Edgar Filing: RENHUANG PHARMACEUTICALS INC

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended April 30, 2008

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

For the transition period from _______________ to _______________.

Commission file number: O-24512

RENHUANG PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of

incorporation or organization)

88-1273503

(I.R.S. Employer

Identification No.)

No. 281, Taiping Road, Taiping District,

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

(Address of principal executive offices)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

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

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

Large accelerated filer o Accelerated filer o

Non-accelerated filer o Smaller Reporting Companyx

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

Applicable only to corporate issuers:

As of May 20, 2008, there were 35,096,680 shares of common stock, par value $0.001, issued and outstanding.

Renhuang Pharmaceuticals, Inc.

TABLE OF CONTENTS

PART I

ITEM 1	FINANCIAL STATEMENTS	4

ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	22

ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29

ITEM 4	CONTROLS AND PROCEDURES	30

PART II

ITEM 1	LEGAL PROCEEDINGS	32

ITEM 1A	RISK FACTORS	32

ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	32

ITEM 3	DEFAULTS UPON SENIOR SECURITIES	32

ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	32

ITEM 5	OTHER INFORMATION	32

ITEM 6	EXHIBITS	33

PART I - FINANCIAL INFORMATION

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

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

ITEM 1 Financial Statements

RENHUANG PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

	April 30, 2008		October 31, 2007(a)
	(Unaudited)		(Audited)
CURRENT ASSETS
Cash and cash equivalents	$	13,401,359	$	10,153,603
Accounts receivable, net		12,354,941		8,889,411
Inventories		1,903,858		969,672
Prepayments and other receivables, net		546,375		196,997
TOTAL CURRENT ASSETS		28,206,533		20,209,683

PROPERTY, PLANT AND EQUIPMENT, NET		2,698,697		2,606,285

TOTAL ASSETS	$	30,905,230	$	22,815,968

(a) Reference is made to the audited financial statements of the Company filed with the SEC on Form 10-K in May 2008.

The accompanying notes are in integral part of the consolidated financial statements

RENHUANG PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

	April 30, 2008		October 31, 2007(a)
	(Unaudited)		(Audited)

CURRENT LIABILITIES
Accounts payable	$	282,826	$	155,600
Due to related party		156,509		157,376
Other payables		1,048,685		1,109,492

TOTAL LIABILITIES		1,488,020		1,422,468

STOCKHOLDERS’ EQUITY
Preferred Stock - Authorized preferred shares 1,000,000, issued and outstanding number of shares nil and at par value of nil		-		-
Common Stock - Authorized common shares 100,000,000, issued and outstanding number of shares 35,096,680 at par value of $0.001		35,097		35,097
Additional paid-in capital		6,627,099		6,627,099
Reserves		1,841,734		1,841,734
Retained earnings		18,336,781		11,980,112
Accumulated other comprehensive income		2,576,499		909,458
TOTAL STOCKHOLDERS’ EQUITY		29,417,210		21,393,500

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	30,905,230	$	22,815,968

. (a) Reference is made to the audited financial statements of the Company filed with the SEC on Form 10-K in May 2008.

The accompanying notes are in integral part of the consolidated financial statements

RENHUANG PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended April 30,						Six Months Ended April 30,
	2008			2007			2008			2007
SALES	$	7,516,594		$	6,315,332		$	17,975,450		$	15,819,325

COST OF SALES		(3,423,785	)		(3,120,081	)		(8,221,517	)		(7,693,017	)

GROSS PROFIT		4,092,809			3,195,251			9,753,933			8,126,308

SELLING AND DISTRIBUTION EXPENSES		(42,087	)		(16,871	)		(111,431	)		(122,446	)

ADVERTISING EXPENSE		(679,640	)		(163,532	)		(1,361,071	)		(172,681	)

GENERAL AND ADMINISTRATIVE EXPENSES		(548,964	)		(369,728	)		(1,324,034	)		(636,504	)

RESEARCH AND DEVELOPMENT		(329,121	)		—			(671,015	)		—

BAD DEBT RECOVERY/(EXPENSE)		733			(568,113	)		42,165			(621,122	)

DEPRECIATION		(3,405	)		(70,181	)		(6,531	)		(138,475	)

INCOME FROM OPERATIONS		2,490,325			2,006,826			6,322,016			6,435,080

OTHER INCOME		20,680			6,732			34,653			10,066

INCOME BEFORE INCOME TAXES		2,511,005			2,013,558			6,356,669			6,445,146

INCOME TAXES		—			—			—			—

NET INCOME	$	2,511,005			2,013,558		$	6,356,669			6,445,146

OTHER COMPREHENSIVE INCOME

FOREIGN CURRENCY TRANSLATION ADJUSTMENT		699,649			164,778			1,667,041			326,013

COMPREHENSIVE INCOME	$	3,210,654		$	2,178,336		$	8,023,710		$	6,771,159

BASIC EARNINGS PER SHARE	$	0.07		$	0.06		$	0.18		$	0.18

DILUTED EARNING PER SHARE	$	0.07		$	0.06		$	0.18		$	0.18

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –BASIC		35,096,680			35,000,181			35,096,680			35,000,181

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –DILUTED		35,096,680			35,002,420			35,096,680			35,000,181

The accompanying notes are in integral part of the consolidated financial statements

RENHUANG PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Six Months Ended April 30
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,356,669		$	6,445,146
Adjustments to reconcile net income to net cash from operating activities :
Depreciation		164,488			138,475
Adjustments to the provision for bad debts		(42,165	)		621,122
Fair value of warrants issued for services		—			22,442
Changes in operating assets and liabilities:
Accounts receivable		(2,769,896	)		(4,293,019	)
Inventories		(841,971	)		(730,158	)
Prepayment and other receivables, net		(283,792	)		469,130
Deferred expenses		—			(2,610	)
Accounts payable and accruals		113,095			(266,893	)
Due to related party		(9151	)		-
Other payables		(133,141	)		739,849
NET CASH PROVIDED BY OPERATING ACTIVITIES		2,554,136			3,143,484

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment		(80,073	)		(143,330	)
Construction in progress	—				(560,965	)
NET CASH USED IN INVESTING ACTIVITIES	$	(80,073	)	$	(704,295	)

CASH FLOWS FROM FINANCING ACTIVITIES:		—			—

The accompanying notes are in integral part of the consolidated financial statements

RENHUANG PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

(Unaudited)

	Six Months Ended April 30,

	2008		2007
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	2,474,063		2,439,189

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		773,693		326,013

Cash and cash equivalents, beginning of period		10,153,603		1,021,267

Cash and cash equivalents, end of period	$	13,401,359	$	3,786,469

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid		—	$	45,996
Income taxes paid		—		—

The accompanying notes are in integral part of the consolidated financial statements

RENHUANG PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Renhuang Pharmaceuticals, Inc., (“Renhuang”) or the (“Company”) was incorporated in the State of Nevada on August 18, 1988 and shares of the Company's Common Stock are traded over-the counter on the Pink Sheets under the symbol RHGP. The Company owns 100% of Harbin Renhuang Pharmaceutical Company Limited (the “BVI”), a holding company. Substantially all of the Company’s operations are conducted through BVI’s wholly-owned subsidiary Harbin Renhuang Pharmaceuticals Co., Ltd (“Renhuang China” or the “Subsidiary”) which was incorporated in Harbin City in the People’s Republic of China (the “PRC” or “China”) in 1996. The subsidiary is principally engaged in production and sales of nutraceutical and bio-pharmaceutical products including tablets, drinks and health food; the Subsidiary’s sales network covers various provinces, cities, and counties throughout China.

Unless otherwise provided in this current report, all references in this current report to “we”, “us”, “our company”, “our”, or the “Company” refers to Renhuang Pharmaceuticals, Inc. on a consolidated basis, including Renhuang China and the BVI.

2. BASIS OF PRESENTATION

The accompanying consolidated financial statements of the Company are stated in United States dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America and include the financial statements of the Company and its subsidiaries. All significant intercompany transactions and balances are eliminated on consolidation.

The accompanying unaudited consolidated financial statements as of April 30, 2008 and for the three and six months ended April 30, 2008 and 2007 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X applicable to smaller reporting companies. In the opinion of management, these unaudited consolidated interim financial statements include all adjustments considered necessary to make the financial statements not misleading. The results of operations for the six months ended April 30, 2008 are not necessarily indicative of the results for the full fiscal year ending October 31, 2008. The unaudited consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended October 31, 2007 as reported in Form 10-K.

The presentation of certain prior period information has been modified to conform to the current presentation.

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

A. CASH AND CASH EQUIVALENTS

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

B. ACCOUNTS RECEIVABLE, NET

Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. The Company issues invoice at the month-end for the deliveries made during that monthly period. An account is considered past due after 90 days from the invoice date as at April 30, 2008 and October 31, 2007.. The Company recognizes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectibility and established on a by-customers basis based upon a variety of factors which include the length of time the receivables are past due, significant one-time events and historical experience. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. The allowance on the doubtful accounts was $143,538 as at April 30, 2008 ($134,295 at October 31, 2007). The Company does not accept returns or offer any post-sales marketing support to customers.

C. INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Production cost is allocated at FIFO and overhead cost is calculated on the weighted average basis. The cost includes all costs to acquire, transport and process inventories to their present location and condition. The Company evaluates the net realizable value of its inventories regularly and records a provision for loss, if necessary, to reduce inventories to their net realizable value. There were $62,549 and $58,521 of inventory reserve provisions recorded at April 30, 2008 and October 31, 2007, respectively.

D. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.

When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included as components of income at the time of disposition.

The Company records depreciation of its property, plant and equipment on a straight-line basis over the estimated useful lives of the assets. The useful lives for property, plant and equipment are estimated as follows:

Machinery and equipment		10 years
Office equipment and furnishings		5 to 10 years
Motor vehicles		5 to 10 years

E. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of certain financial instruments, including cash, accounts receivable, other receivables, accounts payable, and other payables approximate their fair values as of April 30, 2008 because of the relative short-term maturity of these instruments.

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

F. INCOME TAXES

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

In accordance with the relevant income tax laws applicable to wholly foreign owned enterprises operating in PRC, the profits of the Company are fully exempt from income tax for two years (“tax holiday”), commencing from the first profit making year of operations, followed by a 50% exemption for the immediate next three years (“tax preferential period”), after which the profits of the Company will be taxable at the full rate, currently 25% (See Note 12).

G. RELATED PARTIES

All related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. The aggregate of balances due to and from related parties for all periods presented are separately disclosed on the face of the balance sheet (See Note 15).

H. IMPAIRMENT OF LONG-TERM ASSETS

The Company assesses long-lived assets for potential impairment based on a review of projected undiscounted cash flows associated with these assets. Long-lived assets are subjected to impairment evaluations when events and circumstances exist that indicate the carrying amount of these assets may not be recoverable. This process is highly subjective and changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the valuation techniques employed to estimate the fair value of long-lived assets could change and, therefore, impact the assessments of impairment in the future. As of April 30, 2008, management expects its long-lived assets to be fully recoverable.

I. FOREIGN CURRENCY TRANSLATION

The Company maintains its books and accounting records in its functional currency, the Renminbi, (which is the PRC's currency).

In translating the financial statements of the Company from its functional currency into United States dollars (“USD”), its reporting currency, asset and liability accounts are translated using the closing exchange rate in effect at the balance sheet date, equity accounts are translated at historic rates and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income in stockholders’ equity.

Foreign currency transaction gains and losses, if any, are included in the determination of net income for the period.

The Renminbi (“RMB”) is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or can be, converted into United States dollars (“USD”) at the rates used in translation. The exchange rate between the RMB and the USD on April 30, 2008 and the average through October 31, 2007 to April 30, 2008 are:

Exchange rate:	Apr.30,2008	Oct.31,2007
Balance Sheets- Year end RMB:USD exchange rate	7.0002:1	7.4820:1
Operating Statement: Period average RMB:USD exchange rate	7.2120:1	7.6917:1

J. USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates primarily related to the realizable value of accounts receivable, inventories, and the useful lives of plant and equipment. Actual results when ultimately realized could differ from those estimates.

K. REVENUE RECOGNITION

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable, and collectability is reasonably assured; this policy is in accordance with the provisions of Staff Accounting Bulletin No. 104. Renhuang generally recognizes product sales when the product is shipped.

The Company provides rebates to its sales agents (who act as wholesalers) as an incentive plan. The rebate rate is set on a product-by-product basis. When revenue is recognized, the rebate is accounted for as an offset to revenues in accordance with EITF Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). On average, the rebate rate was 17% and 20% of gross revenue in the six months ended April 2008 and 2007, respectively.

L. CERTAIN RISKS AND CONCENTRATIONS

The Company is subject to a significant concentration of credit risk with its trade accounts receivable. The Company performs ongoing credit evaluations with respect to the financial condition of its creditors, but does not require collateral. The Company records a provision for doubtful accounts to cover probable credit losses. Management reviews and adjusts this allowance periodically based on historical experience and its evaluation of the collectability of outstanding accounts receivable.

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

M. RESEARCH AND DEVELOPMENT

Research and development (“R&D”) costs are expensed as incurred. Engineers and technical staff are involved in the production of our products as well as on-going research, with no segregation of the portion of their salaries relating to research and development from the portion of their salaries relating to production. The total salaries are included in cost of sales. R&D for the six months ended April 30, 2008 and 2007 are $671,015 and nil respectively.

N. ADVERTISING

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

O. STOCK-BASED COMPENSATION

The Company measures and records the cost of employee services received in exchange for stock-based compensation at the grant date fair value of the award. This method is in accordance with SFAS No. 123 (revised 2004), “Share-Based Payment”. Total stock based compensation expense for the six months ended April 30, 2008 and 2007 was nil.

P. CLASSIFICATION OF OPERATING COSTS AND EXPENSES

The Company records its operating costs and expenses using the following general classifications:

Cost of Goods Sold

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

Selling Expenses

Selling expenses consists primarily of travel and entertainment, maintenance, payroll (including taxes and benefits) for sales staff, telephone, utilities, insurance, sales commissions and export fees.

General and Administrative Expenses

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

Q. EARNINGS PER SHARE

The Company reports earnings per share in accordance with SFAS No. 128, “Earnings per Share.” Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares available. Diluted earnings per share is computed using the treasury stock method whereby the denominator is increased by the net dilution on the exercise of the warrants and other common stock equivalents if those additional common shares were dilutive. There were 25,000 and 15,000 potentially dilutive securities outstanding during the six months ended April 30, 2008 and 2007, respectively. The 25,000 and 15,000 warrants were deemed to be anti-diluted as the market price of the shares was lower than the exercise price at April 30, 2008 and 2007.

R. COMPREHENSIVE INCOME

The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general-purpose financial statements. SFAS No. 130 defines comprehensive income to include all changes in equity except those resulting from investments by owners and distributions to owners, including adjustments to minimum pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on marketable securities. In the six months ended April 30, 2008, the only component of other comprehensive income is foreign translation gain of $1,667,041 ($326,013 in the six month ended April 30, 2007), which has been recorded as the accumulative other comprehensive income in the balance sheet.

S. RECENT PRONOUNCEMENTS

The Company adopted SFAS No. 157 effective January 1, 2008, except for the nonfinancial assets and liabilities that are subject to a one-year deferral allowed by FASB Staff Position (FSP) SFAS 157-2 (“ FSP SFAS 157-2”). FSP SFAS 157-2 delays the effective date of SFAS No. 157 until fiscal years beginning after November 15, 2008 for nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157 did not have a material effect on our financial statements. The Company does not expect the adoption of SFAS No. 157 will have a material effect on our financial statements beginning in year 2009 as it relates to the items subject to the one-year deferral allowed by FSP SFAS 157-2.

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” (" SFAS 159"). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair values. SFAS No. 159 is effective for fiscal years after November 15, 2007. The adoption of SFAS No. 159, effective January 1, 2008, did not have a material impact on the Company’s financial statements.

In December 2007, the FASB issued Statement No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R provides additional guidance on improving the relevance, representational faithfulness, and comparability of the financial information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement applies prospectively to 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. The Company believes there will be no material impact on its financial statements upon adoption of this standard.

In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company believes there will be no material impact on its financial statements upon adoption of this standard.

In March 2008, the FASB issued SFAS 161, which requires enhanced disclosures on a company’s use of derivative instruments, its applicable accounting policies related to derivatives and the effect of those derivatives on a company’s financial position, results of operations and cash flows. This statement is effective for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. Adoption of SFAS 161 will have no impact on GATX’s financial position, results of operations or cash flows.

4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of April 30, 2008 and October 31, 2007 consist of the following:

	April 30, 2008		October 31, 2007

Cash on hand	$	29,633	$	28,657
Cash in banks		13,371,726		10,124,946
	$	13,401,359	$	10,153,603

The Company maintains a bank account in the PRC which is not protected by FDIC insurance or other insurance. As of April 30, 2008, the Company had $13,371,726 in uninsured deposits with Chinese banks. Historically, the Company has not experienced any losses in such accounts.

5. ACCOUNTS RECEIVABLE, NET

The Company's accounts receivable as of April 30, 2008 and October 31, 2007 are as follows:

	April 30, 2008			October 31, 2007
Accounts receivable	$	12,498,479		$	9,023,706
Less: Allowance for doubtful accounts		(143,538	)		(134,295	)
Accounts receivable, net	$	12,354,941		$	8,889,411

At April 30, 2008, there are two major customers which accounted for $1,654,210 and $1,589,068 of accounts receivable which are approximately 13% and 13% of the total balance, respectively.

These same two major customers also have the sales which amount to over 10% of the total sales for the six months ended April 30, 2008 and 2007 are as follows:

	2008				2007
Customer A:	$	2,014,230	11	%		1,799,788	11	%
Customer B:	$	2,013,327	11	%		1,613,417	10	%

6. PREPAYMENT AND OTHER RECEIVABLES, NET

Prepayments and other receivables as of April 30, 2008 and October 31, 2007 consist of the following:

	April 30, 2008			October 31, 2007

Prepayments and other receivables	$	897,292		$	565,960
Less: allowance for doubtful accounts		(350,917	)		(368,963	)
	$	546,375		$	196,997

As of April 30, 2008, the balance in prepayment and other receivables mainly includes prepayment for advertising of approximately $330,000 and advances to employees of approximately $ 173,000. As of October 31, 2007, the Company had advances to employees of approximately $181,000.

7. INVENTORIES

The Company's inventories as of April 30, 2008 and October 31, 2007 are as follows:

	April 30, 2008			October 31, 2007

Raw materials	$	1,081,758		$	437,144
Finished goods		170,356			64,445
Work-in-progress		714,293			526,604
Less: Valuation allowance		(62,549	)		(58,521	)
	$	1,903,858		$	969,672

8. PROPERTY, PLANT AND EQUIPMENT, NET

	April 30, 2008			October 31, 2007

Cost:-
Machinery and equipment	$	3,256,863		$	2,959,892
Office equipment and furnishings		46,819			38,649
Motor vehicles		35,428			48,364
		3,339,110			3,046,905

Less: Accumulated depreciation:-		(640,413	)		(440,620	)

Net book value	$	2,698,697		$	2,606,285

For the six months ended April 30, 2008, depreciation expenses relating to property, plant and equipment were $164,488 consisting of $157,957 recorded as cost of sales and $6,531 in general and administrative expenses. As of April 30, 2007, the Company had depreciation expenses of $138,475, recorded as general and administrative expenses.

On March 3, 2007, the Company entered into an agreement to purchase certain assets and/or the rights to use those assets from ZhangFa ShiYe Qingyang (“QingYang”) for approximately $467,000. The Company paid a deposit of approximately $302,000 to QingYang and agreed to assume a bank loan of approximately $165,000 to secure these assets. The assumed loan amount is included in other liabilities as of April 30, 2008 and October 31, 2007. The assets acquired, which are comprised of property, equipment and inventory (the collateral), are pledged against the bank loan. Although QingYang transferred operational control of the collateral to the Company, the Company was unable to obtain consent from the bank and local governmental authorities to transfer legal title of the Collateral to Renhuang; as a result, the Collateral is not recorded as an asset of Renhuang though the deposit was initially recorded in the amount of $467,000.

After paying the deposit, the Company began negotiating with the bank and local authorities to settle all outstanding issues and secure full ownership of the assets. The Company was unable to finalize those negotiations prior to October 31, 2007 and management decided to record an impairment reserve against the entire deposit amount at that date as the company did not have legal title to the Collateral and was unable to determine when or if it would gain title. That $467,000 impairment was recorded as a component of general and administrative expenses during the fiscal year ended October 31, 2007. Though the QingYang facilitiy (which constitutes the majority of the collateral has not operated subsequent to the agreement it remains under the control of Renhuang. Management anticipates obtaining title to the Collateral during 2009 upon the conclusion of negotiations with the bank and local government authorities.

9. ACCOUNTS PAYABLES

Accounts payables of $282,826 and $155,600 as of April 30, 2008 and October 31, 2007 consist of balances payable to supplies.

The suppliers from whom the purchased amount is over 10% of the total purchase for the six months ended April 30, 2008 and 2007 are:

	2008				2007
Supplier A:	$	1,684,825	24	%	$	1,585,995	23	%
Supplier B:	$	846,342	12	%	$	806,743	12	%
Supplier C:	$	723,631	10	%

10. OTHER PAYABLES

The balance as of April 30, 2008, includes taxes payable of $335,445, and social insurance payable of $466,124.

As of October 31, 2007, the balance includes taxes payable of $590,022, and social insurance payable of $302,562.

11. RESERVES

The reserve funds as of April 30, 2008 and October 31, 2007 are comprised of the following:

	April 30, 2008		October 31, 2007
Statutory surplus reserve fund	$	1,559,357	$	1,559,357
Public welfare fund		282,377	282,377
	$	1,841,734	$	1,841,734

Pursuant to the relevant laws and regulations of the PRC, the Company is required to annually transfer 10% of its after tax profit as reported on financial statements prepared under the accounting principles of the PRC to a statutory surplus reserve fund until the balance reaches 50% of the registered share capital. This reserve can be used to make up any losses incurred or to increase share capital. Except for reducing losses incurred, any other application may not result in this reserve balance falling below 25% of the registered capital.

Prior to January 1, 2007, the Company was required each year to transfer 5% of its after tax profit as reported on financial statements prepared under the accounting principles of the PRC to the public welfare funds. This reserve was restricted to capital expenditure for employees’ collective welfare facilities that are owned by the Company. The public welfare funds are not available for distribution to the stockholders (except in liquidation). Once capital expenditures for staff welfare facilities have been made, an equivalent amount must be transferred from the public welfare funds to the discretionary common reserve funds. Due to a change in PRC law, appropriation of profit to the public welfare funds is no longer required.

The Company reserves the statutory surplus at year ended. As of April 30, 2008, the estimated statutory surplus for six months ended was approximately $635,000.

12. INCOME TAXES

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

For the year of 2007 and 2008, the Company was granted a tax holiday and is entitled to full exemption from corporation income taxes through December 2008.

Had the company not been granted the tax holiday or been an eligible wholly foreign owned company, the income tax provision at the general PRC income rate of 25% starting from January 1, 2008 and 33% previously would have been approximately $1.8 million and $2.1 million for the six months ended April 30, 2008 and 2007 respectively.

13. COMMON STOCK

During the three and six months ended April 30, 2008, no common stock was issued.

14. WARRANTS

The Company entered into a Director appointment agreement with Mr. Moliteus dated April 16, 2007, pursuant to which the Company issued Mr. Moliteus 15,000 warrants, which expire on April 16, 2010, to purchase 15,000 shares of Renhuang’s common stock at $3.02 per share. On July 31, 2007, warrants to purchase 10,000 additional shares were issued to Mr. Moliteus with an exercise price of $2.50.

Transactions involving warrants are summarized as follows:

	Number of Shares		Weighted Average Price Per Share
Outstanding at October 31, 2006		—		—
Granted
— April 16, 2007		15,000	$	3.02
— July 31, 2007		10,000	$	2.50
Exercised		—		—
Cancelled or expired		—		—
Outstanding at October 31, 2007		25,000	$	2.81
Granted		—		—
Exercised		—		—
Outstanding at April 30, 2008		25,000		2.81

15. RELATED PARTY TRANSACTIONS

The Company rented property and plant from Harbin Renhuang Pharmaceutical Stock Co. Ltd. (“Old Renhuang”), a Company owned by the Company’s major shareholder. The lease term is from May 1, 2007 to May 1, 2008, with monthly rental payment of approximately $48,710. The Company has an amount due from related party of approximately $243,000 including the construction fees paid on behalf of Old Renhuang and receivable from sales. The Company also has an amount due to a relate party of approximately $399,000 related to the professional fee paid by Old Renhuang in 2007 for the reverse merger. The Company offsets the due from and due to related party balances, therefore the net balance was due to related party of approximately $156,000.

16. COMMITMENTS AND CONTINGENCIES

A. CAPITAL AND LEASE COMMITMENTS

The Company entered into a lease for office space from May 1, 2007 to April 30, 2010, with average monthly rental payments $9,393. The Company also rented factory from a related party (See Note 15) with monthly payment of $48,710.

The minimum future payments for the rental leases as followings:

	April 30, 2008
	Office		Factory
2009	$	122,853	$	599,983
2010		122,854		—
Thereafter		—		—
Total	$	245,707	$	599,983

B. LEGAL PROCEEDINGS

The Company is not currently involved in any litigation. There are no actions, suits, proceedings, inquiries or investigations before or by any court, public board, government agency, self-regulatory organization or body pending to the knowledge of the executive officers of the Company.

17. EMPLOYEE WELFARE PLAN

Regulations in the PRC require the Company to contribute to a defined contribution retirement plan for all permanent employees. Pursuant to regulations promulgated by the local authority in the PRC, the retirement pension insurance, unemployment insurance, health insurance, injury insurance and pregnancy insurance are established for employees during the term of their employment. For the three months ended April 30, 2008, the level of contribution to these funds was set at 22% of the average employee salary determined by the Social Welfare Bureau. The Company incurred the payable amount of $142,738 as of April 30, 2008 in other payables.

18. VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

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

19. SUBSEQUENT EVENT

On May 15, 2009, there an agreement was reached between Renhuang and Allied Merit International Investments, Inc. and Griffin Ventures Ltd. (the “Investors”). The Investors agreed to pay Renhuang $1.5 million by July 31, 2009, in exchange for an aggregate of 2,142,856 shares of the Company’s Common Stock and 1,071,428 Warrants with an exercise price of $0.875. The Company issued the 2,142,856 shares on May 20, 2009 and received the $1.5 million on August 7, 2009.

The warrants issued to Mr. Moliteus were cancelled during fiscal 2008.

On January 22, 2009, the local government extended the tax holiday for the Company to the end of 2009.

The Company extended the lease with Old Renhuang on May 1, 2008. No modification made on the minimum payment table in Note 16 regarding the renewed lease.

ITEM 2

Managements Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The following discussion of the financial condition and results of the operation of Renhuang Pharmaceuticals, Inc. including the forward-looking statements involving risk and uncertainties should be read in conjunction with the financial statements and notes included in this Quarterly Report on Form 10-Q. Actual results may differ from the forward-looking statements due to a variety of factors.

Results of operations

Three months ended April 30, 2008 as compared to three months ended April 30, 2007

Revenues, Expenses and Net Income

	2008			2007
Revenue	$	7,516,594			6,315,332
Cost of Sales		(3,423,785	)		(3,120,081	)
Selling and Distribution Expenses		(42,087	)		(16,871	)
Advertising Expenses		(679,640	)		(163,532	)
General and Administrative Expenses		(548,964	)		(369,728	)
Research and Development		(329,121	)		-
Provision for Doubtful Account		733			(568,113	)
Depreciation and Amortization		(3,405	)		(70,181	)
Other Income (expense)		20,680			6,732
Net Income	$	2,511,005			2,013,558

Revenues

For the three months ended April 30, 2008, our revenues increased by $1,201,262 or 19% as compared to $6,315,332 during the same period in 2007. During the three months ended April 30, 2008, we increased production of our higher profit margin products in line with our overall strategy and decreased production of our lower profit margin products. Our revenues increase mainly due to the sales growth of Acanthopanax (Siberian Ginseng) products, Shark Power Health Care products and Tianma Headache Relief Pills.

Cost of Sales

Our cost of sales for the three months ended April 30, 2008 and 2007 were $3,423,785 and $3,120,081 respectively, which were approximately 46% and 49% of revenue and consisted primarily of raw material, labor and production costs. The improvement of the percentage of cost to revenue is due to the production and sales growth of the high margin products represented by Shark Power Health Care products and the sales decline of the low margin products including our Siberian Ginseng pill.

Selling and Distribution Expenses

Our selling and distribution expenses were only $42,087 and $16,871 for the three months ended April 30, 2008 and 2007, respectively. The sales rebates of $1,850,181 and $1,687,293 for the three months ended April 30, 2008 and 2007 were recorded as reductions of revenue. The increase of selling and distribution expenses is mainly due to the sales growth and business expansions.

Advertising Expenses

For the three months ended April 30, 2008 and 2007 our advertising expenses were $679,640 and $163,532 respectively. These advertising expenses were primarily related to the advertising of our Siberian Ginseng products. A significant portion of the increase was due to our more aggressive advertising strategy during this period to increase brand recognition in Southern China.

General and Administrative Expenses

Our general and administrative expenses were $548,964 and $369,728 for the three months ended April 30, 2008, and 2007, respectively. Our general and administrative expenses consist mainly of payroll, leases, professional fees, entertainment, and travel expenses. The increase is mainly due to the growth of the payroll, travel and entertainment expenses. The increase is mainly attributed to increased payroll due to additional personnel and salary increases in this period.

Research and Development

For the three months ended April 30, 2008 and 2007, we spent $329,121 and $0, on research and development, respectively. R&D has been expensed when incurred. The increase is mainly due to new significant R&D projects during the current period including Siberian Ginseng GAP base and projects on improving the process of producing Siberian Ginseng extracts.

Depreciation

We had depreciation expenses of $3,405 and $70,181 for the three months ended April 30, 2008 and 2007, respectively (See Note 8). The decrease is mainly due to allocation of depreciation expense related to production in cost of sales, but none in prior period of 2007.

Six months ended April 30, 2008 as compared to six months ended April 30, 2007

Revenues, Expenses and Net Income

	2008			2007
Revenue	$	17,975,450			15,819,325
Cost of Sales		(8,221,517	)		(7,693,017	)
Selling and Distribution Expenses		(111,431	)		(122,446	)
Advertising Expenses		(1,361,071	)		(172,681	)
General and Administrative Expenses		(1,324,034	)		(636,504	)
Research and Development		(671,015	)		-
Provision for Doubtful Account		42,165			(621,122	)
Depreciation and Amortization		(6,531	)		(138,475	)
Other Income (expense)		34,653			10,066
Net Income	$	6,356,669			6,445,146

Revenues

For the six months ended April 30, 2008, our revenues increased by $2,156,125 or 14% as compared to $15,819,325 during the same period in 2007. Our revenues increase was attributable to the success of our marketing expansion, leading to significantly higher expenses for advertising and marketing. During the six months ended April 30, 2008, we increased production of our higher profit margin products in line with our overall strategy and decreased production of our lower profit margin products. Our revenues for the six months ended April 30, 2008 consisted primarily of sales of the following products: Acanthopanax products, Shark Power Health Care products, and other Chinese traditional medical products.

Cost of Sales

Our cost of sales for the six months ended April 30, 2008 and 2007 were $8,221,517 and $7,693,017 respectively, which were approximately 46% and 49% of revenue and consisted primarily of raw material, labor and production costs. The decline of the percentage of cost to revenue is due to the production and sales acceleration of the high margin products represented by Acanthopanax Ointment and Shark Power Health Care products products.

Selling and Distribution Expenses

Our selling and distribution expenses were only $111,431 and $122,446 for the six months ended April 30, 2008 and 2007, respectively. The sales rebates of $4,427,019 and $4,067,871 for the six months ended April 30, 2008 and 2007 were recorded as reductions of revenue.. The increase of the selling and distribution expenses is mainly due to the sales growth and business expansions.

Advertising Expenses

For the six months ended April 30, 2008 and 2007 our advertising expenses were $1,361,071 and $172,681 respectively. These advertising expenses were primarily related to the advertising of Acanthopanax. These significant increases were due to our more aggressive advertising strategy during this period to increase name recognition in Southern China. The company dedicates to build up a leading ‘Renhuang brand’ associated with Acanthopanax products through consistent ads input in the coming years.

General and Administrative Expenses

Our general and administrative expenses were $1,324,034 and $636,504 for the six months ended April 30, 2008, and 2007, respectively. Our general and administrative expenses mainly included payroll, leasing expenses, professional fee, entertainment, and travelling expenses. The increase is mainly due to the growth of payroll and traveling expenses. The increase is mainly attributed to increased payroll due to additional personnel and salary increases in this period

Research and Development

For the six months ended April 30, 2008 and 2007, we spent $671,015 and nil, on research and development, respectively. R&D have been expensed when incurred for accounting purposes. The increase is mainly due to investments in Acanthopanax GAP base and research work on Acanthopanax products.

Depreciation

Our depreciation expenses were $6,531 and $138,375 for the six months ended April 30, 2008 and 2007, respectively (see Note 8). The decrease is mainly due to allocation of depreciation expense related to production in cost of sales, but none in prior period of 2007.

Liquidity and Capital Resources

Our cash, current assets, total assets, current liabilities, and total liabilities as of April 30, 2008 is as follows:

	April 30, 2008

Cash and Cash Equivalents	$	13,401,359
Total Current Assets		28,206,533
Total Assets		30,905,230
Total Current Liabilities		1,488,020
Total Liabilities		1,488,020
Working capital	$	26,718,513

Sources and Uses of Cash

Operations

Net cash generated from operating activities was $2,554,136 for the six months ended April 30, 2008. Our net cash used in operating activities for the current six month period was primarily $2,769,89 in net account receivables, $ 841,971 in inventories, $283,792 from reduction of prepayment and other net receivables, $113,095 in total accounts payable and accruals, and $ 133,141 in other payables. Cash generated from operating activities declined as we extended credit terms to certain key customers in order to gain market share.

Investments

Net cash used in investing activities was $80,073 for the six months ended April 30, 2008. For the six months ended April 30, 2008, our cash used in investing activities was related to the acquisition of property, plant and equipment.

Financing

There were no financing activities during the six months ended April 30, 2008 and 2007.

Debt Instruments, Guarantees, and Related Covenants

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

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management’s initial estimates as reported. Our critical accounting policies include:

Property, plant and equipments are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included as components of income in the year of disposition. The Company records depreciation of its property, plant and equipment on a straight-line basis over the estimated useful lives of the assets based on their costs.

The Company provides rebates to its sales agents (which act as wholesalers) as an incentive plan. The rebate rate is set on a product-by-product basis. When revenue is recognized, the rebate is accounted for as an offset to revenues in accordance with EITF Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).

Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

	Payments due by period
Obligations	Total			1 Year			1-2 Years			2-3 Years			3-5 Years
Operating Lease Obligations - Total		$	845,690		$	722,836		$	122,854		$	-0-		-0-
Operating Lease Obligations - Related Party			599,983			599,983			-0-			-0-		-0-
Operating Lease Obligations - Third Party			245,707			122,853			122,854			-0-		-0-

As noted above, we lease office space from Old Renhuang pursuant to a year to year lease.

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

Not required.

ITEM 4

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of April 30, 2008, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Principal Accounting Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Principal Accounting Officer have concluded that as of April 30, 2008, our disclosure controls and procedures were not effective at the reasonable assurance level due to the weaknesses described below.

Evaluation of Internal Control over Financial Reporting

As required by Exchange Act Rules 13a-15(f) and 15d-15(f), our management has carried out an evaluation, under the supervision of our Chief Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our internal control over financial reporting as of April 30, 2008.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company,

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization of management and the board of directors of the Company, and

Provide reasonable assurance regarding prevention (or timely detection) of unauthorized acquisition, use, or disposition of the Company's assets, which could have a material effect on Company consolidated financial statements.

Because of certain inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5), such that a misstatement of the annual or interim financial statements may not be prevented or detected. Management has identified the following material weakness that has caused management to conclude that, as of April 30, 2008, our internal control over financial reporting was not effective:

We were unable to meet our requirements to timely file our Annual Report on Form 10-K for the year ended October 31, 2008. Management evaluated the impact of our inability to timely file periodic reports with the Securities and Exchange Commission on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted in the inability to timely make these filings represented an internal control weakness.

We were unable to properly review the U.S. GAAP adjustment procedures, disclosure reporting processes, and consolidated financial statements preparation processes.

We were unable to effectively provide oversight of internal control over financial reporting because there was a lack of a proper reporting channel between the internal audit function and an audit committee.

Remediation of Weaknesses

Management recognizes the importance of this weakness and is committed to remediation and will institute a comprehensive remediation plan. The plan will include, but not be limited to, hiring finance management resources and personnel with knowledge and experience in U.S. GAAP, and where necessary, the plan will utilize the services of external consulting professionals in the area of accounting advisory services. Furthermore, the plan will re-organize the internal audit function and establish communication channels between the internal audit function and an audit committee.

Management intends to allocate resources to insure that reports are filed on a timely basis in the future.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1

Legal Proceedings

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

ITEM 1A

Risk Factors

Not required for smaller reporting company.

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3

Defaults Upon Senior Securities

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

ITEM 4

Submission of Matters to a Vote of Security Holders

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

ITEM 5

Other Information

None.

ITEM 6

Exhibits

(a) Exhibits

3.1 (1)		Restated Articles of Incorporation, as filed with the Nevada Secretary of State on April 21, 2003.

3.2 (5)		Amendment to Articles of Incorporation, as filed with the Nevada Secretary of State on July 28, 2006.

3.3 (1)		Second Restated Bylaws

10.1 (2)		Common Stock Purchase Agreement dated September 19, 2005.

10.2 (2)		Securities Purchase Agreement dated September 16, 2005.

10.3 (3)		Reorganization, Stock and Asset Purchase Agreement dated September 30, 2005.

10.4 (3)		Stock Purchase Agreement dated September 30, 2005.

10.5 (4)		Securities Purchase Agreement dated September 16, 2005.

10.6 (5)		Loan Agreement with Heilongjiang Yuejintiande Building and Installation Project Co.,Ltd

10.7 (6)		Acquisition Agreement between Harbin Renhuang Pharmaceutical Co., Ltd. and Zhongfa Industrial Group Yerui Pharmaceutical Co., Ltd., dated February 28, 2007

21.1 (5)		Subsidiaries of the Registrant

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1		Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

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

SIGNATURES

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

	Renhuang Pharmaceuticals, Inc.

Dated: January 12, 2010		/s/ Li Shaoming
	By:	Li Shaoming
		President and
		Chief Executive Officer

Dated: January 12, 2010		/s/ Zuoliang Wang
	By:	Zuoliang Wang
		Interim Chief Financial Officer