Warrants profitably. There can be no assurance that the price of our shares of Common Stock will meet or exceed the exercise price of the Warrants during the exercise period or at any time thereafter. Accordingly, should an Investor choose to exercise the Warrants, the value of our shares of Common Stock purchased upon such exercise may be less than the Warrant exercise price the Investor pays. The Warrant may be worthless and expire unexercised if the price of our shares of Common Stock does not exceed the Warrant exercise price. Please see “Description of Securities - Warrants” for additional information as to the terms of the Warrants.

MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER MATTERS REQUIRING SHAREHOLDER APPROVAL AND INVESTORS WILL HAVE CONTROL OVER COMPANY ACTIONS.

As a practical matter, our officers and directors will have control of us and will be able to assert significant influence over the election of directors and other matters presented for a vote of stockholders. Even after the Offering is complete, a majority of our shares of Common Stock will be owned by Mr. Yiqing Wan and Ms. Wei Xu, husband and wife. Through their concentration of voting power, they could delay, deter or prevent a change in our control or other business combinations that might otherwise be beneficial to the other stockholders. In deciding how to vote on such matters, Mr. Yiqing Wan and Ms. Wei Xu may be influenced by interests that conflict with other stockholders’ interests. Investors will not have a voice in management decisions and will exercise very little control. In the event that the requisite approval of stockholders is obtained, dissenting or non-participating stockholders generally would be bound by such vote. Accordingly, Offerees should not subscribe for Units in this Offering unless they are willing to entrust all aspects of operational control to our current management team. Further, Investors in the Offering will rely on our management team to use the proceeds as they determine to be in our best interest. Although management has indicated its current intended uses, those may be changed upon their decision.

In addition, our existing officers, directors, affiliates and other insiders are permitted to purchase Units in the Offering. If they do so, their interest in us after the acquisition may be even greater.

INVESTORS MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE PER SHARE OF OUR COMMON STOCK IF THEY ELECT TO EXERCISE THE WARRANTS.

Investors may experience immediate and substantial dilution in net tangible book value per share of our common stock if they elect to exercise the Warrants. The exercise price of the Warrants may be substantially higher than the net tangible book value per share. Accordingly, if Investors exercise the Warrants, they will likely experience immediate and substantial dilution in the net tangible book value per share and further dilution if we issue shares of our common stock in the future. As a result of this dilution, in the event of our subsequent liquidation, Investors exercising their Warrants may receive significantly less than the full exercise price that they paid for the shares of our Common Stock.

INVESTORS MAY EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE PER SHARE OF OUR COMMON STOCK IN THE EVENT WE ISSUE SHARES OF OUR COMMON STOCK IN THE FUTURE.

There are additional authorized but unissued shares of our Common Stock that may be later issued by our management for any purpose without the consent or vote of the stockholders. Investors purchasing in this Offering may be further diluted in their percentage ownership on an as-converted basis in the event additional shares are issued by us in the future.

OUR ARTICLES OF INCORPORATION AUTHORIZE THE ISSUANCE OF SHARES OF PREFERRED STOCK WHICH, IF ISSUED, THE RIGHTS, PREFERENCES, DESIGNATIONS AND LIMITATIONS OF SUCH PREFERRED STOCK COULD OPERATE TO THE DISADVANTAGE OF THE SHARES OF OUR OUTSTANDING COMMON STOCK.

Our articles of incorporation authorize the issuance of shares of preferred stock, the rights, preferences, designations and limitations of which may be set by the board of directors. While no preferred stock is currently outstanding or subject to be issued, the articles of incorporation have authorized issuance of up to 5,000,000 shares of preferred stock (“Preferred Stock”) in the discretion of the board of directors. Such Preferred Stock may be issued upon filing of amended Articles of Incorporation and the payment of required fees; no further shareholder action is required. If issued, the rights, preferences, designations and limitations of such Preferred Stock would be set by our board of directors and could operate to the disadvantage of the shares of our outstanding Common Stock. Such terms could include, among others, preferences as to dividends and distributions on liquidation.

ITEM 2. DESCRIPTION OF PROPERTIES.

Production Facilities and Equipment

Locations

Our head office is located in Wuhan, the capital city of Hubei Province. Wuhan is ~~the~~ the biggest hub city in Central China. Divided by the Yangtze River, Wuhan has ~~come~~ come to be known as the Three Towns of Wuhan, with Hankou and Hanyang on the ~~west~~ west bank, and Wuchang on the east. Hubei borders with Henan to the north, Anhui to to the east, Jiangxi to the southeast, Hunan to the south, Chongqing to the west, and Shanxi to the northwest. The high-profile Three Gorges Dam is located in Yichang, in western Hubei. Hubei's economy ranks 10th in the country and its GDP in 2004, adjusted for purchasing power parity, was approximately 330 billion RMB ($4,600 per capita).

Addresses of Benda Offices and Plants

Address	Function	Size
Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd., Taibei Mingju, 4th Floor, 6 Taibei Road, Wuhan, Hubei Province, PRC	Headquarters/ administration office	800 sq feet (Leased)

Hubei Tongji Benda Ebei Pharmaceutical Co. Ltd. Shanlihe,Yingshan District, Guangshui City, Hubei Province, PRC	GMP certified injection vial production plant	121,110 sq feet

Jiangling Benda Pharmaceuticals Co., Ltd., 84 South Street, Tanqiao Town, Jiangling County, Hubei Province, PRC	API production plant under renovation/ awaiting GMP certification	182,750 sq feet

Yidu Chemical Industry Co., Ltd., Chayuansi Village, Yidu City, Hubei Province, PRC	Bulk chemicals production plant	172,000 sq feet

Shenzhen SiBiono Gene Technology Co., Ltd. No.19, Science & Technology Middle Road, Shenzhen Hi-Tech Industrial Park(Middle), Shenzhen, PRC	Gene therapy production plant	140,000 sq feet

Beijing Shusai Pharyngitis Research Co., Ltd., 6-3-601, Yangguang Xinganxian, Yiyuan, Anhuibeili, Chaoyang District, Beijing, PRC	Operating, promoting, and distributing Pharyngitis Killer	2,000 sq feet (leased) office space in Beijing

Finished Medicines - The Benda Ebei Plant

The Benda Ebei plant produces and packages Benda’s finished medicines. The plant employs about 200 personnel and has six world-class production lines and 11 stand-alone machinery for injection vials, with an annual aggregate production capacity of approximately 900 million units. In PRC, based on management estimate, there are about 197 factories with similar manufacturing facilities for injection vials. Benda Ebei’s capacity is sixth in PRC and first in Hubei province. In 2008 and 2007, Benda Ebei produced approximately 420 million and 418 million units of injection vials respectively, equivalent to 46% capacity. The production processes and equipment at Benda Ebei meets international quality and control standards and have been GMP certified by the SFDA since November 2003 and renew on December 3, 2008 for the production of injection vials; while on November 26, 2008, Benda Ebei received a GMP for the production of tables.

Benda Ebei’s plant will produce lozenges, capsules, granules, oral liquid and pills. Benda Ebei has invested approximately $5 million on its oral medicine production facilities. To date, we have already completed the equipment and facilities installation We expect the production of oral liquid medicines in second quarter of 2008. The Yanlong Anti-cancer Oral Liquid, Qiweiben Capsule will be produced in this section of the plant. (Please refer to the section of New Branded Medicines for the status of progress of these two new drugs.)

Active Pharmaceutical Ingredients - The Jiangling Benda Plant

We manufacture APIs at our Jiangling Benda plant. We closed the plant in July 2004 in order to renovate the buildings, equipment and processes and secure GMP certification by the SFDA. Upon completion, the new plant will be comprised of three large facilities on a total land area of 68 acres. The total expense of these renovations will be approximately $3 million. All the equipment has been ordered.

Bulk chemicals - The Yidu Benda Plant

Yidu Benda was temporarily closed since mid January 2007 to upgrade its waste water treatment system to comply with new environmental standards enforced by PRC local government.

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

Gene therapy – SiBiono Plant

On October 16, 2003, SiBiono successfully obtained a New Drug License from SFDA, and then, in April 4, 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in China. Gendicine ® is the commercialized gene therapy product approved in the PRC government agency. On May 19, 2008, SiBiono received an official notice from the PRC State of SFDA in which it mentioned that during the random inspection performed by the PRC State of SFDA on April 8 to April 10, 2008, the PRC State of SFDA discovered there were several production procedures that did not meet the requirement stated in GMP, thus it required SiBiono to perform necessary improvements in order to fulfill the GMP requirements and the PRC State of SFDA collected back the distributed GMP certificate until the necessary improvements being carried out and passed the examination that conducted by SFDA. On June 10, 2008, SiBiono received another official notice from Guangdong Province SFDA and they demanded the same requirements as stated in the official notice which issued by the PRC State of SFDA dated on May 19, 2008. On November 24, 2008, SiBiono received another official notice from Guangdong Province SFDA which mentioned that after the examination conducted by Shenzhen City SFDA, the Guangdong Province SFDA consent SiBiono to carry out production on a trial basis. It further required SiBiono strictly to follow the requirements of GMP to organize trail ~~production~~ production and follow the procedures to apply for GMP Certificate verification. ~~The~~ ~~management~~On ~~could~~July ~~not~~14, ~~estimate~~2009, SiBiono obtained the ~~exact~~final ~~timing~~approved ~~for~~GMP Certificate, ~~obtaining~~in order words, the ~~final~~SFDA ~~approval on~~allows ~~the~~SiBiono ~~GMP~~to ~~Certificate~~resume its production and sales.

ITEM 3. LEGAL PROCEEDINGS.

1. ~~The~~On ~~Company~~November ~~has~~23, ~~become~~2006, ~~aware~~Benda ~~that~~Ebei ~~Excalibur~~entered ~~Limited~~into ~~Partnership~~an ~~and~~Equity ~~Excalibur~~Transfer ~~Limited~~Agreement ~~Partnership II (the "Plaintiffs") filed a motion for summary judgment in lieu of a complaint pursuant to CPLR § 3213 (the "Motion")~~ with ~~the~~Xiaozhi ~~Supreme~~Zhang ~~Court of the State of New York~~ (~~the "Court"~~“Zhang”), ~~alleging~~to ~~that~~purchase ~~the~~approximately ~~Company~~6.24% ~~has been delinquent on the payment~~ of anSiBiono’s ~~aggregate~~common ~~sum~~stock offor ~~$600,000 and accrued interest and costs arising from the Convertible Promissory Notes that were issued to the Plaintiffs in April 2007 in connection with~~ a ~~$7,560,000~~total ~~private~~consideration ~~placement. Pursuant to the motion, the Plaintiffs requested that the Court (1) enter summary judgment in favor~~ of ~~Excalibur~~Rmb12.48 ~~Limited~~million ~~Partnership~~ (~~“Excalibur~~Rmb6.24 ~~Limited”)~~million in ~~the~~cash ~~amount of $390,000 plus all accrued interest~~ and ~~costs,~~shares ~~and, (2) enter summary judgment in favor~~ of ~~Excalibur~~our ~~Small~~common ~~Cap~~stock ~~Opportunities~~equal LPto ~~(“Excalibur~~Rmb6.24 ~~Small Cap”~~million) in(or ~~the amount of~~ $~~210,000 and accrued interest and costs~~1.71 Asmillion) ofwhich ~~the~~was ~~date~~due ~~hereof,~~and ~~the~~payable ~~Company~~on ~~has~~or ~~not~~before ~~received~~March ~~service of such notice~~31, ~~and therefore, the Company does not have details regarding the content of the complaint made by the Plaintiffs~~2007.

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

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

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

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

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

On2. ~~May 22, 2008,~~ Benda Ebei ~~applied~~should topay ~~Shenzhen~~for ~~People Court to terminate above mentioned arbitration. The termination is based on~~ the ~~ground~~penalty ~~that Xiaozhi Zhang does not own all 6.24%~~ of ~~SiBiono’s~~Rmb ~~common stock. In fact~~46, ~~he only owns 3.28% of SiBiono’s stock. The application has been accepted by Shenzhen People Court and is waiting for its further investigation..~~800;

3. ~~SiBiono~~Benda ~~patents~~Eebi -should onpay ~~January~~for ~~29, 2008, SiBiono entrusted Grandall Legal Group Shenzhen Law Firm to issue a~~ legal ~~letter to Zhaohui Peng, one of the shareholders of Sibiono~~ and ~~the~~arbitration ~~inventor~~expenses of ~~Gendicine,~~Rmb ~~demanding that he transfer all the title of patents to SiBiono~~268,971.

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

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

Item

Patent name

Countries / Date

Application Number (1)

Publication Number (2)

Approved Patent Number (3)

Name of Patent Inventor (6)

Name of Applicant (6)

Patent Assignees

Countries /

Application

Publication

Approved Patent

Name of Patent

Name of

Patent

A new method for manufacturing recombinant adenovirus

Item

Patent name

Date

Number (1)

Number (2)

Number (3)

Inventor (6)

Applicant (6)

Assignees

China

98123346.5

CN1228474A

ZL98123346.5

Peng

SiBiono

A new method for manufacturing recombinant adenovirus

Date

1998/12/14

1999/9/15

2002/7/3

China

98123346.5

CN1228474A

ZL98123346.5

Peng

SiBiono

A recombinant constructed by a virus vector and a human tumor suppressor gene and its use

Date

1998/12/14

1999/9/15

2002/7/3

China

02115228.4

CN1401778A

ZL02115228.4

Peng / Zhang

A recombinant constructed by a virus vector and a

Date

2002/5/8

2003/3/12

2004/11/24

human tumor suppressor gene and its use

PCT (4)

WO2004/078987A1

Not Approved

Peng / Zhang

N/A

China

02115228.4

CN1401778A

ZL02115228.4

Peng / Zhang

Date

~~2004~~2002/35/8

~~2004~~2003/93/1612

N2004/A11/24

Recombinant gene medicine of adenovirus vector and and gene p54 for treating proloferative diseases

PCT

(4)

WO2004/078987A1

Not Approved

Peng / Zhang

N/A

China

03125129.3

CN1471977A

ZL03125129.3

Peng / Zhang

Date

2004/3/8

2004/9/16

N/A

Date

2003/5/10

2004/2/4

2007/7/25

Recombinant gene medicine of adenovirus vector and

PCT (4)

WO2004/104204A1

Not Approved

Peng / Zhang

N/A

and gene p54 for treating proloferative diseases

Date

2004/5/9

2004/12/2

N/A

China

03125129.3

CN1471977A

ZL03125129.3

Peng / Zhang

The application of recombinant adenoviral p53 as cancer vaccine (tentative title)

Date

2003/5/10

2004/2/4

2007/7/25

China

200510002779.1

CN1679641A

ZL200510002779.1

Peng / Zhang

PCT

(4)

WO2004/104204A1

Not Approved

Peng / Zhang

N/A

Date

~~2005~~2004/15/269

~~2005~~2004/~~10/~~12/2

~~2007~~N/~~8/29~~A

PCT (4)

WO2006/079244A1

Not Approved

Peng / Zhang

N/A

The application of recombinant adenoviral p53

Date

2005/1/26

2006/8/3

N/A

as cancer vaccine (tentative title)

US (5)

11/075035

2005/0281785A1

Not Approved

Peng / Zhang

Unidentified Yet

N/A

China

200510002779.1

CN1679641A

ZL200510002779.1

Peng / Zhang

Date

2005/31/726

2005/1210/2212

N2007/A8/29

Human Embryonic Kidney (HEK) sub-clone cell line

PCT

(4)

WO2006/079244A1

Not Approved

Peng / Zhang

N/A

China

03126889.7

CN1513985A

Not Approved

Peng / Zhang

N/A

Date

2005/1/26

2006/8/3

N/A

Date

2003/6/13

2004/7/21

N/A

(5)

11/075035

2005/0281785A1

Not Approved

Peng / Zhang

Unidentified Yet

N/A

PCT (4)

WO2004/111239

Not Approved

Peng / Zhang

N/A

Date

2005/3/7

2005/12/22

N/A

Date

2004/5/9

2004/12/23

N/A

Human Embryonic Kidney (HEK) sub-clone cell line

The complex of polypeptide liposome and human VGEF gene, and its use and human VGEF gene, and its use

China

03126889.7

CN1513985A

Not Approved

Peng / Zhang

N/A

China

02134321.7

CN1389269A

Not Approved

Peng / Zhang / Zhu

N/A

Date

2003/6/13

2004/7/21

N/A

Date

2002/7/4

2003/1/8

N/A

PCT

(4)

WO2004/111239

Not Approved

Peng / Zhang

N/A

Date

2004/5/9

2004/12/23

N/A

The complex of polypeptide liposome and human VGEF

gene, and its use and human VGEF gene, and its use

China

02134321.7

CN1389269A

Not Approved

Peng / Zhang / Zhu

N/A

Date

2002/7/4

2003/1/8

N/A

Note:

(1)

Application number is obtained when application is submitted;

(2)

Publication number is obtained after the first phase examination;

(3)

Approved patent number is obtained after the final examination;

(4)

PCT is referred to an International Patent Organization in Paris;

(5)

US is referred to the application is made in United States of America alone;

(6)

Peng is referred to Zhaohui Peng; Zhang is referred to Xiaozhi Zhang; Zhu is referred to Jinya Zhu.

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

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

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

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

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

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

	A hearing on the application of Pope Investments, LLC ("Pope") seeking the appointment of a receiver was held on March 29, 2010. The parties filed post-trial briefs on April 7, 2010. As of this date (May 12, 2010), the Court has not yet ruled on Pope's application. Since the hearing, the remaining defendants, including the Benda directors and officers named as defendants, have filed a motion to dismiss Pope's complaint against them. No date has yet been set for Pope's response to the motion or the parties' arguments to the Court on the motion.

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

ITEM 4. ~~SUBMISSION~~(REMOVED ~~OF MATTERS TO A VOTE OF~~AND ~~SECURITY HOLDERS.~~RESERVED)

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock was traded on the national, over-the-counter market under the symbol ASTI after our initial public offering in January 1988. However, we were notified by NASD that, due to low trading volume, it would not report transactions in our common stock after October 13, 1989.

On September 16, 2005, our common stock commenced quotation on the Over-the-Counter Bulletin Board (“~~OTC BB~~OTCBB”) ~~maintained by the NASD~~. Our common stock, having $.001 par value per share ("Common Stock"), is traded on the ~~Over-The-Counter~~otcbb ~~Bulletin Board ("OTCBB")~~ under the symbol "BPMA". As of ~~April~~May 913, ~~2009~~ 2010, there were approximately ~~844~~807 holders of record of our common stock.

The following table sets forth, for the periods indicated, the reported high and low closing bid quotations for our common stock as reported on the OTCBB. The bid prices reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions.

Quarter Ended	High Bid		Low Bid
December 31, 2009	$	.09	$	.03
September 30, 2009	$	.04	$	.01
June 30, 2009	$	.05	$	.01
March 31, 2009	$	.09	$	.02
December 31, 2008	$	.19	$	.04
September 30, 2008	$	.26	$	.13
June 30, 2008	$	.34	$	.25
March 31, 2008	$	.77	$	.30
December 31, 2007	$	2.69	$	.65
September 30, 2007	$	2.60	$	1.90
June 30, 2007	$	3.00	$	1.15
March 31, 2007	$	1.65	$	.85
December 29, 2006	$	1.05	$	.76
September 30, 2006	$	.55	$	.40
June 30, 2006	$	.55	$	.40
March 31, 2006	$	.75	$	.40
December 31, 2005	$	.50	$	.15
September 30, 2005	$	.10	$	.05

Transfer Agent and Registrar

Computershare Trust Company, Inc. is currently the transfer agent and registrar for our Common Stock. Its address is 350 Indiana Street, Suite 800, Golden, Colorado 80401. Its phone number is (303) 262-0600.

Dividend Policy

Any future determination as to the declaration and payment of dividends on shares of our Common Stock will be made at the discretion of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions to declare or pay dividends on our shares of Common Stock. In addition, we currently have no plans to pay such dividends. However, even if we wish to pay dividends, because our cash flow is dependent on dividend distributions from our affiliated entities in PRC, we may be restricted from distributing dividends to our holders of shares of our common stock in the future if at the time we are unable to obtain sufficient dividend distributions from Ebei, Jiangling, Yudi or Shusai. Our board of directors currently intends to retain all earnings for use in the business for the foreseeable future. See “Risk Factors.”

Recent Sales of Unregistered Securities.

On August 25, 2008, 3,810,976 shares were issued to the April 2007 PIPE investors as make good shares pursuant to the Make Good and Escrow Agreement. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On July 10, 2008, 540,870 shares were issued to Jayhawk Private Equity Fund upon conversion of certain promissory notes. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On May 1, 2008, 523,438 shares were issued to PIPE investors as penalty for registration delay expenses. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On January 3, 2008, 110,000 shares were issued to the independent directors in lieu of their remuneration. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On October 12, 2007, we issued 166,898 shares of our common stock pro rata to the investors in our November 2006 offering as a penalty payment for failing to meet the filing date of the registration statement. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On October 4, 2007, we issued 236,813 shares of our common stock in connection with the exercise of warrants issued to our placement agent. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On August 16, 2007, we issued 65,200 shares of our common stock in connection with the exercise of warrants issued to our placement agent. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On July 31, 2007, we issued 546,994 shares of our common stock in connection with the exercise of warrants issued to our placement agent. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On June 11, 2007, we issued 33,585 shares of our common stock to Yaojin Wang and 55,975 shares of our common stock to Huimin Zhang in exchange for 2.56% of the outstanding shares of Shenzhen SiBiono Gene Technology Co., Ltd. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

On April 5, 2007, we issued 2,100,000 shares of our common stock to Super Pioneer International Limited in exchange for 57.57% of the outstanding shares of Shenzhen SiBiono Gene Technology Co., Ltd. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

Pursuant to the Investment Agreement, on April 5, 2007, we issued to the Investors a total of 252 Units for $7,560,000 with each Unit consisting of (1) a convertible promissory note (the “Note”) in the principal amount of Thirty Thousand Dollars ($30,000) which shall be convertible into 54,087 shares of the Company's common stock, par value $0.001 per share (the " Common Stock "), and (ii) a warrant (a “ Warrant ”) to acquire 54,087 shares of Common Stock at an exercise price of $0.555 per share. Such securities were not registered under the Securities Act of 1933. The issuance of these shares was exempt from registration, in part pursuant to Regulation S and Regulation D under the Securities Act of 1933 and in part pursuant to Section 4(2) of the Securities Act of 1933. We made this determination based on the representations of Benda which included, in pertinent part, that such shareholders were either (a) "accredited investors" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, or (b) not a "U.S. person" as that term is defined in Rule 902(k) of Regulation S under the Act, and that such shareholders were acquiring our common stock, for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that the Ever Leader Shareholders understood that the shares of our common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

In February 2007, we issued 706,195 shares of our common stock to the various consultants who rendered services related to the reverse merger. The above shares of common stock were issued under an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"). As such, the above shares of common stock will be restricted shares, and the holder thereof may not sell, transfer or otherwise dispose of such shares without registration under the Securities Act or an exemption therefrom.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable to a smaller reporting company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ~~ANALYSIS~~ ANALYSIS OR PLAN OF OPERATION.

Forward-Looking Statements

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

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

Critical Accounting Policies

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

Revenue Recognition

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

Persuasive evidence of an arrangement exists;

Delivery has occurred or services have been rendered;

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

Collectibility is reasonably assured.

The majority of the ~~Company~~Group's revenue results from sales contracts with distributors and revenue is recorded upon the shipment of goods. Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuring collectibility. ~~Based~~Sales onare ~~these~~presented net ~~factors,~~of ~~the~~value ~~Company~~added ~~believes~~tax ~~that~~(VAT). ~~it can~~No ~~apply~~return ~~the~~allowance ~~provisions~~is ofmade ~~SAB~~as ~~104~~products ~~with~~returns are ~~minimal~~insignificant ~~subjectivity~~based on historical experience.

Estimates Affecting Accounts Receivable and Inventories

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

As of December 31, ~~2008~~2009 and ~~2007~~2008, the ~~Company~~Group provided a $35,~~786~~502,~~459~~311 and $~~943~~3,~~647~~788,102, respectively for the allowance of doubtful accounts against trade receivables~~, other receivables and prepaid and deposits~~. Management's estimate of the appropriate allowance on those accounts receivable for the reporting periods was based on the aged nature of these accounts. In making its judgment, management assessed its customers' ability to continue to pay their outstanding invoices and the collectibility of those accounts on a timely basis, and whether their financial position might deteriorate significantly in the future, which would result in their inability to pay their debts to the Company.

Inventories, which are primarily comprised of raw materials, packaging materials, and finished goods, are stated at the lower of cost or net realizable value. Cost being determined on the basis of a moving average. The Group evaluates the need for reserves associated with obsolete, slow-moving and non-salable inventory by reviewing net realizable values on a periodic basis.57

~~For the~~Inventories, ~~year~~which ~~ended~~are ~~December~~primarily 31comprised of raw materials, ~~2008~~packaging materials, and finished ~~2007~~goods, are stated at the ~~Company~~lower ~~provided~~of ~~for~~weighted average cost or net realizable value. Cost being determined on the basis of a ~~reserve~~moving average. The ~~against~~Group ~~its~~evaluates ~~work-in-progress~~the ~~amounting~~need tofor $4reserves associated with obsolete,~~941,372~~ slow-moving and non-salable ~~$4,422,014~~inventory by reviewing net realizable values on a periodic ~~respectively~~basis.

58For the year ended December 31, 2009 and 2008, the Group provided a reserve against its obsolete, slow-moving or non-salable inventory amounting to $9,262 and $244,915, respectively.

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

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

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

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

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

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

After the acquisition with the effective date April 1, 2007, the same accounting treatment was adopted for the treatment of the provision of reserve on work-in-progress. As of December 31, 2008, the provision of reserve on work-in-progress was $4,941,372.

A reserve for obsolete, slow-moving or non-salable inventory was made on raw materials, packing materials, finished goods and work-in-progress at the amount of $122,433, $7,118, $269,749 and $4,542,072 respectively as of December 31, 2008.

Management determination of this allowance was based on potential impairments to the current carrying value of the inventories due to potential obsolescence of aged inventories. In making its estimate, management considered the probable demand for our products in the future and historical trends in the turnover of our inventories. While the Company currently believes that there is little likelihood that actual results will differ materially from these current estimates.

Operational Results

Year ended December 31, ~~2008~~ 2009 Compared to Year ended December 31, ~~2007~~2008

The following table provides key components of our operational results for the year ended December 31, ~~2008~~2009 and ~~2007~~2008 for Benda Pharmaceutical, Inc.

	YEAR ENDED DECEMBER 31
	YEAR ENDED DECEMBER 31,
	2008			2007
				(Restated)
Revenue	$	25,041,986		$	26,384,608
	2009			2008
Cost of goods sold		(15,740,107	)		(13,421,697	)
Revenue	$	21,990,915		$	25,041,986
Gross profit		9,301,879			12,962,911
Cost of goods sold		(13,720,676	)		(15,740,107	)
Selling expenses		(2,708,968	)		(1,581,655	)
Gross profit		8,270,239			9,301,879
Selling expenses		2,378,852			2,708,968
General and administrative expenses
Gains / (losses) on disposals of fixed assets		-			(30,027	)
Bad debts		1,424,072			2,730,434
Research and development expenses		(1,461,951	)		(553,962	)
Depreciation and amortization expense		1,273,051			837,440
Total operating expenses		(20,323,507	)		(15,044,946	)
Goodwill impairment		-			4,141,109
Operating income / (loss)		(11,021,628	)		(2,082,035	)
Inventory wirtten down to net realizable value		-			392,535
Interest income / (expenses) (Note 24)		(4,961,430	)		(3,389,676	)
Other general and administrative expenses		3,224,561			4,189,341
Other income / (expenses) (Note 20)		(1,311,140	)		(966,311	)
Research and development expenses		349,361			1,461,951
Government subsidies / grants (Note 22)		-			2,276,574
Total operating expenses		8,649,897			16,461,778
Income / (loss) before minority interest and income taxes		(17,294,198	)		(4,161,448	)
Operating loss		(379,658	)		(7,159,899	)
Income taxes (Note 23)		-			(965,183	)
Other income (expenses)
Minority interest (Note 28)		1,478,278			(2,236,194	)
Rental income		241,005			-
Net income / (loss)	$	(15,815,920	)	$	(7,362,825	)
Government subsidies / grants (Note 13)		454,491			-
Earnings / (loss) per share - basic	$	(0.16	)	$	(0.07	)
Interest income		129,513			133,251
Weighted average shares outstanding - basic		101,965,464			98,181,685
Interest expense		(2,298,411	)		(5,359,788	)
Earnings / (loss) per share - diluted	$	(0.16	)	$	(0.07	)
Other expenses		(14,833	)		(1,311,140	)
Weighted average shares outstanding - diluted (Note 26)		101,965,464			98,181,685
Loss before income taxes		(1,867,893	)		(13,697,576	)
Income taxes (Note 18)		818,289			776,295
Net Loss		(2,686,182	)		(14,473,871	)
Less: Net loss attributable to the noncontrolling interests		(748,712	)		(2,993,073	)
Net loss attributable to Benda Pharmaceutical, Inc.	$	(1,937,470	)	$	(11,480,798	)
Other Comprehensive Loss
Foreign currency translation (loss) gain		(120,157	)		3,460,265
Comprehensive Loss		(2,806,339	)		(11,013,606	)
Comprehensive loss attributable to the noncontrolling interest		(764,484	)		(2,344,747	)
Comprehensive loss attributable to Benda Pharmaceutical, Inc.	$	(2,041,855	)	$	(8,668,859	)

Net Revenue:

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

60Net revenue decreased by $3.05 million (or 12.18%) to $21.99 million for the year ended December 31, 2009 from $25.04 million for the year ended December 31, 2008. Decrease in revenue is principally attributed by the following factors:

~~Net~~ 1. One of the Benda’s subsidiaries, Benda Ebei’s net revenue decreased by $14.3524 million (or 2619.25%) to $2517.0478 million for the year ended December 31, ~~2008,~~2009 from $2622.3802 million for the year ended December 31, ~~2007~~2008. ~~Decrease~~ inIt ~~revenue~~was ismainly ~~principally~~due ~~attributed~~to by the ~~following factors:~~keen competition in generic medicine and overall economic downturn.

12. One of the Benda’s subsidiaries, Jiangling Benda ~~Ebei’s~~which ~~net~~resumed ~~revenue~~its ~~increased~~production ~~$2.67~~in ~~million~~October ~~(or~~2007 ~~13.78%)~~and toachieved $221.0261 million ~~for~~and ~~the year ended December 31, 2008 from~~ $190.3569 million for the year ended December 31, ~~2007.~~2009 ~~It was mainly due to the increase sales of the existing major products~~ and ~~they~~2008, ~~are shown in the table below:~~respectively.

Products (Million)	December 31,		December 31,
	2008		2007		Variance		Variance %
Ribavirin injection	$	0.59	$	0.54	$	0.04		8	%
Jixuening	$	2.11	$	2.00	$	0.11		5	%
Huitening	$	1.44	$	0.70	$	0.74		105	%
VB1 Methiouine and Vitamin B1 Injection	$	0.13	$	0.08	$	0.05		65	%
Vitamin Injection	$	0.96	$	0.83	$	0.13		16	%

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

2.	One of the Benda’s subsidiaries, Jiangling Benda which resumed its production in October 2007 and achieved $0.69 million for the year ended December 31, 2008.
	Jiangling Benda plans to produce four types of active pharmaceutical ingredients and they are Ribavirin, Asarin, Levofloxacin and Ribose whereas the production of Ribose does not require the GMP certificate, but the production of the other three products do require the GMP certificate.
	On April 9, 2008, Jiangling Benda received the approved GMP Certificate from the Chinese State Food and Drug Administration ("SFDA") which authorizing the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still under the stage of GMP certificate approving process. The management could not estimate the exact timing for obtaining those certificates.

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

3. One of the Benda’s subsidiaries, Yidu Benda’s ~~net~~ceased ~~revenue~~operation ~~dropped $0.7 million (or 100%) to zero for the year ended December 31, 2008 from $0.7 million for the year ended December 31, 2007~~ due to the fact that the plant was ~~temporarily~~ closed since mid January of 2007 to upgrade its ~~waster~~waste water treatment system to comply with new environmental standards enforced by PRC local government. Yidu Benda has completed its upgrading of the waster water system and passed the government’s verification and testing of equipments in October 2007. It is now permitted for the testing on actual production process. Once the actual products are produced, then the environmental government bodies will re-test the production results. The management could not estimate the exact timing for obtaining the final approval on the actual production process. Furthermore, the management is searching for new products to be produced in Yidu Benda which with higher profit margin.

61Yidu Benda has completed its upgrading of the waste water system and passed the government’s verification and testing of equipments in October 2007. It is now permitted for the testing on actual production process. Once the actual products are produced, then the environmental government bodies will re-test the production results. The management could not estimate the exact timing for obtaining the final approval on the actual production process. Furthermore, the management is searching for new products to be produced in Yidu Benda which with higher profit margin.

4.	One of the Benda’s subsidiaries, Beijing Shusai which incorporated on July 15, 2006. China’s State Food and Drug Administration (SFDA) recently experienced an overhaul in its policies and regulatory systems in an effort to fight against corruption in Chinese pharmaceutical industry. Beijing Shusai’s operation has been adversely affected by this recent policy changes which prohibits some state-owned hospitals from forming alliances with private companies. The management could not estimate that such situation could be resolved in the coming future.
5.	One of the Benda’s subsidiaries, SiBiono, acquired and effective since April 1, 2007, net revenue decreased $3.43 million (or 59.58%) to $2.33 million for the year ended December 31, 2008 from $5.76 million for the year ended December 31, 2007. The reason for the dropped in net revenue is mainly due to the fact that SiBiono was underwent a process of re-engineering of the production department during the reporting period. With such re-engineering, the management believes that there would be rapid growth in the following quarters.
	SiBiono GMP - On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 4, 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in China. Gendicine ® is the commercialized gene therapy product approved in the PRC government agency. On May 19, 2008, SiBiono received an official notice from the PRC State of SFDA in which it mentioned that during the random inspection performed by the PRC State of SFDA on April 8 to April 10, 2008, the PRC State of SFDA discovered there were several production procedures that did not meet the requirement stated in GMP, thus it required SiBiono to perform necessary improvements in order to fulfill the GMP requirements and the PRC State of SFDA collected back the distributed GMP certificate until the necessary improvements being carried out and passed the examination that conducted by SFDA. On June 10, 2008, SiBiono received another official notice from Guangdong Province SFDA and they demanded the same requirements as stated in the official notice which issued by the PRC State of SFDA dated on May 19, 2008. On November 24, 2008, SiBiono received another official notice from Guangdong Province SFDA which mentioned that after the examination conducted by Shenzhen City SFDA, the Guangdong Province SFDA consent SiBiono to carry out production on a trial basis. It further required SiBiono strictly to follow the requirements of GMP to organize trail production and follow the procedures to apply for GMP Certificate verification. The management could not estimate the exact timing for obtaining the final approval on the GMP Certificate.

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

5.	One of the Benda’s subsidiaries, SiBiono, acquired and effective since April 1, 2007, net revenue increased $0.26 million (or 11%) to $2.59 million for the year ended December 31, 2009 from $2.33 million for the year ended December 31, 2008.

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

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

Cost of Goods Sold

Cost of goods sold ~~increased~~decreased $2.3202 million (or 1712.2783%) to $1513.7472 million for the year ended December 31, ~~2008~~2009 from $1315.4274 million for the year ended December 31, ~~2007,~~ 2008 primarily due to the ~~corresponding~~decreased ~~increase~~ in ~~net~~the ~~revenue~~sales volume in Benda Ebei. Even though there was a significant drop in the net revenue generated by SiBiono, however since its cost of goods sold was relatively low, thus the overall cost of goods sold still increased in year 2008.

6260

Gross Profit

Gross profit decreased $31.6603 million (or 2811.2409%) to $98.327 million for the year ended December 31, ~~2008~~2009 from $129.9630 million for the year ended December 31, ~~2007~~2008, ~~which~~ which was mainly ~~due~~because toof the decrease in the ~~sales~~products ~~volume~~market ofprice ~~Gendicine~~due ~~which~~to the ~~associated~~overall ~~with~~economic ~~high gross profit margin~~downturn.

Selling Expenses:

Selling expenses ~~increased~~slightly decreased $10.1333 million (or 7112.2719%) to $2.7138 million for the year ended December 31, ~~2008~~2009 from $12.5871 million for the year ended December 31, ~~2007,~~ 2008, primarily due to the ~~promotional~~management ~~fees~~performed ~~for~~cost ~~Gendicine~~control in ~~SiBiono~~the ~~and Benda~~reporting ~~Ebei~~period.

General and Administrative Expenses:

General and administrative ~~expenses~~decreased ~~increased~~ $37.2748 million (or 2554.4240%) to $166.15 27 million for the year ended December 31, ~~2008~~2009 from $1213.8875 million for the year ended December 31, 2008, ~~2007.~~primarily ~~The~~due ~~difference~~to ~~was~~no ~~mainly~~goodwill ~~due~~impairment, toless ~~the~~bad ~~fact~~debt expense, inventory ~~that:~~impairment and R&D expense incurred in 2009.

(1) A consulting and professional fee, $7.88 million was incurred for the SiBiono’s acquisition which happened in the six month ended June 30, 2007 (please refer to Note 19 of Consolidated Financial Statements);Operating Loss:

~~(2)~~The Company ~~Bad~~resulted ~~debts~~an ~~provided~~operating loss $0.38 million for the year ended December 31, 2009, ~~2008~~while ~~was~~the ~~$2.73~~operating ~~million~~loss ~~while~~from ~~this~~comparative ~~figure~~period for ~~year~~2008 ~~ended December 31, 2007~~ was $07.29 16 million. ~~This was mainly affected by the global finance crisis; the customers of the Group slowed payment which caused the ageing of the receivables deteriorate significantly;~~

(3) During the year ended December 31, 2008, the Group made an impairment charge at full amount, $7.8 million on the goodwill which incurred when Benda Ebei acquired SiBiono and effective on April 1, 2007. The reasons for the impairment charge are as follows:

SiBiono has a bank loan matured and was in default, which has been sued and the court has issued a judgment on November 23, 2008 to SiBiono which required SiBiono to repay all loan balance plus penalty and interest approximately Rmb 24 million immediately. As SiBiono has not paid anything yet, thus the land use right of SiBiono on its new production plant may be foreclosed for sales by the lender bank has been frozen unless the amount has been settled between the lender bank and SiBiono;

SiBiono has serious working capital deficit situation and has reported loss of $2.08 million for the year ended December 31, 2008;

c. The management has not yet located or confirmed any feasible re-financing plan and / or equity placement as of the report date. The follow up action is still under the discussion with the lender bank. Please refer to Note 10 of the Notes to Consolidated Financial Statements.

Operating Income/ (Loss):

The Company experienced an operating loss of $11.02 million for the year ended December 31, 2008 while the operating loss from comparative period for 2007 was $2.08 million which was mainly due to significant increase in G&A expenses.

Interest Expenses:

Interest ~~expenses~~expense ~~increased~~was to $42.9630 million ~~for~~and ~~the year ended December 31, 2008 from~~ $35.3936 million for the year ended December 31, ~~2007 primarily because of the~~2009 ~~financing~~and ~~cost associated with the issuance of convertible promissory note. For the year ended December 31,~~ 2008, $0respectively.69 ~~million~~The ~~was~~main ~~incurred~~component ~~for the interest~~ of ~~the~~ ~~notes~~it ~~and~~was ~~$3.52 million in interest expense related to~~ the ~~amortization~~financing ofcost ~~the debt discount~~ associated with the ~~Warrants~~issuance ~~and the debt discount associated with the beneficial conversion feature. (Please refer to Note 24~~ of ~~the~~convertible ~~Notes~~promissory ~~to Consolidation Financial Statements for details)~~note.

Other Income / (Expenses:)

AThe net ~~penalty,~~other $1income (expense) was 0.3801 million, toand ~~investors~~1.31 asmillion for ~~registration~~the ~~delay~~year ~~expenses~~ended December 31, 2009 and ~~non-achievement~~ of2008 ~~the~~respectively. ~~Performance~~The ~~Threshold~~expense ~~according~~incurred toin ~~the~~2008 ~~Make~~was ~~Good~~due to ~~Agreement~~$1.1 ~~signed~~million inRegistration ~~November~~Delay ~~2006~~Penalty ~~incurred~~and in$0.27 ~~the~~million ~~year~~expense ~~ended~~by ~~December~~the issuance 31of 523,438 ~~2008; while~~shares of common stock for the ~~penalty~~make togood ~~investors~~agreement. There was ~~about~~no $1such ~~million~~expense inincurred for the year ended December 31., ~~2007~~2009.

Income Taxes:

Benda is subject to Delaware, United State of America tax, but no provision for income taxes were made for the year ended December 31, ~~2008~~2009 and ~~2007~~2008 as Benda did not have reportable taxable income for the period.

Ever Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax, but no provisions for income taxes were made for the year ended December 31, ~~2008~~2009 and ~~2007~~2008 as Ever Leader did not have reportable taxable income for the periods.

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

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

The exemption periods for Benda Ebei, Jiangling Benda and Yidu Benda expired in the year of 2006, after which they are subject to a 50% reduction in ~~state~~ income taxes, ~~at 18%;~~ whereas the full income tax rate is 33%. The remaining tax holidays was ~~will be~~ expired in ~~2010~~2009.

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

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

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

Year	~~Tax rate~~	Tax rate
2008	~~18%~~		18	%
2009	~~20%~~		20	%
2010	~~22%~~		22	%
2011	~~24%~~		24	%
2012 and thereafter	~~25%~~		25	%

~~There was~~Benda noEbei ~~income~~recorded ~~tax~~$872,643 ofand ~~the Group for the years ended December 31~~$1,109,249 ~~2008. The prepaid~~ income tax byfor the ~~Group during the~~ year ended December 31, ~~2008 at amount of~~ ~~$0.71~~2009 ~~million~~and ~~was~~2008 ~~recorded as prepaid tax~~respectively.

Year ended December 31, 2007 Compared to Year ended December 31, 2006

The following table provides key components of our operational results for the year ended December 31 for Benda Pharmaceutical, Inc.

	December 31,			December 31,
	2007			2006
	(Restated)			(Restated)
Revenue	$	26,384,608		$	15,932,075
Other Sales		-			2,937
Cost of goods sold		(13,421,697	)		(9,103,515	)
Gross profit		12,962,911			6,831,497
Selling expenses		(1,581,655	)		(599,571	)
General and administravive expenses		(13,901,577	)		(2,453,604	)
Gains / (losses) on disposals of fixed assets		(30,027	)		(249,381	)
Research and development expenses		(553,962	)		(30,821	)
Total operating expenses		(16,067,221	)		(3,333,377	)
Operating income / (loss)		(3,104,310	)		3,498,120
Interest expenses		(3,389,676	)		(108,811	)
Other income (expenses)		55,964			(281,190	)
Government subsidies / grants		2,276,574			-
Income / (loss) before minority interest and income taxes		(4,161,448	)		3,108,119
Income taxes		(965,183	)		-
Minority interest		(2,236,194	)		(322,590	)
Net Income / (loss)	$	(7,362,825	)	$	2,785,529
Earnings / (loss) per share - basic	$	(0.07	)	$	0.04
Weighted average shares outstanding - basic		98,181,685			73,414,057
Earnings / (loss) per share - diluted	$	(0.06	)	$	0.04
Weighted average shares outstanding - diluted		127,534,003			74,864,283

Restatement

The Company restated its previously recognized Depreciation expense by($1,446,185) and ($718,387) for the year ended December 31, 2007 and 2006 due to incorrect calculation of depreciation expense previously reported.

The Company restated its previously recognized Amortization expense by ($572,491) and ($254,990) for the year ended December 31, 2007 and 2006 due to incorrect calculation of amortization expense previously reported.

Net Revenue:

Net revenue increased by $10.46 million (or 66%) to $26.38 million for the year ended December 31, 2007, from $15.93 million for the year ended December 31, 2006. Increase in revenue is principally attributed by the following factors:

1. One of the Benda’s subsidiary, Benda Ebei’s net revenue increased $9.7 million (or 101%) to $19.3 million for the year ended December 31, 2007 from $9.6 million for the year ended December 31, 2006. It was mainly due to the increase sales of the existing major products and the introduction of new products and they are shown in the table below:

	December 31,		December 31,		Variance		Variance
Products	2007		2006			+ /(-)		+ /(-) %
Suzheng-B	$	3.38	$	1.93	$	1.45		75	%
Shusai-A		2.13		0.95		1.18		125	%
Xujing		2.90		2.45		0.45		19	%
Vitamin B6 and B1		0.79		0.21		0.58		284	%
Gentamycin 80 Thousand		0.59		-		0.59		100	%
Anagin		0.56		-		0.56		100	%
Lincomycin		1.33		-		1.33		100	%
Kanamycin	$	0.33	$	-	$	0.33		100	%

2. One of the Benda’s subsidiary, Jiangling Benda’s net revenue increased $0.51 million (or 3,315%) to $0.53 million for the year ended December 31, 2007 from $0.02 million for the year ended December 31, 2006. It was mainly due to Jiangling Benda resumed its production in October 2007. The sole product that being sold in the reporting period of the year 2007 was Ribose which does not required the GMP certificate. Furthermore, the upgrade process of Jiangling Benda had been completed and is now waiting for the China’s State Food and Drug Administration (SFDA)’s approval for GMP certificate. However, due to the overhaul and restructuring of SFDA, the management could not estimate the exact timing for obtaining GMP certificate.

3. One of the Benda’s subsidiary, Yidu Benda’s net revenue dropped $5.54 million (or 89%) to about $700,000 for the year ended December 31, 2007 from $6.2 million for the year ended December 31, 2006 due to the fact that the plant was temporarily closed since mid January to upgrade its waster water treatment system to comply with new environmental standards enforced by PRC local government.

4. One of the Benda’s subsidiary, Beijing Shusai which incorporated on July 15, 2006 realized net revenue of about $44,000 for the year ended December 31, 2007. China’s State Food and Drug Administration (SFDA) recently experienced an overhaul in its policies and regulatory systems in an effort to fight against corruption in Chinese pharmaceutical industry. Beijing Shusai’s operation has been adversely affected by this recent policy changes which prohibits some state-owned hospitals from forming alliances with private companies. The management could not estimate that such situation could be resolved in the coming future.

5. Benda’s newly acquired entity SiBiono (acquired and effective on April 1, 2007) realized net revenue of $5.76 million for the year ended December 31, 2007. SiBiono’s flagship product, Gendicine is the commercialized gene therapy product for the treatment of cancer. While only 1,869 vials of Gendicine were sold in the first quarter in 2007 by SiBiono, sales ramped to 21,020 vials in the nine months ended December 31, 2007 after Benda took over SiBiono in April 2007.

Cost of Goods Sold

Cost of goods sold increased $4.32 million (or 45%) to 13.42 million for the year ended December 31, 2007 from $9.1 million for the year ended December 31, 2006, primarily due to the corresponding increase in net revenue.

Gross Profit

Gross profit increased $6.13 million (or 96%) to $12.96 million for the year ended December 31, 2007 from $6.83 million for the year ended December 31, 2006, which was mainly due to the contribution of the gross profit of SiBiono, at about $5.27 million, which was acquired and effective on April 1, 2007.

Selling Expenses:

Selling expenses increased $982K (or 164%) to $1.58 million for the year ended December 31, 2007 from $600K for the year ended December 31, 2006, primarily due to the promotional fees for Gendicine.

General and Administrative Expenses:

General and administrative expenses increased $11.4 million (or 456%) to $13.9 million for the year ended December 31, 2007 from $2.5 million for the year ended December 31, 2006. The following table shows the major expenses that significantly increase the G&A expenses during the reporting periods:

		December 31,		December 31,
Note	Major general & administrative expenses	2007		2006		Variance
1	Amortization on debt issue cost	$	201,255	$	-	$	201,255
2	Finder fees to China Hi-Tech Funds Co. Ltd.		243,590		-		243,590
3	Consulting and professional fees		8,353,615		326,403		8,027,212
4	Penalty to investors		1,022,275		-		1,022,275
5	Advertising		93,747		3,942		89,805
6	Legal fees		304,649		114,993		189,656
7	Office expenses		478,383		210,696		267,687
8	Salaries and wages		961,797		221,174		740,623
9	Conference		79,754		18,495		61,259
10	Consulting		221,044		191,248		29,796
11	Investor relation, transfer agent and filing fees		109,540		9,828		99,712
12	Director Remuneration		94,247		-		94,247
13	Travel and transportation		239,316		87,264		152,052
		$	12,403,212	$	1,184,043	$	11,219,169

Note:

1. See Note 23 of Notes to Consolidated Financial Statements for details;

2. Finder fee to China Hi-Tech Funds Co. Ltd;

3. See Note 18 of Notes to Consolidated Financial Statements for details;

4. Being the penalty for late filing 10K-SB and registration statement, see Note 19 of Notes to Consolidated Financial Statements for details;

5. The increment mainly incurred for the investor relationship activities;

6. The increment mainly incurred in SiBiono and the other subsidiaries of the Group;

7. The increment mainly incurred for the re-opening of Jiangling Benda and the expenses incurred in the newly acquired subsidiary, SiBiono;

8. The increment mainly due to the involvement of CEO, COO and CFO salaries starting in the Year of 2007 and the salary expenses incurred in the newly acquired subsidiary, SiBiono.

9. The increment mainly incurred for the events including road shows and gene therapy conferences;

10. The increment mainly due to the expenses incurred in the newly acquired subsidiary, SiBiono;

11. The increment mainly incurred for the investor relationship activities;

12. It is only incurred starting from the year of 2007;

13. The increment mainly incurred for the investor relationship activities.

Operating Income/ (Loss):

The Company experienced an operating loss of $3.1 million for the year ended December 31, 2007, slipping $6.6 million from comparative period for 2006, which was mainly due to significant increase in G&A expenses.

Interest Expenses:

Interest expenses increased to $3.4 million for the year ended December 31, 2007 from $109,000 for the year ended December 31, 2006 primarily because of the financing cost associated with the issuance of convertible promissory note (please refer to Note 24 of the Notes to Consolidation Financial Statements for details).

Government Subsidies / Grants:

The Company recognized $2.3 million as government subsidies / grant for the year ended December 31, 2007 (please refer to Note 22 of the Note to Consolidated Financial Statements for details).

Income Taxes:

Benda is subject to Delaware, United State of America tax, but no provision for income taxes were made for the years ended December 31, 2007 and 2006 as Benda did not have reportable taxable income for the period in the United States of America.

Ever Leader, a wholly owned subsidiary of Benda, is subject to Hong Kong tax, but no provisions for income taxes were made for the years ended December 31, 2007 and 2006 as Ever Leader did not have reportable taxable income for the periods.

Benda Ebei was registered as a Sino-Foreign Equity Joint Venture on May 26, 2004 and is subject to the tax laws applicable to Sino-Foreign Equity Joint Ventures in the PRC. Benda Ebei, starting from 2005, is fully exempt from PRC enterprise income tax for two years starting from the first profit-making year, followed by a 50% reduction in income taxes, at 18%, for the following three years, commencing from the first profitable year. In 2007, Ebei Benda reported corporate income taxes of $965,183 with a corporate taxes payable of $246,460 as of December 31, 2007.

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

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

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

Beijing Shusai did not have taxable income for the years ended December 31, 2007 and 2006.

According to the taxation regulations of Shenzhen, a Special Economic District of PRC, SiBiono is subject to the full income tax rate of 15% on taxable income. The net losses for the previous year can be carried forward for a maximum period of five years. If the company is approved and recognized as high-tech company, the company can enjoy three years of 50% of the full tax rate with an extension for the coming next three years. Therefore, there was no provision for income taxes made for the year ended December 31, 2007. SiBiono also plans to apply for the PRC enterprise tax exemption for two years starting from the first profit-making year, followed by a 50% reduction in income taxes for the following three years.

As a result, Benda reported corporate income tax expense of $965,183 and $0, as well as corporate income taxes payable of $246,460 and $0, for the years ended December 31, 2007 and 2006, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Net cash ~~provided~~used byin ~~the~~ operating activities was ~~negative~~ $0.829 million for the year ended December 31, 2009, ~~2008~~ while for the year ended December 31, ~~2007~~2008 was $20.21 83 million.

a)	Non-cash operating activities, reconciliation items to the net income
	For the year ended December 31, 2007, an amount about $13.35 million non-cash operating activities was reconciled back to the net income and which mainly included consulting and professional fee related to SiBiono’s acquisition, bad debt provision, amortization of intangible assets, depreciation, minority interest, amortization of debt discount and debt issue cost and government subsidies.
	However, for the year ended December 31, 2008, about $16.5 million of non-cash operating activities was reconciled back to the net income and summarized as follows:

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

1.For ~~$3.52~~the year ~~million~~ended ~~that~~December ~~incurred~~31, as2008, ~~interest~~an ~~expenses~~amount ~~related~~about to$13.68 ~~the~~million ~~amortization~~non-cash ofoperating activities ~~discount~~was onreconciled ~~long-term~~back ~~debt~~to the net income and ~~issuance~~which ~~cost~~mainly ~~associated~~included amortization ~~with~~of ~~the~~debt ~~warrants~~discount and ~~the~~debt ~~beneficial~~issue ~~conversion~~cost, ~~features~~penalty ~~(please~~payment ~~refer~~made toin ~~Note~~form of 24share ofissuance, ~~the~~bad ~~Notes~~debt toprovision, ~~Consolidated~~amortization ~~Financial~~of ~~Statements~~intangible ~~for~~assets, goodwill ~~details);~~impairment, and depreciation.

2.However, for ~~$7.78~~the ~~million~~year ~~that~~ended ~~incurred~~December as31, ~~the~~2009, ~~goodwill~~about ~~impairment~~$4.87 ~~provision~~million ~~(please~~of ~~refer~~non-cash tooperating activities ~~Note~~was 10reconciled ofback ~~the Notes~~ to ~~Consolidated~~the ~~Financial~~net ~~Statements~~income ~~for~~and ~~details);~~summarized as follows:

31. $0.592 million that incurred as ~~the~~interest ~~penalty~~expenses ~~payment~~related ~~made~~to inthe ~~form~~amortization of ~~shares~~discount ~~issuance~~on tolong-term ~~PIPE~~debt ~~investors~~and ~~due~~issuance tocost ~~the~~associated ~~late~~with ~~effective~~the ofwarrants and the ~~registered~~beneficial ~~statement~~conversion features; and

42. Other factors: $21.7342 million incurred on bad debt provision; $2.119 million incurred on depreciation; and $0.771 million incurred on amortization of intangible assets~~; and $0~~.~~26 million incurred on amortization of debt issue cost.~~

69b) Trade receivables

~~b) Trade receivables~~ The net amount ~~change~~ of trade receivable ~~was~~ increased by $23.208 million for the year ended December 31, ~~2008~~2009. The management also noticed that the net balance of the trade receivable, as of December 31, ~~2008~~2009, was a significant asset to the company. However, ~~the~~ management believes that the above situation is temporarily due to the following reasons:

Trade receivables

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

b) ~~Due~~The tomanagement ~~the~~realized ~~fact~~ that ~~there~~it ~~was~~did aaffect ~~big~~the ~~natural~~cash ~~disaster,~~flow ~~earthquake~~situation ~~that~~of ~~happened in~~ the ~~second~~company; ~~quarter~~therefore ~~and~~ the ~~global~~company ~~financial~~will ~~crisis~~put ~~happened~~more ~~since~~efforts ~~the~~to ~~fourth~~reduce ~~quarter, they did affect~~ the ~~collection~~balance of trade receivables ~~to certain extend; and~~.

c)For ~~The~~the year ~~management~~ended ~~realized~~December ~~that~~31, it2009 ~~did~~and ~~affect~~2008, the ~~cash~~amounts ~~flow~~provided ~~situation~~by of(used ~~the~~in) investing ~~company;~~activities ~~therefore~~were ~~the~~$0.13 ~~company~~million ~~will~~and ~~put~~($4.57) ~~more~~million ~~efforts~~respectively. toIt ~~reduce~~was mainly ~~the~~because ~~balance~~higher capital expenditure in 2008 and release of ~~trade~~restricted ~~receivables~~cash in 2009.

~~For the~~Financing ~~year~~cash ~~ended~~outflow ~~December~~was ~~31, 2007, an amount approximately~~ $110.0822 million ~~was~~for ~~spent in~~ the ~~investing~~reporting ~~activities~~period ~~which~~year ~~were~~ended ~~mainly~~December ~~used~~31, 2009, inwhile the ~~acquisition~~financing ofcash ~~SiBiono and~~inflow ~~purchase~~was of$3.6 ~~property~~million ~~and~~for ~~equipment and~~ the ~~payment~~reporting ofperiod ~~construction-in-progress.~~year ~~However~~ended December 31, ~~since~~2008. The ~~most~~major component of ~~the~~it ~~settlements~~was ~~were~~a ~~made~~net inamount ~~the~~$4.3 ~~year~~million ofborrowed ~~2007,~~from ~~thus~~ the ~~investing~~commercial ~~activities~~banks ~~were~~during ~~relatively small in~~ the year ended December 31, 2008~~, only about $1~~.~~54 million.~~

Financing cash inflow was $8.21 million for the reporting period year ended December 31, 2007. The major event of it was a net amount $7.03 million was received from the issuance of convertible promissory notes. For the reporting period year ended December 31, 2008, the financing cash inflow was $1.09 million. The major of it was a net amount $1.93 million was received from the commercial bank notes. (Please refer to the Note 11 of the Notes to Consolidated Financial Statements for the details)62

ITEM 8. FINANCIAL STATEMENTS

The following financial statements required by this item are filed herewith following the signature page to this report:

		Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheet - As of December 31, 2008 and 2007		F-2
Consolidated Statements of Operations - For the years ended December 31, 2008 and 2007		F-3
Consolidated Statement of Stockholders’ Equity - For the years ended December 31, 2008 and 2007		F-4
Consolidated Statements of Cash Flows - For the years ended December 31, 2008 and 2007		F-5
Notes to Consolidated Financial Statements		F-6 to F-35

KEMPISTY & COMPANY CERTIFIED PUBLIC ACCOUNTANTS, P.C. 15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Benda Pharmaceutical, Inc. We have audited the accompanying consolidated balance sheets of Benda Pharmaceutical, Inc. and subsidiaries (the "Company") as of December 31, 2008 and 2007 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years in the two year period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required at this time, to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. and subsidiaries at December 31, 2008 and 2007 and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2008 in conformity with accounting principles generally accepted in the in the United States of America. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has an accumulated deficit of $16,047,561 and a working capital deficiency of $18,857,330 at December 31, 2008, a net loss of $15,815,920 and net cash used in operations of $810,116 for the year ended December 31, 2008, respectively. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Kempisty & Company Certified Public Accountants PC New York, New York April 15, 2009

F-1

Benda Pharmaceutical, Inc.

Consolidated Balance Sheets

(Amounts expressed in U.S. Dollars)

	December 31			December 31
	2008			2007
Assets
Current Assets
Cash and cash equivalents	$	569,019		$	1,266,240
Trade receivables, net (Note 5)		9,336,915			10,472,233
Other receivables (Note 5)		504,349			453,595
Short-term loan receivables (Note 5)		146,685			-
Prepaid tax (Note 23)		771,549			-
Due from related parties (Note 18)		11,000			-
Inventories (Note 7)		2,344,562			1,952,348
Prepaid expenses and deposits (Note 5)		918,209			933,299
Total current assets		14,602,288			15,077,715
Due from related parties (Note 18)		2,961,744			2,630,019
Property and equipments, net (Note 8)		29,057,225			27,123,035
Intangible assets, net (Note 9)		6,003,102			6,494,510
Goodwill (Note 10)		-			7,395,752
Restricted cash (Note 11)		6,162,849			3,957,624
Refundable purchase price paid (Note 6)		1,200,000			1,200,000
Other assets (Note 12)		1,830,634			1,710,972
Debt issue costs (Note 24)		55,485			327,945
Total Assets	$	61,873,327			65,917,572
Liabilities & Shareholders' Equity
Current Liabilities
Bank indebtedness (Note 11)	$	1,288,257		$	874,490
Bank loans payable (current portion) (Note 13)		2,984,560			2,867,004
Long term debt payable (current portion) (Note 14)		2,234,210			1,787,239
Accounts payable and accrued liabilities (Note 15)		7,228,400			4,665,984
Commercial notes payable (Note 11)		9,297,169			5,118,758
VAT taxes payable		516,302			1,279,385
Acquisition cost payable (Note 10)		1,426,491			1,333,246
Long-term convertible promissory notes (current portion) (Note 24)		6,395,951			-
Wages payable		630,475			664,785
Due to related parties (Note 18)		1,457,803			-
Total current liabilities		33,459,618			18,590,891
Long term debt payable (long term portion) (Note 14)		-			425,001
Long-term convertible promissory notes (Note 24)		-			2,875,075
Due to related parties (long-term) (Note 18)		997,593			3,193,618
Total liabilities		34,457,211			25,084,585
Minority interest		4,379,547			5,502,755
Redeemable common stock, 2,049,560 shares at $3.6 per share (Note 19)		7,376,366			7,376,366
Shareholders' Equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized;
None issued and outstanding (Note 25)		-			-
Common stock, $0.001 par value; 150,000,000 shares authorized;
105,155,355 shares issued and outstanding as of 12/31/2008;
100,170,071 shares issued and outstanding as of 12/31/2007 (Note 25)		105,155			100,170
Additional paid in capital (Note 25)		22,108,427			21,547,929
Retained earnings (unrestricted)		(16,047,561	)		100,452
Statutory surplus reserve fund (Note 17)		2,642,775			2,310,681
Accumulative other comprehensive income		6,347,547			3,390,774
Shares issuable for acquisition and services		503,860			503,860
Total Shareholders' Equity		15,660,203			27,953,866
Total Liabilities & Shareholders' Equity	$	61,873,327		$	65,917,572

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

F-2

Benda Pharmaceutical, Inc.

Consolidated Statements of Operations

(Amounts expressed in U.S. Dollars)

	YEAR ENDED DECEMBER 31
	2008			2007
Revenue	$	25,041,986		$	26,384,608
Cost of goods sold		(15,740,107	)		(13,421,697	)
Gross profit		9,301,879			12,962,911
Selling expenses		(2,708,968	)		(1,581,655	)
General and administrative expenses
Amortization of intangible assets		(153,303	)		(141,681	)
Amortization of debt issue costs (Note 24)		(264,962	)		(201,255	)
Depreciation		(861,979	)		(333,964	)
Bad debts		(2,730,434	)		(287,482	)
Director remuneration		(185,468	)		(94,247	)
Brokerage fee		-			(293,751	)
Inventory written down to net realizable value (recovery)		(392,535	)		-
Consulting and professional fees (Note 19)		-			(8,353,615	)
Goodwill impairment (Note 10)		(7,776,223	)		-
Other general and administrative expenses (Note 21)		(3,787,684	)		(3,173,307	)
Total general and administrative expenses		(16,152,588	)		(12,879,302	)
Gains / (losses) on disposals of fixed assets		-			(30,027	)
Research and development expenses		(1,461,951	)		(553,962	)
Total operating expenses		(20,323,507	)		(15,044,946	)
Operating income / (loss)		(11,021,628	)		(2,082,035	)
Interest income / (expenses) (Note 24)		(4,961,430	)		(3,389,676	)
Other income / (expenses) (Note 20)		(1,311,140	)		(966,311	)
Government subsidies / grants (Note 22)		-			2,276,574
Income / (loss) before minority interest and income taxes		(17,294,198	)		(4,161,448	)
Income taxes (Note 23)		-			(965,183	)
Minority interest (Note 28)		1,478,278			(2,236,194	)
Net income / (loss)	$	(15,815,920	)	$	(7,362,825	)
Earnings / (loss) per share - basic	$	(0.16	)	$	(0.07	)
Weighted average shares outstanding - basic		101,965,464			98,181,685
Earnings / (loss) per share - diluted	$	(0.16	)	$	(0.07	)
Weighted average shares outstanding - diluted (Note 26)		101,965,464			98,181,685

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

F-3

Benda Pharmaceutical, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(Amounts expressed in U.S. Dollars)

											Statutory		Accumulated		Shares Issuable
					Additional			Retained			Surplus		Other		for			Total
	Common Stock				Paid-in			Earnings			Reserve		Comprehensive		Acquisition			Stockholder's
	Shares		Amount		Capital			(Unrestricted)			Fund		Income		and Services			Equity
Balance at December 31, 2006		96,258,411		96,258		13,099,424			7,904,434			1,869,523		1,090,408		326,403			24,386,451
Issuance of common stock to various consultants, $0.001 par value; 706,195 shares, services valued at $0.4622 per share;		706,195		706		325,697			-			-		-		(326,403	)		-
Debt discount - beneficial conversion feature on convertible promissory notes (Note 24)		-		-		2,385,089			-			-		-		-			2,385,089
Debt discount - warrants issued with convertible promissory notes (Note 24)		-		-		5,174,911			-			-		-		-			5,174,911
Issuance of common stock for financial and technical services rendered 7/12/07, 2,189,560 shares at $3.6 per share		2,189,560		2,190		-			-			-		-		503,860			506,050
Issuance of common stock being placement agent exercised warrants 7/31/07, 546,994 shares at $0.555 per share		546,994		547		303,032			-			-		-		-			303,579
Issuance of common stock being placement agent exercised warrants 8/16/07, 65,200 shares at $0.555 per share		65,200		65		36,121			-			-		-		-			36,186
Issuance of common stock being placement agent exercised warrants 10/04/07,236,813 shares @ $0.555 per share		236,813		237		131,194			-			-		-		-			131,431
Issuance of common stock for pernalty - late effective of registration registration 10/12/07, 166,898 shares @ $0.555 each		166,898		167		92,461			-			-		-		-			92,628
Allocation of retained earnings to statutory reserve fund		-		-		-			(441,158	)		441,158		-		-			-
Net loss for the year, 12/31/07		-		-		-			(7,362,825	)		-		-		-			(7,362,825	)
Foreign currency translation adjustment		-		-		-			-			-		2,300,365		-			2,300,365
Balance at December 31, 2007		100,170,071	$	100,170	$	21,547,929		$	100,452		$	2,310,681	$	3,390,774	$	503,860		$	27,953,866
Shares issued in lieu of director renumeration 02/18/08, 110,000 shares @$0.69 each		110,000		110		75,790			-			-		-		-			75,900
Shares issued in lieu of penalty for late filing on SB-2 on March 15, 200803/15/08, 523,438 shares @ $0.440 each (Note 20)		523,438		523		229,789			-			-		-		-			230,312
Shares issued for conversion of convertible notes on July 10,200807/10/2008, 540,870 shares @$0.554662 each (Note 24)		540,870		541		(8,039	)		-			-		-		-			(7,498	)
																			-
Shares issued for "Make good agreeement"08/25/2008 3,810,976 shares @$0.07 (Note 20)		3,810,976		3,811		262,958			-			-		-		-			266,769
Foreign currency translation adjustment		-		-		-			-			-		2,956,773					2,956,773
Net loss for the year ended 12/31/08		-		-		-			(15,815,920	)		-		-		-			(15,815,920	)
Statutory capital reserve		-		-		-			(332,093	)		332,093		-		-			-
Balance at December 31, 2008		105,155,355		105,155		22,108,427			(16,047,561	)		2,642,776		6,347,547		503,860			15,660,204

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

F-4

Benda Pharmaceutical, Inc.

Consolidated Statements of Cash Flows

(Amounts expressed in U.S. Dollars)

	YEARS ENDED DECEMBER 31,
	2008			2007
Cash Flows From Operating Activities
Net income / (loss)	$	(15,815,920	)	$	(7,362,825	)
Adjustments to reconcile net income / (loss) to net cash provided by operating activities:
Consulting and professional fees (Note 19)		-			8,353,615
Bad Debt provision		2,730,434			287,482
Inventory written down to net realizable value (recovery)		392,535			-
Goodwill impairment provision		7,776,223			-
Minority interest		(1,478,278	)		2,236,194
Loss on disposals of fixed assets		-			30,027.00
Depreciation		2,086,178			1,022,603
Amortization of intangible assets		705,259			504,736
Amortization of debt issue costs (Note 24)		264,962			201,255
Interest expense (amortization of debt discount) (Note 24)		3,520,876			2,875,075
Penalty to investors settled by issuance of common stock		497,081			92,628
Government subsidies/grants, (Note 22)		-			(2,250,240	)
Directors remuneration settled by issuance of common stock		75,900			-
Changes in operating assets and liabilities:
Trade receivables		(2,213,453	)		(4,351,652	)
Other receivables		195,547			196,755
Short-term loan receivable		(146,685	)		(560,751	)
Prepaid expenses and deposits		359,673			(523,131	)
Inventories		(784,749	)		597,600
Accounts payable and accrued liabilities		2,528,101			-
Taxes payable		(1,503,800	)		862,074
Net cash provided by operating activities		(810,116	)		2,211,445
Cash Flows From Investing Activities
Acquisition cost paid		-			(2,664,244	)
Purchases of property and equipment and construction-in-progress		(1,708,213	)		(5,319,037	)
Disposal of intangible assets		172,548			(3,094,245	)
Net cash used in investing activities		(1,535,665	)		(11,077,526	)
Cash Flows From Financing Actives
Proceeds from issuance of convertible promissory note (Note 24)		-			7,030,800
Proceeds and repayments of borrowings under related parties, net		(1,080,947	)		(592,893	)
Proceeds and repayments of borrowings under government debts payable, net		322,884			19,210
Proceeds and repayments of borrowings under commercial bank notes, net (Note 11)		1,934,319			2,503,504
Proceeds and repayments of borrowings under bank loans, net		(81,523	)		(748,367	)
Net cash provided by (used in) financing activities		1,094,733			8,212,254
Effect of exchange rate changes on cash		553,827			243,948
Net increase in cash and cash equivalents		(697,221	)		(409,879	)
Cash and cash equivalents, beginning of period		1,266,240			1,676,119
Cash and cash equivalents, end of period	$	569,019		$	1,266,240
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	984,621		$	213,113
Cash paid for income taxes	$	740,717		$	718,723

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

F-5

Benda Pharmaceutical, Inc.

Notes to Consolidated Financial Statements

(Amounts expressed in U.S. Dollars)

1. Organization

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

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

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

On April 5, 2007, Benda Ebei entered into an Equity Transfer Agreements with Shenzhen Yuanzheng Investment Development Co., Ltd. and Shenzhen Yuanxing Gene City Development Co., Ltd., the then shareholders of Shenzhen SiBiono GeneTech Co., Ltd (“SiBiono”), to purchase 27.57% and 30% respectively of the shares of SiBiono’s common stock for total consideration of Rmb 60 million (or $7.88 million) due and payable on or before April 30, 2007. On June 11, 2007, Benda Ebei entered into an Equity Transfer Agreements with Huimin Zhang and Yaojin Wang, the individual shareholders of SiBiono, and to purchase 1.6% and 0.96% respectively of the shares of SiBiono’s common stock for total consideration of Rmb 2.56 million (or $0.34 million) due and payable on or before June 30, 2007. Altogether, the total consideration for 60.13% shares of SiBiono’s common stock was Rmb62.56 million or $9.18 million. As of December 31, 2008, an accumulated amount, approximately Rmb52. 83million or $7.75 million was paid and leaving a balance of Rmb 9.73 million or $1.43 million (please refer to Note 10 for the details).

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

F-6

As of December 31, 2008, the organization and ownership structure of the Group is as follows:

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $16,047,561 and a working capital deficiency of $18,857,330 at December 31, 2008, a net loss of $15,815,920 and net cash used in operations $810,116 for the year ended December 31, 2008, respectively.

While the Company is attempting to produce sufficient revenues, the Company’s cash position may not be enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taking to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurance to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues. The financial statements do not include any adjustments that might be necessary it the Company is unable to continue as a going concern.

2. Basis of Preparation

The accompanying consolidated financial statements of Benda and its subsidiaries have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for consolidated financial information

These consolidated financial statements include the accounts of Benda, Ever Leader, Benda Ebei, Jiangling Benda, Yidu Benda, Beijing Shusai and Sibiono for the full year.. All significant inter-company balances and transactions have been eliminated in consolidation.

3. Use of Estimates

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

F-7

4. Significant Accounting Policies

Cash and Cash Equivalents

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

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

As of December 31, 2008 and 2007, the Group provided a $3,786,459 and $943,647 respectively for the allowance of doubtful accounts against trade receivables, other receivables and prepaid and deposits (please refer to Note 5 for details). Management's estimate of the appropriate allowance on those accounts receivable for the reporting periods was based on the aged nature of these accounts. In making its judgment, management assessed its customers' ability to continue to pay their outstanding invoices and the collectibility of those accounts on a timely basis, and whether their financial position might deteriorate significantly in the future, which would result in their inability to pay their debts to the Company.

For the year ended December 31, 2008 and 2007, the Group provided a reserve against its obsolete, slow-moving or non-salable inventory amounting to $4,941,372 and $4,422,014 respectively (please refer to Note 7 for details)

Property and Equipment

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

Buildings	20-30years
Machinery and equipment	10-15 years
Motor Vehicles	5 years
Electronics and office equipment	5 years

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

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

F-8

Impairment of Long-Lived Assets

The Group evaluates potential impairment of long-lived assets, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires the Group to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset. As of December 31, 2008 and 2007, the Group provided a reserve against its Goodwill amounting to $7,776,223 and none, respectively (please refer to Note 10 for details).

Intangible Assets

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

Revenue Recognition

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

1. Persuasive evidence of an arrangement exists;

2. Delivery has occurred or services have been rendered;

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

4. Collectibility is reasonably assured.

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

Research and Development

Research and development costs are expensed as incurred and consist primarily of salaries and related expenses of personnel engaged in research and development activities. The Group spent $1,461,951 and $553,962 on direct research and development (“R&D”) efforts in 2008 and 2007, respectively.

Income Taxes

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

Comprehensive Income

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

F-9

Concentration of Credit Risk

A significant portion of the Group's cash at December 31, 2008 and 2007 is maintained at various financial institutions in the PRC which do not provide insurance for amounts on deposit.

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

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

The following table shows the individual customer’s revenue and account receivable balance which was higher than 5% of total revenue and total account receivables for the years ended December 31, 2008 and 2007:

		YEAR ENDED DECEMBER 31
		2008				2007
	Revenue	$	25,041,986	%		$	26,384,608	%
	Individual customer's revenue
1	Zhuhai Gongbei Pharmaceutical Co, Ltd.		4,861,888		19%		5,034,917		19%
2	Hubei Hengchuan Health Products Co.,Ltd.		2,746,580		11%		-		0%
3	Shenzhen Huihua Pharmaceutical Co. Ltd.		2,788,933		11%		3,264,033		21%
4	Shenyang Pharmaceutical Co. Ltd.		2,620,888		10%		2,784,912		18%
5	Jiangxi Huiren Pharmaceutical Co. Ltd.		2,073,862		8%		2,360,264		15%
	Account receivable, gross	$	13,123,374	%		$	10,909,921	%
	Individual customer's account receivable gross balance
1	Zhuhai Gongbei Pharmaceutical Co, Ltd.		1,742,158		13%		1,658,203		15%
2	Hubei Hengchuan Health Products Co.,Ltd.		1,269,568		10%		-		0%
3	Shenzhen Huihua Pharmaceutical Co. Ltd.		1,238,820		9%		1,111,545		10%
4	Shenyang Pharmaceutical Co. Ltd.		1,087,027		8%		903,202		8%
5	Jiangxi Huiren Pharmaceutical Co. Ltd.		990,665		8%		486,843		4%

Basic and Diluted Earnings Per Share

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

Foreign Currency Translation

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

F-10

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

The exchange rates in effect at December 31, 2008 and 2007 were stated as follows: (for RMB 1.00):

	December 31,		December 31,
	2008		2007
Fixed rate	$	0.1467	$	0.1371
Average rate	$	0.1442	$	0.1317

For the year ended December 31, 2008, the foreign exchange loss was $11,347; and for the year ended December 31, 2007, the foreign exchange gain was $2,302.

Fair Value of Financial Instruments

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

Recent Accounting Pronouncements

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

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

Recently Adopted Accounting Pronouncements

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

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

F-11

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

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. The reclassification had no effect on reported losses.

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

(1) Allowance for doubtful debts

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

	December 31,			December 31,
	2008			2007
Trade receivables, gross	$	13,123,374		$	10,909,921
Allowance for doubtful debts		(3,786,459	)		(437,688	)
Trade receivables, net	$	9,336,915		$	10,472,233
	December 31,			December 31,
	2008			2007
Other receivables, gross	$	504,349		$	614,971
Allowance for doubtful debts		-			(161,376	)
Other receivables, net	$	504,349		$	453,595
	December 31,			December 31,
	2008			2007
Prepaid and deposits, gross	$	918,209		$	1,277,882
Allowance for doubtful debts		-			(344,583	)
Prepaid and deposits, net	$	918,209		$	933,299

F-12

The change of the allowance for doubtful debts between the reporting periods, as of December 31, 2008 and 2007, is displayed as follows:

	2008			2007
Balance at beginning of period	$	(943,647	)	$	(467,015	)
Provision/Reversal during the period		(2,730,434	)		(287,482	)
Addition in lieu of acquisition of SiBiono		-			(121,912	)
Foreign exchange difference		(112,378	)		(67,238	)
Balance at end of period	$	(3,786,459	)	$	(943,647	)

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

For the year ended December 31, 2008, the allowance for trade receivables increased by $ 3,348,771. This was mainly affected by the global finance crisis; the customers of the Group slowed payment which caused the ageing of the receivables deteriorate significantly.

(2) Short-term loan receivable

The short-term receivable is due on June 30, 2009, has no collateral or security and bears annual interest rate of 7.2%.

6. Refundable Purchase Price Paid

On, December 7, 2006, Benda Ebei paid $1.2 million to SECO (Shenzhen) Biotech Co., Ltd. (“SECO”) pursuant to a purchase agreement signed between SECO and Benda Ebei on December 3, 2006 to acquire a technology know-how and drug specifications / technical parameters in producing a Gastropathy drug owned by SECO. According to the signed contract:

· The amount paid is refundable only if SECO fails to pass the examination conducted by Benda Ebei;

· Altogether, there are three phases for the examination; however there is no specific time-table for the examination;

· The contract is valid for 10 years upon the contract signed.

As at December 31, 2008, the deal has not been closed as the product is still under the process of development. As the date when could SECO pass the examination conducted by Benda Ebei cannot be determined, thus the amount paid is reclassified as non-current assets as of December 31, 2008.

F-13

7. Inventories

The Group’s inventories at December 31, 2008 and December 31, 2007 were comprised as follows:

	December 31,			December 31,
	2008			2007
Raw materials	$	874,180		$	1,078,438
Packing materials		481,724			155,101
Other materials / supplies		88,412			93,206
Finished goods		754,838			415,627
Work-in-process		5,086,780			4,631,990
Total inventories at cost		7,285,934			6,374,362
Less: Reserves on inventories		(4,941,372	)		(4,422,014	)
Total inventories, net	$	2,344,562		$	1,952,348

A reserve for obsolete, slow-moving or non-salable inventory was made on raw materials, packing materials, finished goods and work-in-process at the amount of $122,433, $7,118, $269,749 and $4,542,072 respectively as of December 31, 2008. As of December 31, 2007, there was a reserve made on work-in-process at the amount of $4,422,014 only.

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

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

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

F-14

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

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

After the acquisition with the effective date April 1, 2007, the same accounting treatment was adopted for the treatment of the provision of reserve on work-in-process. As of December 31, 2008, the provision of reserve on work in process was $4,542,072.

8. Property and Equipments

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

	December 31, 2007			Addition			Foreign Currency Translation Difference			December 31, 2008
Buildings	$	8,858,126			43,877			790,438		$	9,692,441
Machinery and equipment		15,260,167			139,810			1,369,351			16,769,328
Office equipment		28,762			6,501			5,465			40,728
Motor Vehicles		206,252			25,976			19,935			252,163
Cost		24,353,307			216,164			2,185,188			26,754,660
Less: Accumulated Depreciation
Buildings	$	(981,116	)		(485,939	)		(92,456	)	$	(1,559,511	)
Machinery and equipment		(2,423,002	)		(1,533,417	)		(204,248	)		(4,160,667	)
Office equipment		(4,281	)		(28,058	)		1,500			(30,839	)
Motor Vehicles		(46,447	)		(38,764	)		(4,652	)		(89,863	)
Accumulated Depreciation		(3,454,846	)		(2,086,178	)		(299,856	)		(5,840,880	)
Construction in progress	$	6,224,575			1,492,049			426,821		$	8,143,445
Total property and equipment, net	$	27,123,035			(377,965	)		2,312,153		$	29,057,225

As mentioned in Note 11, Benda Ebei entered into a commercial bank note issuance agreement with Shanghai Pudong Development Bank on August 14, 2007 and a supplementary agreement on January 21, 2008. Under the agreement s the credit facility is secured by the buildings, machinery and equipment of Benda Ebei and Jiangling Benda. As of December 31, 2008, the net book value of pledged property and equipment was approximately Rmb132.19 million (or $19.39 million) in total.

F-15

The deprecation expense for the year ended December 31, 2008 was calculated as follows:

	Original Cost
	December 31,		December 31,				Salvage			Estimate		Depreciation		Deprecation
	2007		2008		Average		Value			Useful Lives		Calculated		Reported		Difference
Building	$	8,858,126		9,692,441		9,275,284		5	%		20		440,576		485,939		(45,363	)
Property and equipment		15,260,167		16,769,328		16,014,748		5	%		10		1,521,401		1,533,417		(12,016	)
Office equipment		28,762		40,728		34,745		5	%		5		6,602		28,058		(21,456	)
Motor vehicle		206,252		252,163		229,208		5	%		5		43,549		38,764		4,785
Total property and equipments	$	24,353,307		26,754,660		25,553,984							2,012,128		2,086,178		(74,050	)

he above table shows the calculation of depreciation expenses for the year ended December 31, 2008. The difference between the depreciation calculated and depreciation reported was due to the changes of foreign exchange translation.

The estimated useful lives for buildings and property and equipments vary from 20 to 30 years and 10 to 15 years, respectively. For the year ended December 31, 2008, the majority of the building subjected to depreciation had useful lives of 20 years and property and equipment had useful lives of 10 years.

The total depreciation expense was $2,086,178 and $1,022,603 for the years ended December 31, 2008 and 2007, respectively, and is broken down as follows:

	YEAR ENDED DECEMBER 31,
	2008		2007
Cost of sales	$	1,224,199	$	688,639
Operating expenses		861,979		333,964
Balance at end of period	$	2,086,178	$	1,022,603

9. Intangible Assets

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

		December 31, 2007			Addition			Disposal			Foreign Currency Translation Difference			December 31, 2008
Land-use rights		$	2,875,796			-			-			241,340		$	3,117,136
Drugs permits and licenses			2,564,996			-			-			215,258			2,780,254
Technology formulas			1,220,164			-			(288,300	)		80,265			1,012,129
Patent			1,685,919			-			-			117,910			1,803,829
	Cost		8,346,875			-			(288,300	)		654,773			8,713,348
Land-use rights		$	(201,030	)		(60,814	)		-			(17,283	)	$	(279,127	)
Drugs permits and licenses			(1,291,425	)		(269,538	)		-			(103,578	)		(1,664,541	)
Technology formulas			(154,863	)		(121,085	)		33,635			(12,370	)		(254,683	)
Patent			(205,048	)		(287,457	)		-			(19,393	)		(511,898	)
	Accumulated amortization		(1,852,366	)		(738,894	)		33,635			(152,624	)		(2,710,247	)
Total intangible assets, net		$	6,494,510			(738,894	)		(254,665	)		502,149		$	6,003,102

In May 2007, SiBiono enter into a co-operation agreement with DNAVEC, a Japanese gene therapy research institute. Under the terms of the agreement, DNAVEC will leverage SiBiono’s proven gene therapy manufacturing platform and will transfer the exclusive development and distribution rights of SeV-Gag in China to SiBiono. The total purchase cost was Rmb2 million or $ 0.28 milllion and recorded as intantigle assets. In November 2008 this project was ceased and the whole cost was recoverable. Therefore the whole cost was removed from intangible assets and related amortization was reversed. As of December 31, 2008, Rmb 1.19 million or $0.17 million was received, leaving a balance of Rmb 0.81 million or $0.11 million receivable.

F-16

The amortization expense for the year ended December 31, 2008 was calculated as follows:

	Original Cost
	December 31,		December 31,				Estimated		Amortization		Amortization
	2007		2008		Average		Useful lives		Calculated		Reported		Difference
Land-use rights	$	2,875,796		3,117,136		2,996,466		40	$	74,912		60,814		14,098
Drugs permits and licenses		2,564,996		2,780,254		2,672,625		10		267,263		269,538		(2,275	)
Technology formulas		1,220,164		1,012,129		1,116,147		10		111,615		87,450		24,165
Patent		1,685,919		1,803,829		1,803,829		6		300,638		287,457		13,181
Total Intangible assets	$	8,346,875		8,713,348		8,589,067			$	754,428		705,259		49,169

The above table shows the calculation of amortization expenses for the year ended December 31, 2008. The difference between the amortization calculated and amortization reported was due to the changes of foreign exchange translation.

The total amortization expense was $705,259 and $504,736 for the years ended December 31, 2008 and 2007, respectively, and is broken down as follows:

	December 31,
	2008		2007
Cost of sales	$	551,956	$	363,055
Operating expenses		153,303		141,681
Balance at end of period	$	705,259	$	504,736

10. Goodwill and Acquisition Cost Payable

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

As of December 31, 2008, there was an amount approximately $7.8 million was recorded as goodwill. Meanwhile, the Group made an impairment charge at full amount on the goodwill due to the following facts (please read in conjunction with Note 13):

a. SiBiono has a bank loan matured and was in default, which has been sued and the court has issued a judgment on November 23, 2008 to SiBiono which required SiBiono to repay all loan balance plus penalty and interest approximately Rmb 24 million immediately. As SiBiono has not paid anything yet, thus the land use right of SiBiono on its new production plant may be foreclosed for sales by the lender bank has been frozen unless the amount has been settled between the lender bank and SiBiono;

b. SiBiono has serious working capital deficit situation and has reported loss of $2.08 million for the year ended December 31, 2008;

F-17

As of December 31, 2008, out of the total acquisition cost Rmb62.56 million (or $9.18 million), the following payments were made:

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

In the year of 2007, an additional amount Rmb20.28 million was paid. The remaining balance was reported as “acquisition cost payable” on the balance sheet. As of December 31, 2008, the total amount paid was Rmb52.83 million (or $7.75 million) and the outstanding balance was Rmb9.73 million (or $1.43 million).

The Group has already obtained the oral consent from the selling shareholders of SiBiono that the remaining balance could be settled within the year of 2009.

11. Restricted Cash, Bank Indebtedness and Commercial Notes Payable

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

	December 31,		December 31,
	2008		2007
Deposits for issuance of commercial notes	$	4,859,346	$	2,615,254
Funds from government technolgy agencies		1,303,503		1,342,370
Total restricted cash	$	6,162,849	$	3,957,624

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

a) Duration of the agreement is three years;

b) It is non-interest bearing;

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

F-18

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

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

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

As of December 31, 2008, Benda Ebei and Jiangling Benda deposited an amount $4,859,346 in Shanghai Pudong Development Bank as deposit for the issuance of commercial bank notes. Such deposits will be released when the commercial bank notes are cleared. As of December 31, 2008, the balance of the commercial bank notes payable was $9,297,169. Thus the net commercial bank notes payable was $4,437,823 as of December 31, 2008.

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

a) Among the cash and cash equivalents balances of SiBiono were composed of two parts; (i) unrestricted cash, which were generated from either operations, or loans from bank and financial institutions, or invested capital; (ii) restricted cash, which were obtained from the various government technology agencies as long term debt payable (see note 14 for the related details).

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

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

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

Due to the above reasons, SiBiono relocated the balances of restricted cash from the cash and cash equivalents balances with an amount $1,303,503 as of December 31, 2008. However, since the balances of the restricted cash were larger than the balance of cash and cash equivalents balances, bank indebtedness were resulted with an amount $1,288,257 as of December 31, 2008.

F-19

12. Other assets

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

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

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

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

Following this arbitration decision, Benda Ebei recognized the liability as total acquisition cost payable of Rmb 12.48 million, plus the penalty and related legal and arbitration expenses, totaling approximately Rmb 12.80 million or ($1.88 million) (Note 15). Accordingly Benda Eebi recognized the right to purchase the 6.24% equity shares in SiBiono and recorded as other assets at Rmb 12.48 million or $1.83 million.

F-20

13. Bank Loans Payable

As of December 31, 2008 and 2007, Sibiono, had one outstanding bank loan with an amount of $2,984,560 and $2,867,004, respectively, which was used primarily to fund construction in progress projects and for general working capital purposes. This loan carries annual interest rate of 6.34% and matures on April 29, 2008. This loan is personal guaranteed by Zhaohui Peng, the former Chairman and a shareholder of SiBiono.

For the year ended December 31, 2008, SiBiono has been sued for default on the bank loans and judgment has been made as follows:

a. On or before November 23,2008 (10 days after the judgment date of November 13, 2008), SiBiono needs to repay the bank for the principal of Rmb20,346,672, accrued interest and penalty up to August 15, 2008 for Rmb1,506,994 and accrued interest from August 16, 2008 through repayment date. However, as SiBiono has not yet repaid anything yet, the accrued interest for the later period will be estimated at Rmb531,780, or total accrued interest as of December 31, 2008 was Rmb2,038,774;

b. Should SiBiono did not make the full repayment; the lender bank can apply for selling the land use rights owned by SiBiono (as the collateral of the loan). Any balance after full repayment of the bank loan principal and accrued interest and penalty from the net proceeds will be returned to SiBiono;

c. Zhaohui Peng should have liability to repay any insufficient amount should the net proceeds of selling the above land use rights are insufficient to repay the bank debts and then reclaimed from SiBiono;

d. SiBiono and Zhaohui Peng have the obligation to repay the legal fees for this lawsuit of Rmb156,068 immediately.

Total interest expense paid related to the Group’s outstanding bank loans was $380,840 and $214,113 for the years ended December 31, 2008 and 2007, respectively.

14. Long Term Debt Payable

As of December 31, 2008, long term debt payable was raised due to the fact that various technology funds were obtained from various government technology agencies to support its gene therapy research and development activities during the past years and recorded as long term debt payable.

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

	December 31,		December 31,
	2008		2007
Long-term debt payable due within one year	$	2,234,210	$	1,787,239
Long-term debt payable due after one year		-		425,001
Total long-term debt payable	$	2,234,210	$	2,212,240

The obligations will be discharged once the examination by the various government technology agencies is conducted and most of the examination will be carried out and completed.

During the year ended December 31, 2008, there was no long term debt payable discharged and recorded as government subsidies (see Note 22 for the related details).

F-21

15. Accounts Payable and Accrued Liabilities

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

	December 31,		December 31,
	2008		2007
Trade payable	$	605,316	$	305,443
Deposits paid by customer		1,055		160,818
Acquistion cost payable following the arbitration (Note 12)		1,876,953		1,754,263
Accrued liabilities		3,999,155		2,162,455
Miscellaneous payables		745,921		283,005
Total account payables and accurred liabilities	$	7,228,400	$	4,665,984

16. Welfare and Employment Liabilities

As stipulated by the relevant laws and regulations for enterprises operating in the PRC, the Group’s PRC entities are required to maintain a welfare plan for all of its employees who are residents of the PRC. Based on the wages payable and according to the labor law of the PRC, the Group accrued 14% on a monthly basis, for employees’ welfare, labor union fees, and education and training programs, respectively. As of December 31, 2008 and 2007, the Group accrued approximately $486,000 and $345,000 for the employees’ welfare respectively.

17. Statutory Reserves

As stipulated by the relevant laws and regulations for enterprises operating in the PRC, the Group is required to make annual appropriations to a statutory surplus reserve fund for each of its PRC subsidiaries. Specifically, the Group is required to allocate 15% its profits after taxes at the fiscal year end, as determined in accordance with the PRC accounting standards applicable to the Group’s PRC subsidiaries, to a statutory surplus reserve until such reserve reaches 50% of the registered capital of the Group’s PRC subsidiaries. As of December 31, 2008 and 2007, the registered capital of the Group’s PRC subsidiaries was $21,719,896 and $20,026,617, respectively.

F-22

1. 18. Related Party Transactions

Due from related parties at December 31, 2008 and 2007 were comprised as follows:

		December 31,		December 31,
	Relationship	2008		2007
Current
Qin Yu	Vice president
Due to Shenzhen SiBiono Gene Tech Co. Ltd.		$	4,314	$	-
Hua Shen	Vice president
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			-		137,097
Pong Tsaiohuei	Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			-		3,257
Xiaozhi Zhang	Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			5,439		5,083
Rong He	Manager
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			1,247		-
		$	11,000	$	145,437
Non current
Hua Shen	Vice president
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			-		137,097
Pong Tsaiohuei	Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			-		3,257
Xiaozhi Zhang	Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			-		5,083
Yiqing Wan	CEO & Director
Due to Ever Leader Holdings Co. Ltd.		$	650,791	$	646,429
Due to Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			439,719		72,949
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			-		3,608
Hubei Benda Science and Technology Co. Ltd	Controlled by CEO
Due to Yidu Benda Chemicals Co. Ltd.			1,607,173		1,502,118
Due to Ever Leader Holdings Co. Ltd.			231,713		230,160
Feng Wang	Minority shareholder
Due to Beijing Shusai Pharyngitis Research Co. Ltd.			32,348		29,318
Total due from related parties		$	2,961,744	$	2,630,019

Due to related parties at December 31, 2008 and, 2007 were comprised as follows:

		December 31,		December 31,
	Relationship	2008		2007
Current
Wei Xu	Vice President, CEO's Spouse & Director
Due from Shenzhen SiBiono Gene Tech Co. Ltd.		$	188,065	$	-

Due from Everleader Holding Ltd.				967,999
Hua Xu	General Manager's Sister

Due from Shenzhen SiBiono Gene Tech Co. Ltd.			25,523		-
Yiqing, Wan	CEO & Director
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			237,780		-
Hua Shen	Vice president
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			33,253		-
Tongyi Tien	Manager
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			364		-
Pong Tsaiohuei	Minority shareholder
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			4,818		-
Total due to related parties		$	1,457,803	$	-
Non current
Hubei Benda Science and Technology Co. Ltd	Controlled by CEO
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.		$	28,602	$	49,056
Due from Jiangliang Benda Pharamaceutical Co. Ltd.			811,073		1,872,374
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			14,262		6,846
Wei Xu	Vice President, CEO's Spouse & Director
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			48,922		-
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			65,691		-
Hua Shen	Vice president
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			-		26,597
Hua Xu	Manager
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			-		1,009,792
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			-		61,491
Yiqing, Wan	CEO & Director
Due from Yidu Benda Chemicals Co. Ltd.			560		-
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			-		137,687
Hui Xu	Manager
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			28,483		26,622
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			-		3,153
		$	997,593	$	3,193,618

F-23

Except for the loans from the shareholder Wei Xu by Everleader which bears interest rate at 12% per annum, unsecure and matures within six months, the above advances bear no interest and the above loans due to related parties are unsecured, non-interest bearing and are not convertible into equity. Proceeds from the above loans were used primarily for general working capital purposes, among whichthe current portion does not have definitive terms and for those portions which are long-term debts in nature, due on December 31, 2012.

19. Redeemable Common Stock Issuable For Services

On April 5, 2007, Benda Ebei entered into Equity Transfer Agreements with certain shareholders of SiBiono to purchase a total of approximately 57.57% of the shares of SiBiono’s common stock for total consideration of RMB 60,000,000 due and payable on or before April 30, 2007.

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

In connection with the above Equity Transfer Agreements, Benda entered into a Financial Consultancy Agreement with Super Pioneer International Limited (“Super Pioneer”) and Technical Consultancy Agreements with Wang and Zhang for financial and technical consultancy services to be rendered. Pursuant to the Financial and Technical Consultancy Agreements (the “Agreements”), Benda agreed to issue an aggregate of 2,189,560 shares of its common stock to Super Pioneer (2.1 million shares, out of which 1.96 million shares is redeemable), Wang (33,585 shares, redeemable) and Zhang (55,975 share, redeemable) within three months from the date of the Agreements. Since the issuance of common shares to Super Pioneer, Wang and Zhang was in the form of financial and technical consultancy services to be rendered, thus the corresponding amount $7,882,416 was recorded as consulting and professional fees.

Super Pioneer, Wang and Zang also agreed to refrain from selling shares of Benda’s common stock for a period of twelve months from the date of the issuance of the shares (the “Lock-up Period”). Within three months from expiration of the Lock-up Period, in the event that the public trading price of Benda’s common stock has not reach $3.60 per share and Benda’s common stock has not been listed on either the NASDAQ or AMEX stock exchanges, Super Pioneer, Wang, and Zang will have the option to require Benda to redeem an aggregate 2,049,560 shares of Benda’s common stock owned by Super Pioneer, Wang, and Zhang at a price of $3.60 per share.

In accordance EITF Topic D-98, “Classification and Measurement of Redeemable Securities” (“EITF Topic D-98”), as the Agreements governing the issuance of the 2,189,560 shares of common stock to Super Pioneer, Wang, and Zang contain provisions requiring Benda to repurchase 2,049,560 of these shares at a redemption price of $3.60 per share at the option of the holders (if certain events outside of control of the Group do not occur), these 2,049,560 shares have been classified as redeemable common stock, at their redemption price of $3.60 per share or totaling $7,376,366, outside of permanent equity at December 31, 2008.

F-24

According to the signed agreements mentioned in above, the redemption would be required to perform in September 2008. However the company has already obtained an oral consent from Super Pioneer, Wang and Zhang that the redemption would be deferred to the year of 2009.

20. Other Income / (Expenses)

Among the other income / (expenses), there was an amount incurred for the penalty to investors. For the years ended December 31, 2008 and 2007, the amount of penalty to investors mainly composed of the following events:

	YEAR ENDED DECEMBER 31,
	2008		2007
Registeration delay expense	$	1,113,405	$	1,022,275
Make Good Agreement		266,768		-
	$	1,380,173	$	1,022,275

a) In accordance with FASB staff position No. EITF00-19-2 the Group recorded $1,113,405 in Registration Delay Expense, for the year ended December 31, 2008. Out of the total penalty, $230,312 was settled by issuance of 523,438 shares of common stock. According to the signed agreement, the penalty would be capped 10% of the total fund raised and such cap was reached in June 2008, thus there would be no more penalties incurred onwards. Furthermore, the Registration Statement had been effective in August 2008.

b) According to the Investment Agreements (issuance of convertible promissory notes) in March 2007, the securities underlying the Notes and Warrants issued to the Investors are also subject to the terms of a Make Good Agreement entered into in connection with a financing the Group executed in November of 2006 (the “Make Good Agreement”). The Group further represented to the Investors that its target net income for fiscal year 2007 (“FY07 Net Income”) will be greater than or equal to $10.0 million (adjusted for a variety of non-cash charges) (the “Performance Threshold”). In the event the Performance Threshold is not attained, the Group is required to issue to the Investors a pro rata portion of 1,000,000 shares of the Group’s common stock for every one (1) cent by which the Group’s earnings per share, determined on a fully diluted basis, is less than $0.07. On Aug 25, 2008, the Group issued 3,810,976 shares of common stock in lieu of the non-achievement of the Performance Threshold at $0.07 per share, totaling to $266,768 and booked as penalty.

F-25

21. Other general and administrative

For the years ended December 31, 2008 and 2007, the amount of other general and administrative expenses mainly composed of the following events:

	YEAR ENDED DECEMBER 31,
	2008		2007
Audit and accounting	$	420,724	$	405,364
Legal fees		240,247		304,649
Office expenses		231,373		428,219
Salaries and wages		950,023		961,797
Consulting fee		982,460		221,044
Rent & Utilities		106,611		77,132
Investor relation, Transfer agent and filing fees		33,563		109,540
Travel and transportation		249,364		239,316
Repair and maintanence		296,822		-
Miscellaneous		276,496		426,246
Total other general & administrative	$	3,787,684	$	3,173,307

22. Government Subsidies / Grants

As mentioned in the Note 14, long term debt payable, various technology funds were obtained from various government technology agencies to support its gene therapy research and development activities during the past years and recorded as long term debt payable. According to the technology fund agreements, the various government technology agencies will examine the results of research and development according to the status of the projects. Once the examination takes place, the obligation of a particular debt payable is discharged accordingly.

According to US GAAP, once the obligation of a particular debt payable is discharged, the amount of this particular debt payable should be treated as government subsidies / grants. During the year ended December 31, 2008, there were no government subsidies / grants recognized as revenue

23. Income Taxes

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

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

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

F-26

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

Year	Tax rate
2008	18%
2009	20%
2010	22%
2011	24%
2012 and thereafter	25%

There was no income tax of the Group for the years ended December 31, 2008. The prepaid income tax by the Group during the year ended December 31, 2008 at amount of $0.71 million was recorded as prepaid tax.

The provision for taxes on earnings consisted of:

	YEAR ENDED DECEMBER 31,
	2008		2007
Crurrent income taxes expenses:
PRC Enterprise Income	$	-	$	965,183
United States Federal Income Tax		-		-
	$	-	$	965,183

A reconciliation between the income tax computed at the U.S statutory rate and the Groups provision for Income tax for the years of 2008 and 2007 are as follows:

	YEAR ENDED DECEMBER 31,
	2008			2007
U.S Statutory rate		34.0	%		34.0	%
Foreign income not recognized in the U.S		-34.0	%		-34.0	%
PRC statuory rate		25.0	%		33.0	%
Tax relief and holidy granted to the Subsidary		-12.5	%		-15.0	%
Provision for income tax		-12.5	%		18.0	%

F-27

24. Long Term Convertible Promissory Note

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

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

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

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

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

On July 10, 2008, 10 units of were converted to shares of 540,870. Therefore, as of December 31, 2008, the aggregate $7,260,000 principal balance of the notes remained outstanding and for the year ended December 31, 2008, the Group recorded $695,286 of interest expense related to the Notes.

F-28

During the year ended December 31, 2008, the Group recorded $3,520,876 in interest expense related to the amortization of the debt discount associated with the Warrants and the debt discount associated with the beneficial conversion feature.

The Group also incurred $529,200 in placement agent commissions related to the issuance of the Notes and Warrants. This amount was recorded by the Group as debt issue costs and is being amortized over expected term of the Notes. For the year ended December 31, 2008, the Group recorded $264,962 in amortization expense related to debt issue costs.

The securities underlying the Notes and Warrants issued to the Investors are also subject to the terms of a Make Good Agreement entered into in connection with a financing the Group executed in November of 2006 (the “Make Good Agreement”). The Group further represented to the Investors that its target net income for fiscal year 2007 (“FY07 Net Income”) will be greater than or equal to $10.0 million (adjusted for a variety of non-cash charges) (the “Performance Threshold”). In the event the Performance Threshold is not attained, the Group is required to issue to the Investors a pro rata portion of 1,000,000 shares of the Group’s common stock for every one (1) cent by which the Group’s earnings per share, determined on a fully diluted basis, is less than $0.065. During the year ended December 31, 2008 the Group issued shares 3,810,976 shares of common stock in lieu of the non-achievement of the Performance Threshold at $0.07 per share, totaling to $266,768.

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

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

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

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

F-29

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

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

In accordance with FASB staff position No. EITF00-19-2, as of December 31, 2008 the Group recorded $1,113,405 for Registration Delay Expense or penalty to investors. According to the signed agreement, the penalty would be capped 10% of the total fund raised and such cap was reached in June 2008, thus there would be no more penalties incurred onwards. Furthermore, the Registration Statement had been effective in August 2008.

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

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

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

(b) As of December 31, 2007, 100,170,071 shares of common stock were issued and outstanding, par value $0.001 each; During the reporting period of the year 2008: (i) 523,438 shares were issued to PIPE investors as penalty for registeration delay expenses (see Note 20); (ii) 110,000 shares were issued to the independent directors in lieu of their remuneration; (iii) 540,870 shares were issued upon conversion of 10 units of convertible promissory notes; and (iv) 3,810,976 shares were issued to the investors under the Make Good Agreement . Thus, the share of common stock issued and outstanding was 105,155,355 as of December 31, 2008.

F-30

				Events occurred
	December 31,			during the			December 31,
Events	2007			reporting period			2008
To record the changes of par value from $0.01 to $0.001
of the outstanding common stock as of 11/17/2005	$	584,481			-		$	584,481
To adjust the par value of outstanding common stock as of 3/31/2006		(5,354	)		-			(5,354	)
Waiver of shareholder loan on 9/5/2006		2,298,434			-			2,298,434
To eliminate the common stock and additional paid-in capital of the former shell
company "Applied Spectrum Technologies, Inc." on 11/15/2006		16,215,770			-			16,215,770
To eliminate the accumulated deficit of the former shell company
"Applied Spectrum Technologies, Inc." on 11/15/2006		(16,209,962	)		-			(16,209,962	)
Issuance of common stock, 25,961,760 shares at $0.4622 per share, on 11/15/2006		11,974,038			-			11,974,038
Issuance of common stock, 64,942,369 shares at $0.001 per share on 11/15/2006		(64,942	)		-			(64,942	)
To relocate the original common stock of Ever Leader on 11/15/2006		1,285			-			1,285
To record the placement agent commission and transaction related fee
of reverse merger on 11/15/2006		(1,694,326	)		-			(1,694,326	)
Issuance of common stock 706,195 at $0.4622 per share		325,697			-			325,697
Debt discount on beneficial conversion feature on convertible promissory notes		2,385,089			-			2,385,089
Debt discount on warrants issued with convertible promissory notes		5,174,911			-			5,174,911
Placement agent exercised 849,007 warrants at strike price through cashless arrangement		470,347			-			470,347
Issuance of common stock to PIPE investors as penalty for late submission of 10KSB		92,461			-			92,461
Issuance of common stock to directors in lieu of their remuneration		-			75,790			75,790
Issuance of common stock to PIPE investors as penalty for registeration delay expenses		-			229,789			229,789
Conversion of convertible promissory notes		-			(8,039	)		(8,039	)
Issuance of common stock to investors under "Make Good Agreement"		-			262,957			262,957
Additional paid-in capital, balance for the period ended	$	21,547,929			560,498		$	22,108,427

(d) As of December 31, 2007, 27,708,929 Warrants, each convertible into one (1) share of the Group’s Common Stock, issued and outstanding, During the year ended December 31, 2008, 1,597,075 warrants were issuable to CRT Capital Group, LLC and 958,245 warrants were issuable to EastGate Financial, Inc. in lieu of their consultancy service. Thus the remaining balance as December 31, 2008 was 30,264,249

(e) None options issued and outstanding.

26. Weighted average shares outstanding – diluted

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

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

F-31

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

	YEAR ENDED DECEMBER 31,
	2008			2007
Numerator:
Net income (loss)	$	(15,815,920	)	$	(7,362,825	)
Denominator:
Basic weighted-average shares outstanding		101,965,464			98,181,685
Effect of dilutive stock options & warrants		-			-
Diluted weighted-average shares outstanding		101,965,464			98,181,685
Net income (loss) per share:
Basic	$	(0.16	)	$	(0.07	)
Diluted	$	(0.16	)	$	(0.07	)

27. Commitments and Contingencies

As of December 31 2008, there was an operating lease commitment and the amounts are stated as follows;

	YEAR ENDED DECEMBER 31,
	2008		2007
Rental and Property Management Fee
Within one year	$	70,203	$	107,600
One to two year		-		73,691
Total commitments payable	$	70,203	$	181,291

28. Segment Information

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

1. Benda Ebei produces conventional medicines which including banded and generic medicines;

2. Jiangling Benda produces active pharmaceutical ingredients, APIs;

3. Yidu Benda produces bulk chemicals;

4. Beijing Shusai produces pharyngitis killer therapy; and

5. SiBiono produces gene therapy medicines, Gendicine.

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

F-32

Selected financial information for each of these segments for the years ended December 31, 2008 and 2007 were as follows:

	YEAR ENDED DECEMBER 31,
Branded/Generic medicine segment	2008			2007
Revenue from external customers	$	22,021,248		$	19,353,654
Cost of sales		(14,761,544	)		(12,046,687	)
Gross profit		7,259,704			7,306,967
Gross margin		33	%		38	%
Research and development		(19,541	)		(2,963	)
Selling expense		(1,329,197	)		(715,588	)
General and administrative expense		(10,126,419	)		(628,426	)
Segment contribution	$	(4,215,453	)	$	5,959,990
Contribution margin		-19	%		31	%
Total assets, segment	$	28,964,374		$	32,296,895
Active pharmaceutical ingredients segment	2008			2007
Revenue from external customers	$	689,481		$	531,531
Cost of sales		(778,212	)		(528,473	)
Gross profit		(88,731	)		3,058
Gross margin		-13	%		0	%
Research and development		(5,776	)		(359	)
Selling expense		(5,581	)		(505	)
General and administrative expense		(1,726,546	)		(224,754	)
Segment contribution	$	(1,826,634	)	$	(222,560	)
Contribution margin		-265	%		0	%
Total assets, segment	$	9,772,782		$	8,852,806
Bulk chemicals segment	2008			2007
Revenue from external customers	$	-		$	698,578
Cost of sales		-			(425,529	)
Gross profit		-			273,049
Gross margin		0	%		39	%
Research and development		-			-
Selling expense		-			(27,309	)
General and administrative expense		(628,182	)		(590,759	)
Segment contribution	$	(628,182	)	$	(345,019	)
Contribution margin		0	%		-49	%
Total assets, segment	$	7,472,081		$	7,668,725
Pharynigitis killer therapy segment	2008			2007
Revenue from external customers	$	4,565		$	43,890
Cost of sales		(251	)		(2,341	)
Gross profit		4,314			41,549
Gross margin		95	%		95	%
Research and development		-			-
Selling expense		(4,370	)		(43,680	)
General and administrative expense		(38,049	)		(116,825	)
Segment contribution	$	(38,105	)	$	(118,956	)
Contribution margin		-835	%		-271	%
Total assets, segment	$	92,255		$	106,345
Gendicine (Ad-p53) segment	2008			2007
Revenue from external customers	$	2,326,692		$	5,756,955
Cost of sales		(200,100	)		(418,667	)
Gross profit		2,126,592			5,338,288
Gross margin		91	%		93	%
Research and development		(1,436,635	)		(550,640	)
Selling expense		(1,369,820	)		(794,573	)
General and administrative expense		(1,400,002	)		(1,295,906	)
Segment contribution	$	(2,079,864	)	$	2,697,169
Contribution margin		-89	%		47	%
Total assets, segment	$	12,333,971		$	13,632,634

F-33

	YEAR ENDED DECEMBER 31,
	TOTAL
	2008			2007
Total revenue from external customers	$	25,041,986		$	26,384,608
Cost of sales		(15,740,107	)		(13,421,697	)
Gross profit		9,301,879			12,962,911
Gross margin		37	%		49	%
Research and development		(1,461,951	)		(553,962	)
Selling expense		(2,708,968	)		(1,581,655	)
General and administrative expense		(13,919,196	)		(2,856,670	)
Segment contribution	$	(8,788,237	)	$	7,970,624
Contribution margin		-35	%		30	%
Total assets, segment	$	58,635,463		$	62,557,407

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

		YEAR ENDED DECEMBER 31,
		2008			2007
Total segment contribution		$	(8,788,237	)	$	7,970,624
Unallocated amounts:
	Loss on disposal of fixed assets		-			(30,027	)
	Government subsidy		-			2,276,574
	Other income/(expenses)		(1,311,140	)		(966,311	)
	Other corporate expenses		(7,194,822	)		(13,412,308	)
Total income / (loss) before minority interest and income taxes		$	(17,294,198	)	$	(4,161,448	)

The other corporate expenses for the year ended December 31, 2008 and 2007 composed of the following events:

	YEAR ENDED DECEMBER 31,
	2008		2007
Consulting and professional fee	$	-	$	8,353,615
Wages and salaries		417,276		347,949
Audit and accounting		330,919		334,106
Amortization of debt issue cost		264,962		201,255
Consulting fee		747,937		157,619
Investor relation, transfer agent and filing fees		33,563		109,540
Director renumeration		185,468		94,247
Legal fee		137,805		102,544
Brokerage		-		50,161
Travel and transportation		4,844		51,071
Office expense		1,120		53,597
Interest expense		4,961,430		3,090,952
Miscellaneous		109,499		465,652
Total	$	7,194,822	$	13,412,308

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

F-34

The following table shows the reconciliation between the segments assets and the total assets for the years ended December 31, 2008 and 2007:

		YEAR ENDED DECEMBER 31,
		2008		2007
Total assets, segment		$	58,635,463	$	62,557,407
Total assets of corporate:
	Cash and cash equivalent		31,070		80,291
	Bank indebtedness		1,288,257		874,490
	Prepaid expesnes and deposit		2,952		851
	Refundable purchase price paid		1,200,000		1,200,000
	Due from related parties		660,102		876,589
	Debit issue costs:
	placement agent commission		55,485		327,945
Accumulative other comprehensive income
Total assets		$	61,873,327	$	65,917,572

The following table shows how the minority interest for year ended December 31, 2008 and 2007 was derived:

	Year Ended December 31, 2008
	Benda			Jiangling			Yidu			Beijing
	Ebei			Benda			Benda			Shusai			SiBiono			Total
Segment operating profit / (loss)	$	(4,215,453	)		(1,826,634	)		(628,182	)		(38,105	)		(2,079,864	)	$	(8,788,237	)
Interest income/ (expenses)		(506,997	)		1,610			52			-			(317,975	)		(823,309	)
Other income / (expenses)		118,065			182			3,943			6,829			64,888			193,906
Income taxes		-			-			-			-			-			-
Income / (loss) before minority interest	$	(4,604,384	)		(1,824,842	)		(624,187	)		(31,276	)		(2,332,950	)	$	(9,417,640	)
MI percentage		5.00	%		9.75	%		9.75	%		28.75	%		42.88	%
MI interest	$	(230,219	)		(177,922	)		(60,858	)		(8,992	)		(1,000,287	)	$	(1,478,278	)
	Year Ended December 31, 2007
	Benda			Jiangling			Yidu			Beijing
	Ebei			Benda			Benda			Shusai			SiBiono			Total
Segment operating profit / (loss)	$	5,959,990			(222,560	)		(345,019	)		(118,956	)		2,697,169		$	7,970,624
Loss on disposal of assets		-			(24,852	)		(5,175	)		-			-			(30,027	)
Interest income/ (expenses)		(88,077	)		2,547			(23,748	)		(23	)		(189,423	)		(298,724	)
Government subsidy		-			-			-			-			2,276,574			2,276,574
Other income / (expenses)		(18,449	)		(12,273	)		3,555			(1,251	)		84,382			55,964
Income taxes		(965,183	)		-			-			-			-			(965,183	)
Income / (loss) before minority interest	$	4,888,281			(257,138	)		(370,387	)		(120,230	)		4,868,702		$	9,009,228
MI percentage		5.00	%		9.75	%		9.75	%		28.75	%		42.88	%
MI interest	$	244,414			(25,071	)		(36,112	)		(34,566	)		2,087,529		$	2,236,194

29. Subsequent Events

(a) SiBiono patents - on January 29, 2007, SiBiono entrusted Grandall Legal Group Shenzhen Law Firm to issue a legal letter to Zhaohui Peng, one of the shareholders of Sibiono and the inventor of Gendicine, requesting him to transfer all the title of patents to SiBiono.

F-35

Item

Patent name

Countries / Date

Application Number (1)

Publication Number (2)

Approved Patent Number (3)

Name of Patent Inventor (6)

Name of Applicant (6)

Patent Assignees

A new method for manufacturing recombinant adenovirus

China

98123346.5

CN1228474A

ZL98123346.5

Peng

SiBiono

Date

12/14/1998

9/15/1999

7/3/2002

A recombinant constructed by a virus vector and a human tumor suppressor gene and its use

China

02115228.4

CN1401778A

ZL02115228.4

Peng / Zhang

Date

5/8/2002

3/12/2003

11/24/2004

PCT (4)

PCT/CN/2004/000465

WO2004/078987A1

Not Approved

Peng / Zhang

N/A

Date

3/8/2004

9/16/2004

N/A

Recombinant gene medicine of adenovirus vector and and gene p54 for treating proloferative diseases

China

03125129.3

CN1471977A

ZL03125129.3

Peng / Zhang

Date

5/10/2003

2/4/2004

7/25/2007

PCT (4)

PCT/CN/2004/000458

WO2004/104204A1

Not Approved

Peng / Zhang

N/A

Date

5/9/2004

12/2/2004

N/A

The application of recombinant adenoviral p53 as cancer vaccine (tentative title)

China

200510002779.1

CN1679641A

ZL200510002779.1

Peng / Zhang

Date

1/26/2005

10/12/2005

8/29/2007

PCT (4)

PCT/CN/2005/000111

WO2006/079244A1

Not Approved

Peng / Zhang

N/A

Date

1/26/2005

8/3/2006

N/A

US (5)

11/075035

2005/0281785A1

Not Approved

Peng / Zhang

Unidentified Yet

N/A

Date

3/7/2005

12/22/2005

N/A

Human Embryonic Kidney (HEK) sub-clone cell line

China

03126889.7

CN1513985A

Not Approved

Peng / Zhang

N/A

Date

6/13/2003

7/21/2004

N/A

PCT (4)

PCT/CN/2004/000457

WO2004/111239

Not Approved

Peng / Zhang

N/A

Date

5/9/2004

12/23/2004

N/A

The complex of polypeptide liposome and human VGEF

gene, and its use and human VGEF gene, and its use

China

02134321.7

CN1389269A

Not Approved

Peng / Zhang / Zhu

N/A

Date

7/4/2002

1/8/2003

N/A

Note:

(1) Application number is obtained when application is submitted;

(2) Publication number is obtained after the first phase examination;

(3) Approved patent number is obtained after the final examination;

(4) PCT is referred to an International Patent Organization in Paris;

(5) US is referred to the application is made in United States of America alone;

(6) Peng is referred to Zhaohui Peng; Zhang is referred to Xiaozhi Zhang; Zhu is referred to Jinya Zhu.

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

(b) As mentioned in Note 12, following this arbitration decision, Benda Ebei has the obligation to pay the total acquisition cost payable of Rmb12.48 million, plus the penalty and related legal and arbitration expenses, totaling approximately Rmb12.80 million (or $1.88 million).

F-36

(c) The Company has become aware that Excalibur Limited Partnership and Excalibur Limited Partnership II (the "Plaintiffs") filed a motion for summary judgment in lieu of a complaint pursuant to CPLR § 3213 (the "Motion") with the Supreme Court of the State of New York (the "Court"), alleging that the Company has been delinquent on the payment of an aggregate sum of $600,000 and accrued interest and costs arising from the Convertible Promissory Notes that were issued to the Plaintiffs in April 2007 in connection with a $7,560,000 private placement. Pursuant to the motion, the Plaintiffs requested that the Court (1) enter summary judgment in favor of Excalibur Limited Partnership (“Excalibur Limited”) in the amount of $390,000 plus all accrued interest and costs, and, (2) enter summary judgment in favor of Excalibur Small Cap Opportunities LP (“Excalibur Small Cap”) in the amount of $210,000 and accrued interest and costs. As of the date hereof, the Company has not received service of such notice, and therefore, the Company does not have details regarding the content of the complaint made by the Plaintiffs.

(d) On March 4, 2009, the Company received a Notice and Default and Payment Demand letter (the "Default Letter") from Pope Investments LLC ("Pope") in connection with its convertible promissory note in the amount of $5,520,000 (the "Note") purchased in our April 2007 private placement offering. The Default Letter provided notice of default based on the Company's failure to make a required interest payment on the Note by February 20, 2009. The Default Letter further demanded full payment of all interest, liquidated damages and accrued interest thereon in the amount of $130,364.37 by March 14, 2009, or Pope will accelerate the maturity date of the full principal amount of the Note. On April 7, 2009, the Company received further Default Letters and Payment Demand from Pope, Excalibur Limited and Excalibur Small Cap demanding payment in full of the balance of the Notes, which matured on March 28, 2009.

F-37

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

~~Commencing~~On March ~~January~~1, ~~2007~~2010, ~~Rotenberg~~Benda ~~has~~Pharmaceutical, ~~decided~~Inc. (the “Company”) was notified Kempisty & Company Certified Public Accountants, P.C., the Company’s independent registered public accounting firm (“K&Co”), intended to nocease ~~longer~~auditing ~~undertake~~services ~~audits~~for public companies and that certain employees of ~~Chinese~~Kempisty would be providing ~~based~~services ~~companies.~~for ~~Therefore~~MaloneBailey, ~~Schwartz~~LLP ~~Levitsky~~(“MB”). On ~~Feldman~~March ~~LLP~~1, 2010, K&Co resigned as ~~Rotenberg's~~the independent registered public accounting firm of the Company and, with ~~sub-contractor~~the onapproval of the Audit Committee of the Company'’s ~~audit~~Board ~~shall~~of beDirectors, MB was engaged as the Company'’s independent registered public accounting firm.

OnK&Co ~~February~~performed 8,audit ~~2007,~~of ~~we dismissed Schwartz Levitsky Feldman LLP (“SLF”) as our independent registered public accounting firm. SLF was previously appointed on January 9, 2007 as our independent auditors for~~ the ~~fiscal~~Company’s ~~year~~consolidated ~~ended September 30, 2006 on whose~~ financial statements ~~they rendered an unqualified opinion on January 11, 2007. On November 17, 2006, SLF was also engaged to audit the financial statements of Everleader~~ for the fiscal ~~years~~year ended December 31, ~~2005 and 2004~~2008. ~~Benda~~K&Co’s ~~and~~report ~~SLF~~ did not ~~have~~contain ~~any disagreements with regard to any matter~~an ofadverse ~~accounting~~opinion ~~principles~~ or ~~practices,~~a ~~financial~~disclaimer ~~statement~~of ~~disclosure,~~opinion ~~or auditing scope or procedure during the year ended September 30, 2006 for which SLF issued an audit report,~~ and ~~the~~were ~~subsequent~~not ~~interim~~qualified ~~period~~or ~~through~~modified ~~February~~as 8,to ~~2007. As required by applicable Securities legislation~~uncertainty, ~~Benda~~ ~~engaged SLF to~~ audit ~~the financial statements of Everleader for the fiscal years ended December 31~~scope, ~~2005~~or ~~and~~accounting ~~2004. During the period of the engagement with SLF~~principles, ~~neither~~ ~~Benda~~except ~~nor~~for ~~Everleader~~an ~~had retained a qualified Chief Financial Officer.~~explanatory ~~Accordingly,~~paragraph ~~neither~~related ~~Benda~~to ~~nor Everleader had~~ the ~~technical~~Company’s ~~expertise~~ability ~~and~~to continue as a ~~result~~ ~~was unable to provide sufficient audit documentation and/or information~~going ~~to allow SLF to complete the audit of Everleader for the years ended December 31, 2005 and 2004~~concern.

~~On March~~During 7,the ~~2007,~~fiscal weyears ~~engaged~~ended ~~Kempisty~~December ~~and Company Certified Public Accountants~~31, ~~P.C. (“Kempisty”)~~2009 toand beDecember ~~our new independent registered public accounting firm. Prior to engaging Kempisty~~31, ~~the~~2008 ~~Company~~and ~~had not consulted Kempisty regarding~~ the ~~application~~subsequent ofinterim ~~accounting~~period ~~principles~~up tothrough athe ~~specified~~March ~~transaction~~1, ~~completed or proposed~~2010, ~~the~~there ~~type~~were ofno ~~audit opinion that might be rendered on the Company’s~~(i) ~~financial~~disagreements ~~statements~~between ~~or a reportable event, nor did~~ the Company ~~consult~~and ~~with Kempisty~~K&Co ~~regarding any disagreements with its prior auditor~~ on any matter of ~~accounting~~ accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to ~~the~~its satisfaction ~~of the prior auditor~~, would have caused itK&Co to make a reference to the subject matter of ~~the~~such disagreements in connection with its report, or (ii) “reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K.

72On March 1, 2010, the Company furnished K&Co with a copy of this report prior to filing with the Securities and Exchange Commission (“SEC”) and requested that K&Co furnish it with a letter addressed to the SEC stating whether or not it agreed with the statements made by the Company in this report insofar as they relate to K&Co’s audit services and engagement as the Company’s independent registered public accounting firm. K& Co has furnished a letter addressed to the SEC dated March 1, 2010, a copy of which is attached hereto as Exhibit 16.

As noted above, on March 1, 2010, the Company engaged the services of MB as the independent registered public accounting firm of the Company. During the fiscal years ended December 31, 2009 and 2008 and from December 31, 2009 through the engagement of MB as the Company’s independent registered public accounting firm, neither the Company nor anyone on its behalf consulted MB with respect to any accounting or auditing issues involving the Company. In particular, there was no discussion with the Company regarding the application of accounting principles to a specified transaction, the type of audit opinion that might be rendered on the financial statements, or any matter that was either the subject of a disagreement, as described in Item 304 of Regulation S-K, with K&Co, or a “reportable event” as described in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with United State’s generally accepted accounting principles (US GAAP), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework ~~issued~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on the ~~this~~evaluation ~~assessment~~of these disclosure controls and procedures, ~~Management~~ ~~concluded~~and in light of the material ~~Company~~weaknesses ~~maintained~~found ~~effective~~in our internal ~~control~~controls, ~~over~~the Chief Executive Officer ~~financial~~concluded ~~reporting~~that asour ofdisclosure ~~December~~controls ~~31,~~and ~~2008~~procedures were not effective.

~~Because of~~Management ~~its~~Report ~~inherent limitations, internal control over financial reporting may not~~on ~~prevent~~Internal orControl ~~detect~~Over ~~misstatements. Therefore,~~Financial ~~even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.~~Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of our Chief Executive Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2009 using the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of December 31, 2009, we determined that control deficiencies existed that constituted material weaknesses, as described below.

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

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

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

Management is currently evaluating remediation plans for the above control deficiencies. Accordingly, we concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2009 based on criteria established in Internal Control—Integrated Framework issued by COSO.

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

Changes in Internal Controls

During the quarter ended December 31, 2009 there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, positions and ages of our executive officers and directors. All of our directors serve until the next annual meeting of stockholders or until their successors are elected and qualify. Officers are elected by the board of directors and their terms of office are, except to the extent governed by employment contract, at the discretion of the board of directors.

Name	Age	Position	Date of Appointment
Yiqing Wan	46	Chief Executive Officer, Chief Financial Officer and Chairman	November 10, 2006
Wei Xu	45	Vice President of Operations	November 15, 2006
Jun Tang	42	Director	April 25, 2008
Hui Long	47	Vice President of Technology	November 15, 2006
Jingbo Wu	46	Vice President	November 15, 2006
Dr. Q.Y. Ma	51	Chairman of Compensation Committee and Director	March 20, 2007
Eric Yu	40	Chief Financial Officer and Director	February 9, 2007
Dr. George (Guoqing) Zhou, Ph.D.		Chief Operating Officer	August 13, 2008

7365

Business Experience Descriptions:

Mr. Yiqing Wan, Chairman, and Chief Executive Officer and Chief Financial Officer

Mr. Wan was appointed as Chairman and Chief Executive Officer on November 10, 2006. Mr. Wan was appointed as the Chief Financial Officer in September 2009 upon Eric Yu’s resignation from the position. Mr. Wan founded Benda Ebei in April 2001and has served as its president and general manager overseeing the day to day operations of the Company since such time. Before founding Benda Ebei, Mr. Wan was Chairman of Zhanjiang Jinhui Pharmaceutical Corp. (from 1995 to 1998), Chairman of Shandong Jinhai Real Estate Development Co. (from 1992 to 1995), Manager of Hainan Pharmaceutical Co. Ltd Guangzhou Division (from 1990 to 1992), and Director of Yichang No.4 Drug Plant (from 1982 to 1990). Mr. Wan has held a range of operational and executive positions in a number of pharmaceutical enterprises for more than two decades and has developed significant management experience in production planning and implementation and in product marketing. Mr. Wan earned B.S. degree in Biological Engineering from Sanxia University in 1982.

Ms. Wei Xu, Vice President of Operations

Ms. Xu was appointed as Vice President of Operations on November 15, 2006. In April, 2007, she was appointed as the General Manger of Shenzhen SiBiono Gene Tech Co., Ltd., a subsidiary of the company. From 2002 to present, she serves as Chairperson of a related company, Hubei Benda Science and Technology Co., Ltd. Prior to such time, she was the Chairman at Hubei Tongji Benda Pharmaceutical Co., Ltd. (from 1999 to 2004), General Manager at the Zhanjiang Jinhui Pharmaceutical Co., Ltd (from 1995 to 1998) and Manager at the Hainan Pharmaceutical Co., Ltd., Guangzhou Division (from 1991 to 1995).

Jun Tang, Director

Jun Tang is now serving as president and Chief Executive Officer in Xin Hua Du Industrial Group Co., a group company incorporated in the PRC covering retail, real estate, mining, high-tech and tourism industries with a subsidiary already listed both in Hong Kong Stock Exchange and in PRC A-shares market and a subsidiary to be listed in PRC A-shares market in the year of 2008.

Prior to joining Xin Hua Du Industrial Group Co. this April of 2008, Mr. Tang served as the president and director of Shanda Interactive Entrainment Limited, a company listed in NASDAQ, and now remain as a member of Shanda's board of directors and serve as an advisor to the CEO of Shanda.

Prior to joining Shanda in 2004, Mr. Tang served as the president of Microsoft China Co., Ltd. from March 2002 to January 2004 and the general manager of Microsoft Asia product support and service and Microsoft Global Technical Engineering Center from January 1998 to March 2002. He received the Microsoft Chairman Bill Gates Award in 1998 and the Microsoft Top Honor Award in 2002 from Microsoft Corporation, and remains the honorary president of Microsoft China Co. Ltd. Prior to joining Microsoft, Dr. Tang founded Intertex Company, a software and entertainment company, in Los Angeles, California in 1993.

Mr. Tang received his doctorate degree, master’s degree and bachelor’s degree in the U.S., Japan and China, respectively. Mr. Tang was honoured as PRC Top 10 Economic Person, PRC Top 10 IT Person, PRC Top 10 Valuable CEO etc.

Mr. Hui Long, Vice President of Technology

Mr. Long was appointed as Vice President of Technology on November 15, 2006. Mr. Long has held senior technical and production management positions with pharmaceutical enterprises for approximately 20 years. From 2001 to present, he is the General Manager of Jiangling Benda Pharmaceutical Co., Ltd. Prior to such time, he was he deputy general manager of Zhanjiang Jinhui Pharmaceuticals Co. Ltd (from 1995 to 2000), the Chief of Technical Division of Sanxia Pharmaceutical Co., Ltd (from 1993 to 1995) and t. Mr. Long earned a B.S. in Biological Engineering from Sanxia University in 1982 and an M.S. in Biological Engineering from Sanxia University in 1988.

7466

Mr. Jingbo Wu, Vice President

Mr. Wu was appointed as Vice President on November 15, 2006. Since 2002, Mr. Wu has been the general manager of North Hubei Tongji Benda Pharmaceutical Company Ltd., overseeing the company’s daily activities and GMP authentication. Prior to this position, he was the deputy general manager of Ebei Pharmaceutical Corp. (from 2000 to 2001) and the deputy general manager of Zhejiang Jinhui Pharmaceutical Co. Ltd. (from 1999 to 2000). Mr. Wu received his certification of graduation in Business Administration from Wuhan University in 1995.

Dr. Q.Y. Ma, Director

Dr. Ma was appointed as a Director on March 20, 2007. Dr. Ma has over 20 years of R&D and managerial experience in US. Dr. Ma has been the managing director of Time Innovation Ventures, a venture capital firm focused on funding technology start-ups and joint ventures in China, since 2000. He has also been a director of ComTech, a Chinese semiconductor company, since 2004. He served as an Associate Professor of electrical engineering at the University of Hong Kong from 1998 to 2005. Dr. Ma also served as an Associate Professor at the Department of Electrical Engineering at Columbia University and in the Department of Radiology at Harvard Medical School from 1994 to 2005. He has served as a consultant to IBM, General Electric, TRW Inc. and DuPont. Dr. Ma is a co-founder of and advisor to Semiconductor Manufacturing International Corp., and the Chairman of TiMed. He has served as an adviser to the Ministry of Information Industry, Beijing Government, and as senior advisor to Zhangjiang Hi-Tech Park in Shanghai. He has published over 160 papers and obtained 7 patents. Dr. Ma received his PhD from Columbia University, and attended the Executive Program of Stanford University's School of Business.

~~Eric Yu Tak Shing, Chief Financial Officer and Director~~67

Mr. Yu is a Certified Public Accountant with thirteen years of experience in public and corporate accounting and finance. In February of 2007, Mr. Yu was appointed as the Chief Financial Officer of the Company. Mr. Yu has served as the Financial Controller for Beijing Teletron Telecom Engineering Co. Ltd. from March of 2006 to January of 2007 and was in charge of the company’s issuance of private placements and Pre-IPO issues. From March of 2005 to March of 2006, Mr. Yu served as the Financial Controller for Payease Inc., where he was in charge of merger and acquisition fund raising and arranging bridge loans. From June of 2001 to February of 2005, Mr. Yu served as the Financial Controller for several companies including Dynegy Network Technology Services (BJ) Ltd., an internet data center, China Gas Holdings, Ltd. and Tianjin East Ocean Gas Co. Ltd., manufacturers in natural gas. From May of 2000 to February of 2005, Mr. Yu also served as the Financial Controller of the project companies of AsiaVest Investment Advisory Limited. His responsibilities included managing the accounting and listing department, and planning for an IPO with a fund raising target of HK$150 million.

Mr. Yu received a Bachelor of Commerce degree with a Accountancy and Legal Studies major in 1993 from University of Wollongong, Australia. Mr. Yu has worked closely with investment bankers for Pre-IPO and Private Placements, and in constructing financial and accounting systems and practice according to the high standards required for public listing.

Mr. Yu has served as a professional accountant to a widespread range of clients in China, Hong Kong, and the United States, and has worked in several different industries including Natural Gas, Telecom, Manufacturing, Infrastructure Construction, Hospitality, and Auditing.

Dr. George (Guoqing) Zhou, Ph.D.

Dr. George Zhou was appointed as our Chief Operating Officer on August 13, 2008. Prior to joining the Company, from June 2007 to July 2008, Mr. Zhou served as Partner and managing director of Eos Funds, a consulting and direct investment for Chinese companies to list in the US and Canadian public.

From June 2004 to May 2007, Mr. Zhou served as Co-founder, President, CEO, and Board Director of Red Mountain Pharmaceuticals Ltd., currently called Abepharma Ltd., a British Virgin Island Company with 19 subsidiaries, 1800 employees and has pharmaceutical manufacture, wholesale and retail (about 300 pharmacy chain stores) operations in Chifeng city, Inner Mongolia, China.

From June 2004 to December 2006, Mr. Zhou also served as Co-founder, CEO and Chairman of Board of Red Mountain Pharmaceutical (China), Inc., the subsidiary of Abepharma Ltd.

From June 2004 to December 2006, Mr. Zhou served as Co-founder, CEO, and then Chairman of the Board of Kangjian Pharmaceutical Co. Ltd. which acquired Chifeng Medical Group, the state owned enterprise (SOE) with about 3000 employees, 50 subsidiaries, including pharmaceutical manufacture, wholesales and over 300 retail stores, medical devices, hospitals and clinics, hotels, real estates, farms, restaurants. Mr. Zhou helped to successfully transform the company into a private corporation; re-structured part of its assets and businesses as Red Mountain Pharmaceuticals (China). Inc.; introduced US investors to the corporation; and set Western standard management schedules, including US GAAP Audit.

Prior to entering the pharmaceutical industry, Mr. Zhou was a post-doctoral fellow in molecular biology at the University of Victoria, Canada, and received a Ph.D. in molecular biology from Umea University, Sweden. He received his Masters degree in Genetics at Southwest University, China. He was an associate professor from August of 1996 to 1998 at Chongqing University, China.

Employment Agreements

On November 15, 2006, we executed employment agreements with each of our executive officers, specifically, Yiqing Wan, our Chief Executive Officer; Wei Xu, our Vice President of Operations; Hui Long, our Vice President of Technology; Daping Gu, our Vice President of Marketing; and Jingbo Wu, our Vice President. The employment agreements are for terms of three years, except for Yiqing Wan, whose term is for five years. The employment agreements provide for annual salaries and annual bonuses in amounts as set forth in the table herein entitled “Executive Compensation Summary.”

Audit Committee and Audit Committee Financial Expert

The Audit Committee assists the Board of Directors in its oversight of the quality and integrity of the accounting, auditing and reporting practices of the Company. The Audit Committee has the authority and responsibility to hire one or more independent auditors to audit the Company’s books, records and financial statements and to review the Company’s systems of accounting (including its systems of internal control), to discuss with such independent auditors the results of such audit and review, to conduct periodic independent reviews of the systems of accounting (including systems of internal control), and to make reports periodically to the Board of Directors with respect to its findings. The Board of Directors has determined that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the Committee. The committee is also responsible for making recommendations to the Board of Directors or otherwise acting with respect to corporate governance matters, including board size and membership qualifications, new director orientation, committee structure and membership, communications with shareholders, and board and committee self-evaluations. The Audit Committee operates under a written charter adopted by our Board of Directors.

The members of the Audit Committee are independent of the Company (as defined under Rule 4200(a)(15) of the NASDAQ Marketplace Rules). We currently do not have a member of the Audit Committee that is a “financial expert” as defined under Item 407 of Regulation S-B.

Code of Ethics

A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:

· Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; ~~· Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer;~~

76· Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer;

· Compliance with applicable governmental laws, rules and regulations; · The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and · Accountability for adherence to the code.68

Compliance with applicable governmental laws, rules and regulations;

The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

Accountability for adherence to the code.

Due to the limited scope of our current operations, we have not adopted a corporate code of ethics that applies to its principal executive officer, principal accounting officer, or persons performing similar functions.

Indemnification

Under Delaware law and pursuant to our articles of incorporation and bylaws, we may indemnify our officers and directors for various expenses and damages resulting from their acting in these capacities. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our officers or directors pursuant to those provisions, our counsel has informed us that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.

Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that directors, executive officers and persons who own more than 10% of the outstanding common stock of certain reporting companies file initial reports of ownership and reports of changes in ownership in such common stock with the Securities and Exchange Commission ("SEC"). Officers, directors and stockholders who own more than 10% of the outstanding common stock of certain reporting companies are required by the SEC to furnish such companies with copies of all Section 16(a) reports they file. We are required to comply with Section 16(a). Accordingly, stock ownership information contained in this report is based on what is known to us.

ITEM 11. EXECUTIVE COMPENSATION

The following table shows the compensation paid over the past three fiscal years with respect to: (i) the Company’s President as of the end of the 2009, 2008 and ~~2007~~ 2007 fiscal year; (ii) the two other most highly compensated executive officers (in terms of salary and bonus) serving at the end of the 2009, 2008 and 2007 fiscal year whose annual salary and bonus exceeded $100,000; and (iii) up to two ~~additional~~ additional individuals who would be in category (ii) but for the fact that the ~~individual~~ individual was not serving as an executive officer of the Company at the end of the last completed fiscal year (the “named executive officers”):

SUMMARY COMPENSATION TABLE

Name and principal position	Year	Salary ($)		~~Bonus ($)~~	Bonus ($)	~~Stock Awards ($)~~		~~Option~~Stock Awards ($)		~~Non-Equity Incentive Plan Compensation ($)~~		Option Awards ($)	~~Nonqualified Deferred Compensation Earnings ($)~~	~~All Other Compensation ($)~~	Non-Equity Incentive Plan Compensation ($)	~~Total ($)~~		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Yiqing Wan, CEO and President	~~2008 2007~~2009	~~$ $~~	160,000 ~~160,000~~	—			—	—			—		—	—		~~$ $~~	~~160,000 160,000~~						160,000
Wei Xu, Vice President	2008 2007	$ $	100,000 100,000	—			—	—			—		—	—		$ $	100,000 100,000
	2008	$	160,000																			$	160,000
Hui Long, Vice President	2008 2007	$ $	6,170 6,170	—			—	—			—		—	—		$ $	6,170 6,170
	2007	$	160,000			—			—				—			—			—		—	$	160,000
Daping Gu, Vice President	2008 2007	$ $	6,000 6,000	—			—	—			—		—	—		$ $	6,000 6,000
Wei Xu, Vice President	2009		100,000																				100,000
Jingbo Wu, Vice President	2008 2007	$ $	6,000 6,000	—			—	—			—		—	—		$ $	6,000 6,000
	2008	$	100,000																			$	100,000
Eric Yu, CFO	2008 2007	$ $	100,000 89,000	—			—	—			—		—	—		$ $	100,000 89,000
	2007	$	100,000			—			—				—			—			—		—	$	100,000
Hui Long, Vice President	2009		17,580																				17,580
	2008	$	6,170																			$	6,170
	2007	$	6,170			—			—				—			—			—		—	$	6,170
Daping Gu, Vice President	2009		17,580																				17,580
	2008	$	6,000																			$	6,000
	2007	$	6,000			—			—				—			—			—		—	$	6,000
Jingbo Wu, Vice President	2009		17,580																				17,580
	2008	$	6,000																			$	6,000
	2007	$	6,000			—			—				—			—			—		—	$	6,000
Eric Yu, CFO*	2009		12,631																				12,631
	2008	$	100,000																			$	100,000
	2007	$	89,000			—			—				—			—			—		—	$	89,000

77*Eric Yu resigned from his position of Director and CFO in September 2009.

~~No stock options were granted or exercised by any executive officer during the fiscal year ended December 31, 2008.~~69

~~For~~No ~~the~~stock ~~year~~options ~~ended~~were ~~December~~granted ~~31,~~or ~~2008,~~exercised weby ~~paid~~any ~~$94,247~~executive asofficer during the ~~director~~fiscal year ~~remuneration~~ended ~~to our~~December ~~independent~~31, ~~directors~~2009.

WeFor ~~have~~the ~~entered into a five~~ year ~~employment~~ended ~~contract with Mr. Wan and three year~~December ~~contracts with Ms. Xu~~31, ~~Mr. Yu, and Mr. Long. Pursuant to the Employment~~ ~~Agreements entered into with the executive officers~~2009, ~~starting~~we ~~from January 1,~~paid ~~2007~~$90,000 as the director ~~compensation~~remuneration ofto ~~CEO,~~our ~~CFO and Vice President, Wei Xu would be as~~independent ~~follows:~~directors.

1We have entered into a five year employment contract with Mr. Wan and three year contracts with Ms. Xu and Mr. Long. Pursuant to the Employment Agreements entered into with the executive officers, starting from January 1, 2007, the compensation of CEO, ~~Yiqing~~CFO ~~Wan’s~~and ~~yearly~~Vice ~~salary~~President, Wei Xu would be ~~$160,000;~~as follows:

21. CEO, CFO, ~~Eric~~Yiqing YuWan’s yearly salary would be $~~100~~160,000;

32. Vice President, Wei Xu’s salary would be $100,000.

43. The other Vice Presidents’ yearly salary would remain the same as the fiscal year of 2006.

There would be no specific salary increment and bonus scheme for the above mentioned key managements for the next three years; it all depends on the profitability of the company and subject to the Board of Directors’ approval.

Each employment contract immediately terminates upon death or disability, and may be terminated by the Company either with or without cause after 30 days notice, or terminated by the officer for good reason with 60 days notice. We are not currently aware of the plans of any key employees to retire or leave the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth information as of ~~April~~December 1331, 2009 with respect to ~~the~~ the beneficial ownership of the outstanding shares of the Company’s capital stock by (i) each person known by the Company who will beneficially own five percent (5%) or more of the outstanding shares; (ii) the officers and directors of the Company; and (iii) all the aforementioned officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants or convertible securities exercisable or convertible within 60 days of ~~April~~May 13, ~~2009~~ 2010 are deemed outstanding for computing the percentage of the person or entity holding such options, warrants or convertible securities but are not deemed outstanding for computing the percentage of any other person~~, and is based on 160,125,557 common shares issued and outstanding on a fully converted basis as of April 13, 2009~~.

7870

Name of Beneficial Owner	Amount of Beneficial Ownership			Percent of Beneficial Ownership (54)
XIA Pharmaceutical Inc. (1)		44,687,136	(2)	2742.~~91%~~50	%
Hui Long (1)		0		0.00%	%
Yiqing Wan (1)		44,687,136	(2)	2742.~~91%~~50	%
Wei Xu (1)		44,687,136	(2)	2742.~~91%~~50	%
John Micek, III (1)		973,566	(4)	0.61%
Dr. Q.Y. Ma (1)		0		0.00	%
Dr. Q.Y. Ma (1)		0		0.00%
Daping Gu (1)		0		0.00	%
Eric Yu (1)		1,500,000	(6)	0.94%
Ruilu Song (1)		0		0.00	%
Daping Gu (1)		0		0.00%
Jingbo Wu (1)		0		0.00	%
Ruilu Song (1)		0		0.00%
Pope Investments, LLC (3) 5100 Poplar Ave., Suite 805 Memphis, TN 38137		54,108,458		39.52	%
Jingbo Wu (1)		0		0.00%
All Executive Officers and Directors as a group (7 persons)		44,687,136		42.50	%
Pope Investments, LLC (3) 5100 Poplar Ave., Suite 805 Memphis, TN 38137		51,108,458		31.92%
All Executive Officers and Directors as a group (7 persons)		47,160,702		29.45%

(1)	Address is c/o Room 13, Floor 25, Sunny New World Tower, No. 231 Xin Hua Road, Jianghan District, Wuhan, Hubei, PRC.
(2)	Yiqing Wan and Wei Xu each have a 50% equity ownership in XIA Pharmaceutical Inc. They are both our executive officers and Yiqing Wan is a director. In addition, they are husband and wife.
(3)	William P. Wells is the manager of Pope Investments, LLC (“Pope”) and exercises sole voting and investment control over such shares. In addition to the 22,337,998 shares of common stock, Pope also holds warrants for the right to purchase a total of 21,818,452 additional shares, and a Convertible Promissory Note convertible into 9,952,008 additional shares.
(4)	John Micek was a member of our Board of Directors. He is the beneficial owner of 216,348 shares of common stock held in the name of Silicon Prairie Partners LLC, of which he is the Managing Member; 54,087 shares of common stock held in the name of Mr. Micek’s son Jordan Micek; 54,087 shares of common stock held in the name of Mr. Micek’s son Peter Micek; and 54,087 shares of common stock held in the name of Mr. Micek’s daughter Gabriel Micek. He is also the beneficial owner of warrants to purchase 216,348 shares of common stock held in the name of Silicon Prairie Partners LLC, of which he is the Managing Member; 54,087 shares of common stock held in the name of Mr. Micek’s son Jordan Micek; 54,087 shares of common stock held in the name of Mr. Micek’s son Peter Micek; and 54,087 shares of common stock held in the name of Mr. Micek’s daughter Gabriel Micek.
(5)	Applicable percentage of ownership is based on 105,155,355 shares of common stock outstanding as of April 13, 2009 together with securities exercisable or convertible into shares of common stock within sixty (60) days of April 13, 2009 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of April 13, 2009 are deemed to be beneficially owned by the person holding such options for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
(6)	Eric Yu is a member or our Board of Directors and our Chief Financial Officer. XIA Pharmaceutical, Inc. transferred 1,500,000 shares to Mr. Yu.

(1)	Address is c/o Room 13, Floor 25, Sunny New World Tower, No. 231 Xin Hua Road, Jianghan District, Wuhan, Hubei, PRC.

79(2) Yiqing Wan and Wei Xu each have a 50% equity ownership in XIA Pharmaceutical Inc. They are both our executive officers and Yiqing Wan is a director. In addition, they are husband and wife.

(3)

William P. Wells is the manager of Pope Investments, LLC (“Pope”) and exercises sole voting and investment control over such shares. In addition to the 22,337,998 shares of common stock, Pope also holds warrants for the right to purchase a total of 21,818,452 additional shares, and a Convertible Promissory Note convertible into 9,952,008 additional shares.

(4)

Applicable percentage of ownership is based on 105,155,355 shares of common stock outstanding as of May 13, 2010 together with securities exercisable or convertible into shares of common stock within sixty (60) days of May 13, 2010 for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of May 13, 20109 are deemed to be beneficially owned by the person holding such options for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Described below are certain transactions or series of transactions since inception between Benda and our subsidiaries and our executive officers, directors and the beneficial owners of 5% or more of our common stock, on an as converted basis, and certain persons affiliated with or related to these persons, including family members, in which they had or will have a direct or indirect material interest in an amount that exceeds $60120,000 other than compensation arrangements that are otherwise required to be described under "Executive Compensation."

Kevin R. Keating

Keating Securities, LLC (the “Placement Agent”) acted as placement agent in connection with the Financing. For their services, the Placement Agent received a commission equal to 7.5% of the gross proceeds or approximately $900,000 from the offering and a non-accountable expense allowance equal to 1.5% of the gross proceeds or approximately $180,000. In addition, the Placement Agent received, for nominal consideration, five-year warrants to purchase 2,596,176 shares of our common stock, or 10% of the number of shares of Common Stock sold in the offering, at an exercise price of $0.555 (“Placement Agent Warrants”). We also paid for the out-of-pocket expenses incurred by the Placement Agent and all purchasers in the amount of approximately $100,000. As additional compensation for the Placement Agent's services, we will also pay the Placement Agent the Warrant Solicitation Fee with respect to the exercise, in whole or in part, of any Warrant equal to 3.0% of the total exercise price of the Common Stock issued in such exercise of such Warrant. Such cash Warrant Solicitation Fees shall be paid to the Placement Agent, in immediately available funds, within three (3) business days following receipt, directly or indirectly, by us, of any cash or other proceeds from the exercise of such Warrant.

At or prior to the Closing, pursuant to the terms of the Exchange Agreement, we will enter into a certain financial advisory agreement with Keating Securities, LLC ("Keating Securities"), a registered broker-dealer, under which Keating Securities will be compensated by us for its advisory services rendered to us in connection with the Exchange Agreement. The transaction advisory fee will be $395,000. This fee shall be paid upon the Closing of the Exchange Agreement.

Kevin R. Keating, our former President and sole officer and director who resigned on November 15, 2006, is the father of Timothy J. Keating, the principal member of Keating Investments, LLC. Keating Investments, LLC is the managing member of KI Equity, which is our majority stockholder. Keating Investments, LLC is also the managing member and 100% owner of Keating Securities, LLC, a registered broker-dealer. Kevin R. Keating is not affiliated with and has no equity interest in Keating Investments, LLC, KI Equity, or Keating Securities, LLC and disclaims any beneficial interest in the shares of our common stock owned by KI Equity. Similarly, Keating Investments, LLC, KI Equity and Keating Securities, LLC disclaim any beneficial interest in the shares of our common stock currently owned by Kevin R. Keating.

Effective January 1, 2006, we entered into a contract with Vero Management, L.L.C. ("Vero") for managerial and administrative services. Vero has not been engaged to provide, and Vero does not render, legal, accounting, auditing, investment banking or capital formation services. Kevin R. Keating, our former officer and director, is the manager of Vero. The term of the contract is for one year, but the contract may be terminated at any time. In consideration of the services provided, Vero is paid $2,500 for each month in which services are rendered.

Mark R. Littell and Norwood

On December 14, 2005, KI Equity entered into a Purchase Agreement with Norwood Venture Corp. (“Norwood”) for 2,281,302 shares of our common stock, representing 77.2% of the common shares then outstanding. Mark R. Little, our former Chairman, Chief Executive Officer, President and Chief Financial Officer who resigned on December 30, 2005, is the President and controlling shareholder of Norwood. In connection with the Purchase Agreement, Mark R. Littell and Norwood entered into an agreement releasing Applied from any and all claims they have against us.

During 2006, Norwood paid an accrued legal expense on behalf of Applied in the amount of $1,568, which was recorded as additional paid-in capital.

In connection with the Purchase Agreement, we paid Norwood approximately $18,936 for consulting services rendered by it to Applied Spectrum.

8172

Related Party Transactions ~~and~~ a nd Long Term Loan Receivable

Due from related parties at December 31, ~~2008~~2009 and ~~2007~~2008 were comprised as follows:

			December 31,		December 31,
		Relationship	~~2008~~2009		~~2007~~2008
Current
Qin Yu		Vice president
Due to Shenzhen SiBiono Gene Tech Co. Ltd.			$	4,314	$	-
	Due to SiBiono		$	2,024	$	4,314
Hua Shen		Vice president
Xiaoji Zhang		Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				-		137,097
	Due to SiBiono			5,423		5,439
Pong Tsaiohuei		Minority shareholder
Hua Xu		General Manager's Sister
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				-		3,257
	Due to SiBiono			22,726		-
Xiaozhi Zhang		Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				5,439		5,083
Rong He		Manager
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				1,247		-
	Due to SiBiono			688		1,247
			$	1130,~~000~~861	$	~~145~~11,~~437~~000
Non current
Hua Shen		Vice president
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				-		137,097
Pong Tsaiohuei		Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				-		3,257
Xiaozhi Zhang		Minority shareholder
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				-		5,083
Yiqing Wan		CEO & Director
Due to Ever Leader Holdings Co. Ltd.			$	650,791	$	646,429
	Due to Ever Leader		$	646,586	$	650,790
Due to Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.				439,719		72,949
	Due to Benda Ebei			520,712		439,719
Due to Shenzhen SiBiono Gene Tech Co. Ltd.				-		3,608
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
Due to Yidu Benda Chemicals Co. Ltd.				1,607,173		1,502,118
	Due to Yidu Benda			1,602,950		1,607,173
Due to Ever Leader Holdings Co. Ltd.				231,713		230,160
	Due to Ever Leader			230,216		231,713
Feng Wang		Minority shareholder
Due to Beijing Shusai Pharyngitis Research Co. Ltd.				32,348		29,318
	Due to Beijing Shusai			32,262		32,348
Total due from related parties			$	2,961,744	$	2,630,019
			$	3,032,726	$	2,961,743

~~Due~~The balance toowned by the CEO & Director, and the Company under his control, ~~related~~totaled ~~parties~~$3,000,464 atand $2,929,395 as of December 31, ~~2008~~2009 and 2008, respectively. ~~2007~~This ~~were~~is ~~comprised~~a asviolation of Section 402 of the Sarbanes-Oxley Act of ~~follows:~~2002 which prohibits on personal loans to executives.

		December 31,		December 31,
	Relationship	2008		2007
Current
Wei Xu	Vice President, CEO's Spouse & Director
Due from Shenzhen SiBiono Gene Tech Co. Ltd.		$	188,065	$	-
Due from Everleader Holding Ltd.			967,999		-
Hua Xu	General Manager's Sister
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			25,523		-
Yiqing, Wan	CEO & Director
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			237,780		-
Hua Shen	Vice president
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			33,253		-
Tongyi Tien	Manager
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			364		-
Pong Tsaiohuei	Minority shareholder
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			4,818		-
Total due to related parties		$	1,457,803	$	-
Non current
Hubei Benda Science and Technology Co. Ltd	Controlled by CEO
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.		$	28,602	$	49,056
Due from Jiangliang Benda Pharamaceutical Co. Ltd.			811,073		1,872,374
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			14,262		6,846
Wei Xu	Vice President, CEO's Spouse & Director
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			48,922		-
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			65,691		-
Hua Shen	Vice president
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			-		26,597
Hua Xu	Manager
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			-		1,009,792
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			-		61,491
Yiqing, Wan	CEO & Director
Due from Yidu Benda Chemicals Co. Ltd.			560		-
Due from Shenzhen SiBiono Gene Tech Co. Ltd.			-		137,687
Hui Xu	Manager
Due from Hubei Tongji Benda Ebei Phamacetucial Co. Ltd.			28,483		26,622
Due from Beijing Shusai Pharyngitis Research Co. Ltd.			-		3,153
		$	997,593	$	3,193,618

~~Except for~~Due ~~the loans from the shareholder Wei Xu by Everleader which bears interest~~to ~~rate~~related parties at ~~12%~~December ~~per annum~~31, ~~unsecure~~2009 and matures within six months, the above advances bear no interest and the above loans due to related parties are unsecured, non-interest bearing and are not convertible into equity. Proceeds from the above loans 2008 were ~~used~~comprised ~~primarily for general working capital purposes~~as ~~and are also long-term debts in nature, due on December 31, 2012.~~follows:

			December 31,		December 31,
		Relationship	2009		2008
Current
Wei Xu		VP, CEO's Spouse & Director
	Due to SiBiono		$	234,569	$	188,065
	Due from Ever Leader			1,356,172		968,000
	Due from Benda			36,184		-
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due from Benda Ebei			28,528		-
	Due from Jiangliang Benda			793,864		-
	Due from Beijing Shusai			14,111		-
SiBiono Zhongjia Gene Tech (SZ) Co., Ltd.		Associate company
	Due from SiBiono			103,948		-
Yiqing, Wan		CEO & Director
	Due from SiBiono			224,071		237,780
Hua Xu		General Manager's Sister
	Due from SiBiono			-		25,523
Hua Shen		Vice president
	Due from SiBiono			-		33,253
Dongyi Tien		Manager
	Due from SiBiono			-		364
Pong Tsaiohuei		Minority shareholder
	Due from SiBiono			-		4,818
			$	2,791,447	$	1,457,803

Non current
Hubei Benda Science and Technology Co. Ltd		Controlled by CEO
	Due from Benda Ebei		$	-	$	28,602
	Due from Jiangliang Benda			-		811,073
	Due from Beijing Shusai			-		14,262
Wei Xu		VP, CEO's Spouse & Director
	Due from Benda Ebei			23,894		48,922
	Due from Beijing Shusai			65,339		65,691
Yiqing, Wan		CEO & Director
	Due from Yidu Benda			559		560
Hui Xu		Manager
	Due from Benda Ebei			28,410		28,483
			$	118,202	$	997,593

Except for the loans from the shareholder Wei Xu by Everleader which bears interest rate at 12% per annum, unsecure and matures within six months, the above advances bear no interest and the above loans due to related parties are unsecured, non-interest bearing and are not convertible into equity. Proceeds from the above loans were used primarily for general working capital purposes, among which the current portion does not have definitive terms and for those portions which are long-term debts in nature, they are expected to be repaid by the Company in over 12-month period.

Reorganization Related Transactions

Ever Leader was incorporated in Hong Kong on October 29, 2005 for the purpose of functioning as an off-shore holding company to obtain ownership interests in various Benda entities that were previously owned, either directly or indirectly, by Wan and Xu. Ms. Mo Mo Hon (“Hon”), a Hong Kong SAR resident, is the sole registered shareholder of Ever Leader, holding the single issued and outstanding share of Ever Leader in trust for Xu.

8274

8375

The organization and ownership structure of the Company subsequent to the consummation of the reorganization as summarized in the paragraphs above is as follows:

8476

~~The organization~~ ITEM ~~and~~14. PRINCIPAL ~~ownership~~ACCOUNTANT ~~structure~~FEES ~~of the Company subsequent to the~~AND ~~consummation of the reorganization as summarized in the paragraphs above is as follows:~~SERVICES

~~ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K.~~ (1)AUDIT FEES

The aggregate fees paid for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company's annual financial statements and review of financial statements included in the Company's Form 10-K (a17 CFR 249.308a) or 10-Q (17 CFR ~~Exhibits~~249.308b) or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was $220,000 to MB and $125,000 to K&Co for the fiscal year ended December 31, 2009 and $420,734 to K&Co for the fiscal year ended December 31, 2008.

85(2)AUDIT-RELATED FEES

EXHIBIT INDEX

The following exhibits are incorporated by reference or included as part of this report:

Exhibit Number		Description
2.1		Articles of Merger between Applied Spectrum Technologies, Inc., a Minnesota corporation, and Applied Spectrum Technologies, Inc., a Delaware corporation, together with the Agreement and Plan of Merger (1)
2.2		Exchange Agreement by and among Applied Spectrum Technologies, Inc. (“Applied Spectrum”); KI Equity Partners, III, LLC (“KI Equity”); Ever Leader Holdings Limited (“Ever Leader”); and each of the equity owners of Ever Leader Shareholders, dated September 7, 2006 *(2)
2.3		Voting Agreement by and among the Ever Leader Shareholders and KI Equity, dated November 15, 2006 (4)
2.4		Escrow Agreement by and among Applied Spectrum, Ever Leader, Keating Securities, LLC and Steele Street State Bank, the escrow agent, dated November 15, 2006 (4)
2.5		Make Good Agreement by and among Keating Securities, LLC, Applied Spectrum, Ever Leader, Mr. Yiqing Wan and Ms. Wei Xu, and Moveup Investments Limited, dated November 15, 2006 (4)

2.6		Make Good Escrow Agreement by and among Keating Securities, LLC, Applied Spectrum, Ever Leader, Mr. Yiqing Wan and Ms. Wei Xu, and Moveup Investments Limited, dated November 15, 2006 (4)
3.1		Certificate of Incorporation of Applied Spectrum Technologies, Inc., a Delaware corporation. (1)
3.2		Bylaws of Applied Spectrum Technologies, Inc., a Delaware corporation. (1)
4.1		Lock-Up Agreement amongst Applied Spectrum, Keating Securities, LLC, Yiqing Wan, Wei Xu and Moveup Investments Limited (4)
4.2		Specimen Stock Certificate for Shares of Common Stock of the Company (3)
10.1		Placement Agent Agreement dated October 17, 2006 between Applied Spectrum and Keating Securities, LLC (4)
10.2		Securities Purchase Agreement by and among Applied Spectrum, Ever Leader and the Investor listed on the attached Schedule of Buyers (4)

10.3		Registration Rights Agreement (4)
10.4		Form of Common Stock Purchase Warrant (4)
10.5		Form of Placement Agent Stock Purchase Warrant (4)
10.6		Employment Agreement with Yiqing Wan (4)

10.7		Employment Agreement with Wei Xu (4)
10.8		Employment Agreement with Hui Long (4)
10.9		Employment Agreement with Daping Gu (4)
10.10		Employment Agreement with Ruilu Song (4)

10.11		Employment Agreement with Jingbo Wu (4)
10.12		Form Investment Agreement between the Company and Buyers (5)
10.13		Equity Transfer Agreement with Shenzhen Yuanzheng Investment Development Co., Ltd (5)
10.14		Financial Consultancy Agreement (5)

10.15			Equity Transfer Agreement with Shenzhen Yuanxing Gene City Development Co., Ltd. (5)
10.16			Modification and Amendment Agreement dated April 5, 2007 (5)
10.17			Technical Consultancy Agreement with Huimin Zhang (6)
10.18			Equity Transfer Agreement with Huimin Zhang (6)
10.19			Technical Consultancy Agreement with Yaojin Wang (6)
10.20			Equity Transfer Agreement with Yaojin Wang (6)
10.21			Interview by Eric Yu for WallSt.net dated July 26, 2007 (7)
10.22			Rights Purchase Agreement with Dr. Yan Li (7)
10.23			The Science and Technology Cooperation Agreement between College of Chemistry and Life Science of China Three Gorges University and Yidu Benda (7)

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.
32.1		Certification of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.
32.2		Certification of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

(1)	Incorporated by reference to the Company's Current Report on Form 8-K dated November 17, 2005 and filed on November 22, 2005 (SEC File No. 000-16397).
(2)	Incorporated by reference to the Company's Current Report on Form 8-K dated September 7, 2006 and filed on September 7, 2006 (SEC File No. 000-16397).
(3)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (SEC File No. 33-17959).

(4)	Incorporated by reference to the Company's Current Report on Form 8-K dated November 15, 2006 and filed on November 17, 2006 (SEC File No. 000-16397).
(5)	Incorporated by reference to the Company’s Current Report on Form 8-K dated April 5, 2007 and filed on April 6, 2007 (SEC File No. 000-16397).

(6)		Incorporated by reference to the Company’s Current Report on Amendment No. 1 to Form 8-K dated April 5, 2007 and filed on June 15, 2007 (SEC File No. 000-16397).
(7)		Incorporated by reference to the Company’s Amendment No. 2 to Registration Statement on Form SB-2 (SEC File No. 33-17959).

(b) Reports on Form 8-K.

On March 4, 2009, the Company filed a Form 8K disclosing the acceleration of a debt obligation and the filing of a lawsuit against the Company.

ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(1) AUDIT FEES

The aggregate fees paid for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company's annual financial statements and review of financial statements included in the Company's Form 10-K (17 CFR 249.308a) or 10-Q (17 CFR 249.308b) or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was $334,106 for the fiscal year ended December 31, 2007 and $420,734 for the fiscal year ended December 31, 2008.

(2) AUDIT-RELATED FEES

There were no fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the Company's financial statements.

(3) TAX FEES

There were no fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

(4) ALL OTHER FEES

There were no other fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above.

RE-APPROVAL POLICIES AND PROCEDURES

Before the accountant is engaged by the issuer to render audit or non-audit services, the engagement is approved by the Company's the board of directors acting as the audit committee.

88ITEM 15. EXHIBITS, LIST AND REPORTS ON FORM 8-K.

(a)Exhibits.

EXHIBIT INDEX

The following exhibits are incorporated by reference or included as part of this report:

Exhibit Number		Description
2.1		Articles of Merger between Applied Spectrum Technologies, Inc., a Minnesota corporation, and Applied Spectrum Technologies, Inc., a Delaware corporation, together with the Agreement and Plan of Merger (1)

2.2		Exchange Agreement by and among Applied Spectrum Technologies, Inc. (“Applied Spectrum”); KI Equity Partners, III, LLC (“KI Equity”); Ever Leader Holdings Limited (“Ever Leader”); and each of the equity owners of Ever Leader Shareholders, dated September 7, 2006 *(2)

2.3		Voting Agreement by and among the Ever Leader Shareholders and KI Equity, dated November 15, 2006 (4)

2.4		Escrow Agreement by and among Applied Spectrum, Ever Leader, Keating Securities, LLC and Steele Street State Bank, the escrow agent, dated November 15, 2006 (4)

2.5		Make Good Agreement by and among Keating Securities, LLC, Applied Spectrum, Ever Leader, Mr. Yiqing Wan and Ms. Wei Xu, and Moveup Investments Limited, dated November 15, 2006 (4)

2.6		Make Good Escrow Agreement by and among Keating Securities, LLC, Applied Spectrum, Ever Leader, Mr. Yiqing Wan and Ms. Wei Xu, and Moveup Investments Limited, dated November 15, 2006 (4)

3.1		Certificate of Incorporation of Applied Spectrum Technologies, Inc., a Delaware corporation. (1)

3.2		Bylaws of Applied Spectrum Technologies, Inc., a Delaware corporation. (1)

4.1		Lock-Up Agreement amongst Applied Spectrum, Keating Securities, LLC, Yiqing Wan, Wei Xu and Moveup Investments Limited (4)

4.2		Specimen Stock Certificate for Shares of Common Stock of the Company (3)

10.1		Placement Agent Agreement dated October 17, 2006 between Applied Spectrum and Keating Securities, LLC (4)

10.2		Securities Purchase Agreement by and among Applied Spectrum, Ever Leader and the Investor listed on the attached Schedule of Buyers (4)

10.3		Registration Rights Agreement (4)

10.4		Form of Common Stock Purchase Warrant (4)

10.5		Form of Placement Agent Stock Purchase Warrant (4)

10.6		Employment Agreement with Yiqing Wan (4)

10.7		Employment Agreement with Wei Xu (4)

10.8		Employment Agreement with Hui Long (4)

10.9		Employment Agreement with Daping Gu (4)

10.10		Employment Agreement with Ruilu Song (4)

10.11		Employment Agreement with Jingbo Wu (4)

10.12		Form Investment Agreement between the Company and Buyers (5)

10.13		Equity Transfer Agreement with Shenzhen Yuanzheng Investment Development Co., Ltd (5)

10.14		Financial Consultancy Agreement (5)

10.15		Equity Transfer Agreement with Shenzhen Yuanxing Gene City Development Co., Ltd. (5)

10.16		Modification and Amendment Agreement dated April 5, 2007 (5)

10.17		Technical Consultancy Agreement with Huimin Zhang (6)

10.18		Equity Transfer Agreement with Huimin Zhang (6)

10.19		Technical Consultancy Agreement with Yaojin Wang (6)

10.20		Equity Transfer Agreement with Yaojin Wang (6)

10.21		Interview by Eric Yu for WallSt.net dated July 26, 2007 (7)

10.22		Rights Purchase Agreement with Dr. Yan Li (7)

10.23		The Science and Technology Cooperation Agreement between College of Chemistry and Life Science of China Three Gorges University and Yidu Benda (7)

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

32.1		Certification of Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

32.2		Certification of Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Included as Exhibit in this Form 10-K.

(1)	Incorporated by reference to the Company's Current Report on Form 8-K dated November 17, 2005 and filed on November 22, 2005 (SEC File No. 000-16397).

(2)	Incorporated by reference to the Company's Current Report on Form 8-K dated September 7, 2006 and filed on September 7, 2006 (SEC File No. 000-16397).

(3)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (SEC File No. 33-17959).

(4)	Incorporated by reference to the Company's Current Report on Form 8-K dated November 15, 2006 and filed on November 17, 2006 (SEC File No. 000-16397).

(5)	Incorporated by reference to the Company’s Current Report on Form 8-K dated April 5, 2007 and filed on April 6, 2007 (SEC File No. 000-16397).

(6)	Incorporated by reference to the Company’s Current Report on Amendment No. 1 to Form 8-K dated April 5, 2007 and filed on June 15, 2007 (SEC File No. 000-16397).

(7)	Incorporated by reference to the Company’s Amendment No. 2 to Registration Statement on Form SB-2 (SEC File No. 33-17959).

(b)	Reports on Form 8-K.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BENDA PHARMACEUTICAL, INC.
Date: April 15, 2009	By:	/s/ Yiqing Wan
Date: May __, 2010	By:	/s/ Yiqing Wan
		Yiqing Wan
		Yiqing Wan Chief Executive Officer, Chief Financial Officer, President, and Director
		Chief Executive Officer and President, and Director

Date: April 15, 2009	By:	/s/ Eric Yu
		Eric Yu
		Chief Financial Officer
		Principal Accounting Officer
		Director

In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on August 1, 2008.

Name	Title	Date
/s/ Yiqing Wan	Chief Executive Officer and	~~April~~May 15__, ~~2009~~2010
Yiqing Wan	President / Director
/s/ Jun Tang	Director	~~April~~May 15__, ~~2009~~2010
Jun Tang
/s/ Dr. Q.Y. Ma	Director	~~April~~May 15__, ~~2009~~2010
Dr. Q.Y. Ma
/s/ Eric Yu	Chief Financial Officer, Principal	April 15, 2009
Eric Yu	Accounting Officer, and Director

8981

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Benda Pharmaceutical, Inc.

Wuhan, Hubei Province, PRC

We have audited the accompanying consolidated balance sheet of Benda Pharmaceutical, Inc. (the “Company”) as of December 31, 2009 and the related statements of operations, changes in shareholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required at this time, to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. at December 31, 2009 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses for the year ended December 31, 2009 and had a working capital deficiency at December 31, 2009. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/MALONEBAILEY, LLP

www.malonebailey.com

Houston, Texas

May 17, 2010

Page 1 of 39

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Benda Pharmaceutical, Inc.

Wuhan, Hubei Province, PRC

We have audited the condensed Parent Only balance sheet of Benda Pharmaceutical, Inc. (the “Company”) as of December 31, 2009 and the related condensed Parent Only statements of income and cash flows for the year then ended included in Footnote 24 to the Consolidated Financial Statements of Benda Pharmaceutical, Inc. These Parent Only condensed financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the condensed Parent Only financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. at December 31, 2009 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

/s/MALONEBAILEY, LLP

www.malone-bailey.com

Houston, Texas

May 17, 2010

Page 2 of 39

KEMPISTY & COMPANY

CERTIFIED PUBLIC ACCOUNTANTS, P.C.

15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Benda Pharmaceutical, Inc.

We have audited the accompanying consolidated balance sheets of Benda Pharmaceutical, Inc. and subsidiaries (the "Company") as of December 31, 2008 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required at this time, to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. and subsidiaries at December 31, 2008 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

As discussed in Note 25 to the consolidated financial statements, the accompanying consolidated balance sheet as of December 31, 2008 and the related statements of operations, cash flows and stockholders' deficit for the year then ended have been restated.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses for the year ended December 31, 2008 and had a working capital deficiency at December 31, 2008. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Kempisty & Company

Certified Public Accountants PC

New York, New York

May 17, 2010

Page 3 of 39

KEMPISTY & COMPANY

CERTIFIED PUBLIC ACCOUNTANTS, P.C.

15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Benda Pharmaceutical, Inc.

We have audited the condensed Parent Only balance sheet of Benda Pharmaceutical, Inc. as of December 31, 2008 and the related condensed Parent Only statements of operations and cash flows for the year then ended included in Footnote 24 to the Consolidated Financial Statements of Benda Pharmaceutical, Inc. These Parent Only condensed financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the condensed Parent Only financial statements referred to above present fairly, in all material respects, the financial position of Benda Pharmaceutical, Inc. at December 31, 2008 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses for the year ended December 31, 2008 and had a working capital deficiency at December 31, 2008. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning this matter are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Kempisty & Company

Certified Public Accountants PC

New York, New York

May 17, 2010

Page 4 of 39

Benda Pharmaceutical, Inc.

Consolidated Balance Sheets

			(Restated)
	December 31		December 31
	2009		2008
Assets
Current Assets
Cash and cash equivalents	$	191,095	$	584,266
Trade receivables, net (Note 5)		12,405,018		9,328,914
Advance for inventory purchase		2,110,857		230,888
Notes receivable		81,426		154,691
Inventories (Note 6)		2,038,987		2,344,561
Due from related parties, short term (Note 14)		30,861		11,000
Prepaid expenses and other current assets		1,720,237		508,854
Total current assets		18,578,481		13,163,174

Due from related parties, long term (Note 14)		3,032,726		2,961,743
Property and equipment, net (Note 7)		28,658,131		28,907,035
Intangible assets, net (Note 8)		6,629,501		7,369,482
Debt issuance costs (Note 19)		-		55,485
Restricted cash (Note 10)		4,409,334		5,162,184
Other assets (Note 11)		2,285,581		2,291,602
Total Assets	$	63,593,754	$	59,910,705

Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable		902,079		605,317
Customer deposit		1,507,147		1,056
Other payable		4,569,503		2,232,874
Accrued liabilities		6,175,538		3,940,480
Convertible notes (Note 19)		7,260,000		6,395,951
Short-term debt (Note 12)		11,576,121		12,281,729
Accrued VAT and other taxes		795,013		954,509
Acquisition price payable (Note 1)		1,422,743		1,426,491
Wages payable		1,187,075		1,020,474
Due to related parties, short term (Note 14)		2,791,447		1,457,803
Redeemable common stock, 2,049,560 shares at $3.6 per share (Note 15)		7,376,366		7,376,366
Total current liabilities		45,563,032		37,693,050

Filing Compare · Benda Pharmaceutical, Inc.