Aida Pharmaceuticals (AIDA) 10QSB/A 2006 Q2 Quarterly report (small business) (amended)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB/A-2

 (Mark One)

S

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

For the quarterly period ended June 30, 2006

£

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______________ to _____________

Commission file number000-50212

AIDA PHARMACEUTICALS, INC.

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

Nevada	81-0592184
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

31 Dingjiang Road, Jianggan District, Hangzhou, China	310016
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number  86-0571-85802712

__________________________________________________________________

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 13b-2 of the Exchange Act). Yes£   NoS

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.          Yes£     No£

APPLICABLE ONLY TO CORPORATE ISSUES

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of August 10, 2006, there were 27,000,000 shares of $.001 par value common stock issued and outstanding.

Transitional Small Business Disclosure Format (Check one):  Yes£    NoS

SEC2334(9-05)

Persons who are to respond to the collection of information contained in this form are

not required to respond unless the form displays a currently valid OMB control number.

FORM 10-QSB

AIDA PHARMACEUTICALS, INC.

INDEX

		Page
PART I.	Financial Information	3
	Item 1.  Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2006 (Unaudited)
	and December 31, 2005	4
	Condensed Consolidated Statements of Income and Comprehensive Income for the
	Three and Six Months Ended June 30, 2006 and 2005 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended
	June 30, 2006 and 2005 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements as of June 30, 2006
	(Unaudited)	10
	Item 2.  Management’s Discussion and Analysis of Financial Condition or Plan of Operation	24
	Item 3.  Controls and Procedures	38
PART II.	Other Information	38
	Item 1.  Legal Proceedings	38
	Item 5.  Other Information	38
	Item 6.  Exhibits and Reports on Form 8-K	39
	Signatures	40

(Inapplicable items have been omitted)

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

In  the  opinion  of management, the accompanying unaudited condensed consolidated financial statements included  in this Form 10-QSB reflect all adjustments (consisting only of normal recurring  accruals)  necessary  for  a  fair  presentation  of  the  results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

NOTE – This Amended 10-QSB reflects a correction of the par value from $.006 to $.001 in the Condensed Consolidated Balance Sheets. There are no additional changes.

3

AIDA PHARMACEUTICAL, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS
		June 30, 2006 (Unaudited)		December 31, 2005
CURRENT ASSETS
Cash and cash equivalents	$	5,684,350	$	3,129,450
Restricted cash		1,991,196		1,903,487
Accounts receivable, net of allowance for doubtful accounts of $386,688  and         $386,688 as of June 30, 2006 and December 31,2005, respectively		9,752,632		9,390,137
Notes receivable		2,929,596		3,323,076
Inventories		3,978,566		3,348,592
Deferred tax assets		10,246		-
Due from related parties		1,129,471		54,120
Other receivables, prepaid expenses, and other assets		449,724		449,672
Due from employees		445,199		497,486
Prepayments for goods		380,700		316,960
Total current assets		26,751,680		22,412,980
Plant and equipment, net		11,607,066		11,987,572
Land use rights, net		2,150,559		1,755,440
Construction in progress		878,722		856,776
Patents, net		1,887,327		1,788,014
Due from employees		792,364		616,440
Long term investments		288,836		218,605
Deposits		4,243,585		2,817,391
Deferred taxes		240,367		205,919
TOTAL ASSETS	$	48,840,506	$	42,659,137

See accompanying notes to condensed consolidated financial statements.

4

AIDA PHARMACEUTICAL, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	3,125,248	$	1,622,449
Other payables and accrued liabilities		1,865,426		3,003,233
Accrued expense		2,162,254		-
Short term debts		23,665,617		21,450,710
Due to related parties		316,753		159,492
Taxes payable		117,130		38,722
Customer deposits		1,182,220		1,390,526
Due to employees		212,668		493,492
Deferred taxes		163,011		106,279
Total current liabilities		32,810,327		28,264,903
LONG-TERM LIABILITIES
Long-term bank loans		3,752,064		3,717,380
Deferred taxes		477,806		387,316
Notes payable		2,126,169		-
Minority interests		3,707,572		3,565,431
Total long-term liabilities		10,063,611		7,670,127
TOTAL LIABILITIES		42,873,938		35,935,030
SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value; 75,000,000 shares authorized; 25,000,000 shares       issued and outstanding  at June 30, 2006 and December 31, 2005, respectively		25,000		25,000
Additional paid-in capital		3,418,323		3,418,323
Deferred compensation		(1,274,167)		-
Retained earnings (the restricted portion is $593,971 and $593,971 at June 30, 2006       and December 31, 2005, respectively)		3,562,972		3,136,495
Accumulated other comprehensive income		234,440		144,289
Total Shareholders’ Equity		5,966,568		6,724,107
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	48,840,506	$	42,659,137

See accompanying notes to condensed consolidated financial statements.

5

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

 OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

		THREE MONTHS ENDED JUNE 30,				SIX  MONTHS ENDED JUNE 30,
		2006		2005		2006		2005
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
REVENUES	$	7,284,888	$	5,031,908	$	12,599,694	$	9,832,579
COST OF GOODS SOLD		(3,579,700)		(1,191,544)		(6,554,934)		(2,627,422)
GROSS PROFIT		3,705,188		3,840,364		6,044,760		7,205,157
Research and development		-		-		-		(120,824)
Selling and distribution		(1,863,507)		(2,893,166)		(3,540,243)		(4,357,773)
General and administrative		(939,536)		(938,671)		(1,586,281)		(1,563,252)
INCOME FROM OPERATIONS
		902,145		8,527		918,236		1,163,308
OTHER INCOME (EXPENSES)
Interest expense, net		(384,500)		(267,895)		(653,191)		(481,877)
Government grants		43,124		72,746		503,587		121,640
Investment income		12,490		-		12,490		-
Gain on non-monetary transactions		-		-		-		125,097
Other (loss) income, net		31,403		(63,203)		71		5,041
INCOME BEFORE INCOME TAXES		604,662		(249,825)		781,193		933,209
INCOME TAXES		(130,270)		(62,942)		(227,110)		(123,240)
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS		474,392		(312,767)		554,083		809,969
MINORITY INTERESTS		(75,504)		146,870		(142,141)		(229,131)
INCOME FROM CONTINUING OPERATIONS		398,888		(165,897)		411,942		580,838
DISCONTINUED OPERATION
Gain from disposition of discontinued operation		-		-		-		159,331
Income from discontinued operation		-		-		-		25,743
GAIN FROM DISCONTINUED OPERATION		-		-		-		185,074
NET INCOME (LOSS)		398,888		(165,897)		411,942		765,912
OTHER COMPREHENSIVE INCOME
Foreign Currency Translation gain		22,918		28		90,151		45
OTHER COMPREHENSIVE INCOME BEFORE INCOME TAXES		22,918		28		90,151		45
INCOME TAXES RELATED TO OTHER COMPREHENSIVE INCOME		(7,563)		(9)		(29,750)		(15)
OTHER COMPREHENSIVE INCOME , NET OF INCOME TAXES		15,355		19		60,401		30
COMPREHENSIVE INCOME (LOSS)	$	414,243	$	(165,878)	$	472,343	$	765,942
WEIGHTED AVERAGE SHARES OUTSTANDING BASIC AND DILUTED		25,000,000		23,375,000		25,000,000		23,375,000

See accompanying notes to condensed consolidated financial statements.

6

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

 OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

		THREE MONTHS ENDED JUNE 30,				SIX  MONTHS ENDED JUNE 30,
		2006		2005		2006		2005
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Income per common share from continuing operations, basic and diluted	$	0.02	$	0.01	$	0.02	$	0.03
Income per common share from gain from disposition of discontinued operations, basic and diluted	$	0.00	$	0.00	$	0.00	$	0.00
Income per common share from income from discontinued operations, basic and diluted	$	0.00	$	0.00	$	0.00	$	0.01
Net income per common share, basic and diluted	$	0.02	$	0.01	$	0.02	$	0.03

See accompanying notes to condensed consolidated financial statements.

7

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

		For the Six Months Ended June 30,
		2006		2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	411,943	$	765,912
Adjustments to reconcile net income to net cash provided by  operating activities:
Depreciation and amortization		810,053		687,191
Deferred taxes		102,527		(274,392)
Gain from forgiveness of debt		-		(125,097)
Minority interests’ share of net income		142,140		229,130
Loss of disposal of fixed assets		230		-
Amortization of deferred compensation		45,833		-
Gain on disposal of discontinued operation		(12,490)		(26,068)
Changes in operating assets and liabilities, net of effects of acquisition:
(Increase) Decrease In:
Accounts receivable		(362,495)		32,608
Inventories		(629,974)		793,151
Other receivables, prepaid expenses, and other assets		(53)		618,826
Prepayments for goods		(63,740)		(1,292)
Discontinued operation		-		423,351
Increase (Decrease) In:
Accounts payable		1,502,800		(79,992)
Other payables and accrued liabilities		(295,554)		565,631
Due to employees		(280,824)		259,678,
Taxes payable		78,409		84,287
Customer deposits		(208,306)		780,088
Discontinued operation				876,051
Net cash provided by  operating activities		1,240,499		5,609,063
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash		(87,709)		(2,022,957)
Purchases of plant and equipment		(164,021)		(473,406)
Purchases of construction in progress		(13,950)
Proceeds from disposal of discontinued operation, net of cash sold		-		1,581,755
Cash received from sale of plant and equipment		819		-
Purchase of land use right		(394,169)		-
Deposit for land use right		(986,915)		-
Deposit for long term investment		(499,749)		-
Deposit for fixed assets		(7,880)		-
Deposit for patent		(125,069)		-
Notes receivable		393,479		(1,335,312)
Due from related parties		(1,075,350)		-
Due from employees		(123,638)		(1,134,201)
Proceeds from disposal of investment		137,559		-
Purchase of investment		(187,603)		-
Purchase of a subsidiary, net of cash acquired		-		(936,707)
Discontinued operation		-		224,141
Net cash used in investing activities		(3,134,196)		(4,096,687)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of short-term debt		4,341,076		-
Repayment of short-term debt		-		(1,437,167)
Proceeds from long-term debt		34,684		-
Proceeds from  notes payable		-		3,256,526
Proceeds from related parties		157,262		-
Repayment to related parties		-		(2,282,174)
Discontinued operation		-		(1,666,084)
Net cash used in financing activities		4,533,022		(2,128,899)

See accompanying notes to the condensed consolidated financial statements.

8

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

		For the Six Months Ended March 31,
		2006		2005
INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS		2,639,325		(616,523)
Effect of exchange rate changes on cash		(84,425)		25
Cash and cash equivalents at beginning of period		3,129,450		2,810,050
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	5,684,350	$	2,193,552
SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid	$	(79,533)	$	(912)
Interest paid	$	(671,098)	$	(497,244)

SUPPLEMENTAL NON-CASH DISCLOSURES:

1. During the three months ended March 31, 2005, a liability of $639,230 was settled by transferring equipment with a net book value of     $514,133 resulting in a $125,097 gain.
2. During the six months ended June 30, 2006, $274,229 was transferred from deposits to patents.
3. On February 1, 2005, the Company purchased an additional 52% interest in Changzhou Fangyuan Pharmaceutical Co., Ltd. for     $3,232,542.  Thereafter, Changzhou Fangyuan Pharmaceutical Co., Ltd. became a 66% owned subsidiary of the Company.  The     following represents the assets purchased and liabilities assumed at the acquisition date:
Land use right, net	$	1,182,180
Patents, net		1,868,534
Construction in progress		856,776
Deposits		1,603,483
Plant and equipment, net		8,354,078
Cash and cash equivalents		2,295,835
Accounts receivable, net		1,038,479
Inventories, net		467,223
Other receivables and prepayments		122,748
Prepayments for goods		380,554
Due from related parties		1,917,521
Total assets purchased	$	20,087,411
Short term bank loans		(8,667,193)
Accounts payable		(370,371)
Accrued expense		(459,159)
Other payable and accrued liabilities		(1,007,904)
Customer deposits		(112,373)
Deferred taxes		(216,278)
Long-term bank loans		(3,717,380)
Total liabilities assumed	$	(14,550,658)
Total net assets	$	5,536,753
Share percentage		66%
Net assets acquired	$	3,654,257
Total consideration paid (including the investments of $421,715 in prior years)	$	3,654,257

See accompanying notes to condensed consolidated financial statements.

9

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

1.

ORGANIZATION AND PRINCIPAL ACTIVITIES

Aida Pharmaceuticals, Inc. (Formerly BAS Consulting, Inc. (“BAS”)) (“Aida” or the "Company") was incorporated under the laws of the State of Nevada on December 18, 2002. The Company was considered a development stage company as defined by Statement of Financial Accounting Standards (“SFAS”) No. 7 until the share exchange agreement between the shareholders of Earjoy Group Limited (“Earjoy”) and the Company became effective. During its development stage, the Company has developed and refined its basic business plan and strategy and commenced making business contacts and seeking clients.  On March 6, 2006, BAS Consulting, Inc. changed its name to Aida Pharmaceuticals, Inc.

On December 8, 2005, the Company completed and closed the share exchange agreement dated as of June 1, 2005 by and among the Company, Earjoy and the shareholders of Earjoy.  Pursuant to the agreement, the Company completed the following actions:

(1)

Effective November 30, 2005, the Company implemented a 1 for 6.433138 reverse stock split prior to the closing of the agreement so that the Company’s 10,453,850 outstanding shares as of the date of the agreement then represent 1,625,000 shares of common stock;

(2)

The Company issued and delivered to the shareholders of Earjoy an aggregate of 23,375,000 shares of its post−reverse stock split common stock, representing 93.5% of all of the Company’s issued and outstanding common stock, in exchange for 100% of the outstanding capital of Earjoy;

After the share exchange, Earjoy became a wholly−owned subsidiary of the Company.

Hangzhou Aida Pharmaceutical Co., Ltd. (“HAPC”) is a wholly owned subsidiary of Earjoy. HAPC is the principal operating subsidiary of Earjoy. HAPC has been in operation since March 1999 and was established as a limited liability company under the laws of the People’s Republic of China (“PRC”) on March 26, 1999. On December 23, 2004, Earjoy entered into a Share Purchase Agreement with Best Nation Investment Co., Ltd. for the acquisition by Earjoy of 100% of all interests in HAPC.

After the share exchange, HAPC became the principal operating subsidiary of the Company and is deemed to be the accounting acquirer and the exchange transaction has been accounted for as a reverse acquisition in accordance with SFAS No. 141, “Business Combinations”.  The acquisition will be accounted for as the recapitalization of HAPC since, at the date of acquisition, the prior consulting operations generated no revenue.

On February 1, 2005, the Company purchased an additional 52% interest in Changzhou Fangyuan Pharmaceutical Co., Ltd. for $3,232,542 in cash. Thereafter, Changzhou Fangyuan Pharmaceutical Co., Ltd. became a 66% owned subsidiary of the Company.

10

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

1.

ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

The primary operations of the Company and its subsidiaries are the development, production and distribution of cardiovascular and anti cancer drugs, in the form of powder for injection, liquid for intravenous injection, capsule, tablet, ointment, etc., within the PRC.

2.

BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The condensed consolidated balance sheet information as of December 31, 2005 was derived from the audited consolidated fin ancial statements included in the Company’s Annual Report Form 10-KSB.  These interim financial statements should be read in conjunction with that report.

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

3.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Aida Pharmaceuticals, Inc. (Formerly BAS Consulting , Inc.) and the following subsidiaries:

(i)

Earjoy Group Limited (“Earjoy”)(100% subsidiary of Aida);

(ii)

Hangzhou Aida Pharmaceutical Co., Ltd. (“HAPC”)(100% Subsidiary of Earjoy);

(iii)

Hangzhou Boda Medical Research and Development Co.,(“Boda”)(100% Subsidiary of HAPC);

(iv)

Hainan Aike Pharmaceutical Co., Ltd. (“Hainan”) (50% subsidiary of HAPC) and Yang Pu Aike Pharmaceutical Co., Ltd. (“Yangpu”)(95% subsidiary of Hainan). HAPC exercise significant influence over Hainan by controlling over 50% of the voting rights;

(v)

Changzhou Fangyuan Pharmaceutical Co., Ltd.(“Fangyuan”)(66% subsidiary of HAPC).

All significant inter-company accounts and transactions have been eliminated in consolidation.

4.

CONCENTRATIONS

The Company has four major customers who accounted for the following percentages of total sales and total accounts receivable in 2006 and 2005:

	Sales		Accounts Receivable
Major Customers	For the Six  Months Ended  June 30, 2006	For the Six  Months Ended  June 30, 2005	June 30, 2006	December 31, 2005
Company A	15%	12%	5%	7%
Company B	8%	4%	1%	0%
Company C	6%	2%	1%	1%
Company D	5%	1%	6%	2%

11

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

The Company has two major suppliers who accounted for the following percentages of total purchases and total accounts payable in 2006 and 2005:

	Purchases		Accounts Payable
Major Customers	For the Six  Months Ended  June 30, 2006	For the Six  Months Ended  June 30, 2005	June 30, 2006	December 31, 2005
Company E	11%	12%	10%	7%
Company F	7%	8%	3%	6%

The sole market of the Company is the PRC for the periods ended Jun 30, 2006 and 2005.

Of the total revenue for the six months ended June 30, 2006, 47% was fully dependent on the patent for Etimicin Sulfate owned by the Company.  The net book value of the patent is $96,850 at June 30, 2006.

5.

USE OF ESTIMATES

The preparation of the consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ materially from those estimates.

6.

FOREIGN CURRENCY TRANSLATION

The accompanying consolidated financial statements are presented in United States dollars.  The functional currency of the Company is the Renminbi (RMB).  The consolidated financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

	June 30, 2006	December 31, 2005
Period end RMB:  US$ exchange rate	7.9956	8.0702
Average yearly RMB:  US$ exchange rate	8.0329	8.1734

7.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, due to/from related parties, other receivables and prepaid expenses, due from/to employees, prepayments for goods, accounts payable, other payables and accrued liabilities, short-term debts, taxes payable and customer deposits.  Management has estimated that the carrying amount approximates fair value due to their short-term nature.

12

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

8.

EARNING PER SHARE

Basic earning per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive securities outstanding for the period prospected.

9.

NOTES RECEIVABLE

Notes receivable at June 30, 2006 and December 31, 2005 consist of the following:

Bank acceptance notes :
		June 30, 2006 (Unaudited)		December 31, 2005
Due February 4, 2006  (subsequently settled)		-		8,674
Due February 15, 2006 (subsequently settled)		-		136,864
Due March 11, 2006  (subsequently settled)		-		6,196
Due April 13, 2006 (subsequently settled)	$	-	$	49,566
Subtotal		-		201,300
Notes receivable from related companies:
		June 30, 2006 (Unaudited)		December 31, 2005
Due October 14, 2006		-		319,951
Due November 11, 2006		375,206		371,738
Due November 30, 2006		62,534		61,956
Due December 2, 2006		62,534		123,913
Due December 14, 2006		454,183		-
Due December 31, 2006	$	11,506	$	-
Subtotal		965,963		877,558

Notes receivable from unrelated companies:
		June 30, 2006 (Unaudited)		December 31, 2005
Due May  20, 2006		-		123,913
Due December 1,2006		869,566		1,160,265
Due November 30, 2006		968,998		960,040
Due May 31, 2007		125,069		-
Subtotal		1,963,633		2,244,218
Total	$	2,929,596	$	3,323,076

Notes receivable are interest-free and unsecured.

13

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

10.

INVENTORIES

Inventories at June 30, 2006 and December 31, 2005 consist of the following:

		June 30, 2006 (Unaudited)		December 31, 2005
Raw materials	$	998,532	$	735,017
Work-in-progress		752,654		357,220
Finished goods		2,227,380		1,788,025
Processing materials		-		468,330
	$	3,978,566	$	3,348,592

During the technique improvement from April 2005 to April 2006, the HAPC engaged Hangzhou Aoya bio-tech Co., Ltd.  to manufacture products "Aida". With the termination of the processing service, there was no amount of processing materials as at June 30, 2006.

11.

DUE TO/FROM RELATED PARTIES

(I)

Due From Related Parties

		June 30, 2006 (Unaudited)		December 31, 2005
Current:
Ningbo Tianheng Pharmaceuticals Co., Ltd.	$	12,507	$	12,391
Hangzhou Jin’ou Medicine Co., Ltd		1,061,930		-
Zhejiang Guobang Veterinary Drug Co., Ltd.		55,034		41,729
Total due from related parties	$	1,129,471	$	54,120

(II) Due To Related Parties

		June 30, 2006 (Unaudited)		December 31, 2005
.
Merlin Green Canada Inc.	$	26,431	$	136,593
Jin’ou Group		201,961		22,899
Zhejiang Guobang Co., Ltd.		88,361		-
Total due to related parties	$	316,753	$	159,492

(III)  Due From Employees

		June 30, 2006 (Unaudited)		December 31, 2005
Current	$	445,199	$	497,486
Long-term		792,364		616,440
Total due from employees	$	1,237,563	$	1,113,926

14

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

11.

DUE TO/FROM RELATED PARTIES(CONTINUED)

(IV) Due To Employees

		June 30, 2006 (Unaudited)		December 31, 2005
Current	$	212,668	$	493,492
Total due to employees	$	212,668	$	493,492

12.

BUSINESS COMBINATION

On February 1, 2005, HAPC signed a purchase agreement with Jiangsu Sunshine Group Inc. to purchase an additional 52% interest in Changzhou Fangyuan Pharmaceutical Co., Ltd. for $3,232,542, and the acquisition was completed on February 1, 2005. The acquisition date for accounting purpose was February 1, 2005. Thereafter, Changzhou Fangyuan Pharmaceutical Co., Ltd. became a 66% owned subsidiary of the HAPC and the financial results of Changzhou Fangyuan Pharmaceutical Co., Ltd. have been consolidated in the accompanying consolidated financial statements of the Company.

The following summarizes the acquisition:

Total consideration paid	$	3,654,257
Fair value of assets acquired		(18,309,680)
Fair value of liabilities assumed		9,603,434
Negative goodwill	$	(5,051,989)
Negative goodwill applied to a patent		5,051,989
Total	$	5,051,989

The following is the pro forma net income and basic and diluted net income per share of the Company for the six months ended June 30, 2005 assuming the acquisition was completed on January 1, 2005:

Net income	$	1,494,777
Net income per share, basic and diluted	$	0.06

15

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

13.

PLANT AND EQUIPMENT

Plant and equipment consist of the following as of June 30, 2006 and December 31, 2005 :

		June 30, 2006 (Unaudited)		December 31, 2005
At cost:
Buildings	$	7,023,763	$	6,944,082
Machinery		8,013,202		7,832,139
Motor vehicles		613,319		607,649
Office equipment		551,395		573,220
Leasehold improvements		369,439		366,024
		16,571,118		16,323,114
Less:  Accumulated depreciation
Buildings		1,198,952		1,089,490
Machinery		2,998,371		2,582,907
Motor vehicles		377,212		332,125
Office equipment		318,128		293,561
Leasehold improvements		71,389		37,459
		4,964,052		4,335,542
Plant and equipment, net	$	11,607,066	$	11,987,572

Depreciation and amortization expense for six months ended June 30, 2006 and 2005 is $607,456 and $486,405, respectively.

14.

LAND USE RIGHT

		June 30, 2006 (Unaudited)		December 31, 2005
Cost	$	2,307,952	$	1,896,091
Less: Accumulated amortization		(157,393)		(140,651)
Land use rights, net	$	2,150,559	$	1,755,440

Amortization expense for six months ended June 30, 2006 and 2005 is $20,627 and $19,009 respectively.

Amortization expense for the next five years and thereafter is as follows:

2006 within half year	$	17,762
2007		47,362
2008		47,362
2009		47,362
2010		47,362
Thereafter		1,943,349
Total	$	2,150,559

16

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

15.

PATENTS

		June 30, 2006 (Unaudited)		December 31, 2005
Cost	$	2,414,339	$	2,194,078
Less: Accumulated amortization		(527,012)		(406,064)
Patents, net	$	1,887,327	$	1,788,014

In February 2005, the Company acquired a patent valued at $1,868,534 in connection with the acquisition of Changzhou Fangyuan Pharmaceutical Co., Ltd. Amortization expense for six months ended June 30, 2006 and 2005 is $68,812 and $44,662, respectively.

Amortization expense for the next five years and thereafter is as follows:

2006 within half year	$	165,995
2007		331,991
2008		289,723
2009		276,344
2010		226,316
Thereafter		596,958
Total	$	1,887,327

16.

DEPOSITS

Deposits at June 30, 2006 and December 31, 2005 consist of the following:

		June 30, 2006 (Unaudited)		December 31, 2005
Deposits for patent	$	749,787	$	910,138
Deposits for plant and equipment		1,095,382		1,003,930
Deposits for land use right		1,332,105		341,999
Deposits for acquisition		1,066,311		561,324
Total	$	4,243,585	$	2,817,391

17

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

17.

LONG-TERM INVESTMENTS

As of June 30, 2006, long-term investments consist of the following:

	Ownership Interest		June 30, 2006	Ownership Interest		December 31, 2005
At cost:
Hangzhou Longde Medical Machinery Co., Ltd.	10.6%	$	101,233	10.6%	$	97,790
Zhejiang Anglikang Pharmaceutical Co., Ltd.	-		-	8.33%		120,815
Hangzhou Jin'ou Medicine Co,. Ltd	50.0%		187,603			-
		$	288,836		$	218,605

In April  2006, the Fangyuan , 66% subsidiary of the HAPC, entered into an agreement with Jin’ou Group to set up Hangzhou Jin’ou Medicine Co., Ltd (“Jin’ou Medicine”).  Pursuant to the mutual agreement, Fangyuan would invest $312,672 accounting for 40% of total equity capital in Jin’ou Medicine to be registered.  At June 30, 2006, Fangyuan invested $187,603 representing a 50% ownership. And the rest amount of investment will be paid by December 31, 2006.   Since the Company do not hold over 50 per cent of the outstanding voting shares, and the company can not exercise control over Jin’ou Medicine’s operation, therefore it is classified as an associate.

On June 8, 2006, the HAPC entered into agreement with Wu Weihua to transfer it’s 8.33% interest in Zhejiang Anglikang Pharmaceutical Co.,Ltd. in exchange of  $137,560 with a gain of $12,490.

18.

SHORT –TERM DEBT

Short-term debt as of June 30, 2006 consists of the following:

		June 30, 2006 (Unaudited)		December 31, 2005
Loans from Industrial and Commercial Bank of China Qingchun Branch, due July 24, 2006,  monthly interest only payments at 5.115% per annum, secured by assets owned by the Company.	$	-	$	743,476
Loans from Industrial and Commercial Bank of China Qingchun Branch, due August 1, 2006, monthly interest only payments at 5.115% per annum, secured by assets owned by the Company. (subsequently repaid on its due date)		875,482		867,389
Loans from Industrial and Commercial Bank of China Qingchun Branch, due August 8, 2006, monthly interest only payments at 5.115% per annum, secured by assets owned by the Company.( subsequently repaid on its due date)		781,680		774,454

18

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

18.

SHORT –TERM DEBT(CONTINUED)

	June 30, 2006 (Unaudited)	December 31, 2005
Loans from Industrial and Commercial Bank of China Qingchun Branch, due August 21, 2006, monthly interest only payments at 5.115% per annum, secured by assets owned by the Company.	625,344	619,563
Loans from Industrial and Commercial Bank of China Qingchun Branch, due June 6, 2007, monthly interest only payments at 5.363% per annum, secured by assets owned by the Company	1,250,688	-
Loans from Industrial and Commercial Bank of China Qingchun Branch, due June 27, 2007, monthly interest only payments at 5.363% per annum, secured by assets owned by the Company	750,413	-
Loan from Hangzhou Commercial Bank Gaoxin Branch due February 27, 2007, monthly interest only payments at 5.363% per annum, guaranteed by Xinchang Guobang Chemicals Co., Ltd..	1,250,688	-
Loan from Bank of China Kaiyuan Branch due April 17, 2006, monthly interest only payments at 5.58% per annum, guaranteed by Xinchang Guobang Chemicals Co., Ltd. And Qiu Jiajun & Jin Biao (subsequently repaid on its due date)	-	1,239,127
Loan from Hangzhou Commercial Bank Gaoxin Branch April 25, 2006, monthly interest only payments at 5.115% per annum, guaranteed by Hangzhou Jin’ou And Xinchang Guobang Chemicals Co., Ltd. (subsequently repaid on its due date)	-	1,239,127
Loan from Industrial and Commercial Bank of China due April 10, 2006, monthly interest only payments at 4.575% per annum, secured by assets owned by the Company. (subsequently repaid on its due date)	-	1,115,214
Loan from Bank of China Kaiyuan Branch due May 8, 2007, monthly interest only payments at 5.606% per annum, guaranteed by Xinchang Guobang Chemicals Co., Ltd.	1,000,550	-
Loan from Bank of China Kaiyuan Branch due May  16, 2007, monthly interest only payments at 5.606% per annum, guaranteed by Xinchang Guobang Chemicals Co., Ltd.	625,344	-
Loan from Bank of China Kaiyuan Branch due April 17, 2007, monthly interest only payments at 5.348% per annum, guaranteed by Xinchang Guobang Chemicals Co., Ltd.	2,126,169	-
Loan from Industrial Bank due September 26, 2006, monthly interest only payments at 5.115% per annum, respectively, guaranteed by Jin’ou Group	1,250,688	1,239,127
Loan from Huaxia Bank Wenhui Branch due April 3, 2007, monthly interest only payments at 5.348% per annum,  guaranteed by Ningbo Tianheng Co., Ltd	750,413	-

19

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

18.

SHORT –TERM DEBT(CONTINUED)

	June 30, 2006 (Unaudited)	December 31, 2005
Loan from Bank of Communication Qingchun Branch, due June 5, 2007 monthly interest only payments at 5.363% per annum, guaranteed by Nanwang Information Industry Group Co., Ltd	1,250,688	-
Loan from Bank of Communication Qingchun Branch, due June 19, 2007 monthly interest only payments at 5.363% per annum, guaranteed by Nanwang Information Industry Group Co., Ltd	1,250,688	-
Loan from China Development Bank Haikou Branch, due November 24, 2006, monthly interest only payments at 5.115% per annum, guaranteed by Haikou Assure Investment Ltd.	187,603	371,738
Loan from Changzhou Commercial Bank, due January  1, 2006, monthly interest only payments at 4.785% per annum, guaranteed by Xinchang Guobang Chemicals Co. Ltd. (subsequently repaid on its due date)	-	619,563
Loan from Changzhou Commercial Bank, due February 15, 2006, monthly interest only payments at 6.51% per annum, guaranteed by Changzhou High-tech Development Co. Ltd. (subsequently repaid on its due date)	-	619,563
Loan from Huaxia Bank Wenhui Branch due March 16, 2006, monthly interest only payments at 4.8825% per annum, guaranteed by Xinchang Guobang Chemicals Co., Ltd. and Ningbo Tianheng Pharm. Co. Ltd. (subsequently repaid on its due date)	-	743,476
Loan from China Citic Bank Hangzhou Branch, due January 22, 2006, monthly interest only payments at 4.785% per annum, guaranteed by Xinchang Guobang Chemicals Co., Ltd. (subsequently repaid on its due date)	-	495,651
Loan from Changzhou Commercial Bank, due April 15, 2006 and January 21, 2006, respectively, monthly interest only payments at 6.975% per annum, guaranteed by Changzhou High-tech Development Co. Ltd.	-	3,097,817
Loans from Changzhou Commercial Bank, due December 26, 2006, monthly interest only payments at 6.975% per annum, secured by assets owned by the Company.	250,138	-
Loans from Changzhou Commercial Bank, due June 20, 2007, monthly interest only payments at 6.975% per annum, secured by assets owned by the Company.	1,106,859	-
Loans from Changzhou Commercial Bank, due June 28, 2007, monthly interest only payments at 6.975% per annum, secured by assets owned by the Company.	1,769,722	-
Total short-term bank loans	17,103,157	13,785,285

20

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

18.

SHORT –TERM DEBT(CONTINUED)

Notes payable to unrelated companies:		June 30, 2006 (Unaudited)		December 31, 2005
Due January 4, 2006 (subsequently repaid on its due date)		-		146,261
Due April 5, 2007		312,672		309,781
Due April 20, 2007		312,672		309,781
Due April 29, 2006		-		743,476
Due May 1, 2006		-		1,239,127
Due May 9, 2006		-		146,361
Due May 25, 2006		-		1,239,127
Due August 31, 2006		1,375,757		1,363,039
Due November 30, 2006		2,069,888		2,168,472
Due October 29, 2006		1,240,783		-
Due December 15, 2006		1,250,688		-
Total notes payable		6,562,460		7,665,425
Total short-term debt	$	23,665,617	$	21,450,710

19.

DISCONTINUED OPERATION

On April 1, 2005, HAPC entered into a disposition agreement with Zhejiang Guobang Veterinary Drug Co., Ltd., a company controlled by the director of the Company.  Pursuant to the agreement HAPC agreed to sell all of its interest in the branch in Shangyu, PRC to Zhejiang Guobang Veterinary Drug Co., Ltd. for $1,603,533 resulting in a gain of $26,068. In association with the agreement, the branch in Shangyu, PRC was no longer a consolidated subsidiary of the HAPC.  In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long−Lived Assets,” the results of operations of the branch in Shangyu are removed from the detail line items in the company’s financial statements and presented separately as “discontinued operation”.  The income from discontinued operation of $0 and $161,341 for the six months ended June 30, 2006 and 2005, respectively, and the gain from disposition of discontinued opera tion of $26,068 in 2005 are reflected in the Company’s condensed consolidated statements of income for the six months ended June 30, 2005.

21

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

19.

DISCONTINUED OPERATION(CONTINUED)

The condensed income statements for the three months ended March 31, 2005 of the branch in Shangyu are as follows:

		For the three Months Ended March 31, 2005
Revenue	$	3,776,980
Cost of goods sold		(3,544,336)
Gross profit		232,644
Selling and distribution		(37,254)
General and administrative		(26,679)
Interest expense		(7,370)
Income tax expense		-
Net income	$	161,341

Net assets of the discontinued operation at March 31, 2005 are as follows:

		March 31, 2005 (date of disposal)
Cash and cash equivalents	$	21,778
Other current assets		3,601,410
Non-current assets		1,245,583
Current liabilities		(4,668,677)
Total net assets of the discontinued operation	$	200,094

20.

DEFERRED COMPENSATION

According to the executed consulting agreements, the Company will issue 1,200,000 shares of common stock to two consultants  as  compensation for their management and marketing consulting service from June 5, 2006 to June 5, 2008. The shares were valued at $1,320,000 using the closing share price of $1.1 at the date service commenced. The amount is included in accrued expenses in the condensed consolidated balance sheet at June 30, 2006. The deferred compensation will be amortized over the service period. For the six months ended June 30, 2006, amortization expense is $45,833and $1,274,167 was reflected as deferred compensation.

22

AIDA PHARMACEUTICALS, INC.

(FORMERLY BAS CONSULTING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 AS OF JUNE 30, 2006

(UNAUDITED)

21.

COMMITMENTS AND CONTINGENCIES

The Company occupies plant and office space leased from third parties.  Accordingly, for the  six months ended June 30, 2006 and 2005, the Company recognized rental expense for these spaces of $126,801 and $26,045 respectively.

As of June 30, 2006, the Company has outstanding commitments with respect to non-cancelable operating leases for real estate, which fall due as follows

Period Ending June 30		Amount
2006		54,901
2007		79,381
2008		70,041
2009		70,041
2010		70,041
Thereafter		145,918
Total	$	490,323

As of June 30, 2006, the Company has outstanding commitments with respect to  non-cancelable capital injection  to Jin’ou medicine , which fall due as follows

Period Ending June 30		Amount
2006		312,672
Total	$	312,672

22.

SUBSEQUENT EVENTS

On March 31, 2006, the HAPC entered into a share purchase agreement with Zhejiang Medical Group Inc. to purchase an additional 45% of the outstanding shares of Shanghai Qiaer Bio-Technology Co., Ltd., a company engaged in the research, development and sales of pharmaceutical products and related services, for $495,650.  Previously, HAPC paid $561,324 as deposit to purchase 55% of the outstanding shares of Shanghai Qiaer Bio-Technology Co., Ltd. When the transfer is closed, Shanghai Qiaer Bio-technology Co., Ltd. will become a 100% owned subsidiary of the Company. The share transfer is expected to be closed in the third quarter of 2006.

After re-negotiating the original 55% Qiaer share purchase, on July 15, 2006, the HAPC amended its purchase agreement with Shanghai Handsome Biotech Co., Ltd. to reduce the percent of Qiaer shares originally purchased from 40% at a price of $223,058 to 17.5% at a price of $1,350,788. The Company also amended the purchase agreement with Zhongtuo Times Investment Co., Ltd. for 15% of the Qiaer shares at a price of $281,936 to $1,065,093. Thus, the Company received 32.5% of Qiaer for a total purchase price of  $2,415,880. And upon consummation, the Company will own a total of 77.5% of Qiaer.

In June 2006, the HAPC adopted a Non-qualified Stock Grant and Option Plan (“Plan”) that provides for the granting of shares to two consultants and key employees. The Plan reserves 2,000,000 shares of common stock, including 1,200,000 shares granted to two consultants “Zheng Zhigang “ and “Qiao Bei”, and 800,000 shares to the employees.  And certain shares to the consultants were registered on July 11, 2006.

23

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

FORWARD-LOOKING STATEMENTS

We have included forward-looking statements in this report. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward looking statements. Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "estimate", "plan" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors. Factors that might cause forward-looking statements to differ materially from actual results include, among other things, overall economic and business conditions, demand for the Company's products, competitive factors in the industries in which we compete or intend to compete, natural gas availability an d cost and timing, impact and other uncertainties of our future acquisition plans.

GENERAL

Aida Pharmaceuticals Inc. (formerly known as BAS Consulting, Inc.) (the “Company”) was incorporated in the State of Nevada on December 18, 2002 (inception).  The Company attempted to operate as a consulting firm and was not successful. The Company then began to seek an acquisition candidate and on December 8, 2005, we completed and closed the Share Exchange Agreement (the “Agreement”) dated as of June 1, 2005 by and among BAS Consulting, Inc., Earjoy Group Limited, a British Virgin Islands international business company (“Earjoy”), and the shareholders of Earjoy (the “Earjoy Shareholders”). A copy of the Agreement was previously filed as an Exhibit to our Current Report on Form 8-K dated June 1, 2005 as filed with the Securities and Exchange Commission (the “SEC”) on June 15, 2005.

On March 6, 2006, the Company amended its Articles of Incorporation to change the name of the Company to Aida Pharmaceuticals, Inc. As a result of the acquisition, we now operate the business of AIDA Pharmaceuticals, Inc.

On July 5, 2006, the Company registered 2,500,000 shares of its common stock, $.001 par value on Form S-8 with the Securities and Exchange Commission. Pursuant to the registration statement, the Company issued 2,000,000 shares to employees and consultants.

OUR BUSINESS

AIDA Pharmaceuticals, Inc. has the following subsidiaries:

a)  

Earjoy Group Limited, (“Earjoy”)

b)  

Hangzhou Aida Pharmaceutical Co., Ltd (“Hangzhou Aida”);

c)  

Hangzhou Boda Medical Research and Development Co., Ltd. (“Boda”);

d)  

Hainan Aike Pharmaceutical Co., Ltd. (“Aike”) and;

e)  

Changzhou Fangyuan Pharmaceutical Co., Ltd. (“Fangyuan”)

Earjoy is an investment holding company.

Hangzhou Aida has been in operation since March 1999 and was established as a limited liability company under the laws of the People’s Republic of China (“PRC”) on March 26, 1999. On December 23, 2004, Earjoy entered into a Share Purchase Agreement with Best Nation Investment Co., Ltd. for the acquisition by Earjoy of 100% of all interests in Hangzhou Aida.

Hangzhou Aida is a fully integrated pharmaceutical company engaged in the development, manufacture, marketing, licensing, and distribution of pharmaceutical products primarily in Mainland China. Aida (including its subsidiaries) has a total of nine production lines for the manufacturing of antibiotics, cardiovascular and anti-tumor drugs in various forms, including injectable powder, injectable liquid, capsules, tablets and ointments. All of them have been certified according to the Good Manufacturing Practices (“GMP”) guidelines issued by the State Food and Drug Administration of the People’s Republic of China. Hangzhou Aida sells its Category-A antibioticøEtimicin÷, cardiovascular and anti-tumor products under the trademark “Aida.”,“Aiyi” and ”Chuangcheng”. All these products are prescription drugs that are sold mainly to the hospitals in Mainland China.

Hangzhou Aida’s strategy is to control all facets of its research and development efforts, including formulation development, clinical studies, regulatory submissions and manufacturing. In addition, the company markets its own branded products directly to health care professionals through its Mainland China sales operations. A key element of Hangzhou Aida’s business is the development, manufacture and sale of branded pharmaceutical products that incorporate Hangzhou Aida’s expertise in research and development and exclusive relationships with raw material suppliers, which provide significant therapeutic advantages over existing competing formulations.

24

Hangzhou Aida will also work to develop synergistic marketing partnerships in China and around the world in areas such as technology licensing, clinical research, product development, in-licensing and out-licensing of products, co-development and co-marketing agreements.

The headquarters of Hangzhou Aida is located in Hangzhou specializes in the production of Etimicin powder.

Boda is a wholly owned subsidiary of Hangzhou Aida and engages itself in the research and development of new drugs.

Aike is a 50% owned subsidiary of Hangzhou Aida. Hangzhou Aida exercise significant influence over Aike by controlling over 50% of the voting rights and Aike owns 95% of Yangpu Aike Pharmaceutical Co., Ltd. (“Yangpu”). Both Aike and Yangpu specialize in the production of transfusion type of Etimicin.

On February 1, 2005, Hangzhou Aida acquired an additional 52% equity interest in Fangyuan, and Fangyuan became a 66% owned subsidiary as a consequence. Fangyuan is sole supplier of the raw material of Etimicin and is also a major producer of the liquid type of Etimicin.

The Company is capable of producing all types of Etimicin namely, powder, liquid and transfusion and thus have achieved a significant influence in the industry. Its influence is further enhanced by the acquisition of Fangyuan, which is the sole supplier of the raw material of Etimicin. This is a significant and unique advantage of the Company.

On March 31, the Company entered into an agreement to purchase at a price of $495,650, an additional 45% of the outstanding shares of Shanghai Qiaer Bio-Technology Co., Ltd. from Zhejiang Pharmaceutical Co., Ltd. The Company previously had given a deposit to purchase 55% of Shanghai Qiaer Bio-Technology Co., Ltd. and with the purchase of the additional 45% of the outstanding shares, the Company would have owned 100% and Shanghai Qiaer Bio-Technology Co., Ltd. would have been considered a wholly owned subsidiary. Shanghai Qiaer Bio-Technology Co., Ltd. is a company engaged in the research, development and sales of pharmaceutical products and related services.

Subsequent to the above report, the Company has re-negotiated the original 55% Qiaer share purchase. The Company amended its purchase agreement with Shanghai Handsome Biotech Co., Ltd. to reduce the percent of Qiaer shares originally purchased from 40% at a price of RMB 1.78 million (approx. USD $223,058) to 17.5% at a price of RMB 10.78 million (approx. USD $1,350,788). The Company also amended the purchase agreement with Zhongtuo Times Investment Co., Ltd. for 15% of the Qiaer shares at a price of RMB 2.25 million (approx. USD $281,936) to RMB 8.5 million (approx. USD $1,065,093). Thus, the Company received 32.5% of Qiaer for a total purchase price of RMB 19.28 million (approx. USD $2,415,880). The purchase agreement with Zhejiang Pharmaceutical Co., Ltd. remains unchanged.

On August 8, the Company completed and closed the Share Purchase Agreements with Zhejiang Pharmaceutical Co., Ltd , Shanghai Handsome Biotech Co., Ltd and Zhongtuo Times Investment Co., Ltd. respectively. With these agreements, the Company acquired 77.5% of the outstanding shares of Shanghai Qiaer Bio-Technology Co., Ltd collectively. Copies of those Agreements was previously filed as an Exhibit to our Current Report on Form 8-K dated April 14 and April 24 respectively as filed with the Securities and Exchange Commission.

At the closing of this transaction, the Company received the registration certificate in the name of the Company for the 77.5% of the outstanding shares of Shanghai Qiaer Bio-Technology Co., Ltd. The chairman of the Board and CEO of the Company, Mr. Jin Biao was elected as the Board Chairman of Shanghai Qiaer Bio-Technology Co., Ltd , the Company has two positions including Mr.Jin of the total three in the Board of Directors of Shanghai Qiaer Bio-Technology Co., Ltd.

Qiaer Bio-Tech was founded in 2001 and is located in the Zhangjiang Hi-tech development zone in Shanghai, China. The key product of Qiaer Bio-Tech is rh-Apo21, a pioneering potential gene drug used for cancers. The rh-Apo21 is nearing the end of the Phase I clinical trial which is expected to be complete by the end of April 2006. Qiaer Bio-Tech has applied for three patents from the Chinese government authority, one of which has been granted with the other two in process.

Before the re-negotiation, the Phase I clinical trial of rh-Apo2l has been successfully completed. Management believes its determination to re-negotiate the Shanghai Handsome Biotech Co., Ltd. and the Zhongtuo Times Investment Co., Ltd. contracts for the purchase of Qiaer shares was reasonable in view of the fact that the Qiaer market value had significantly increased and represents a considerable potential benefit to the Company’s shareholders.

25

Products

The table below illustrates the major products produced and marketed by Aida:

Product	Produced By	Specification	Standard/Category
Etimicin Sulfate Injection Powder	Aida	50mg, 100mg, 150mg	National Category-A
Etimicin Sulfate Injection liquid	Fangyuan	1ml, 2ml	National Category-A
Etimicin Sulfate for transfusion	Aike	100ml(with 100mg/200mg)	National Category-D

Etimicin Sulfate is the first antibiotic developed in China. It is a new generation of the amino glycoside family of antibiotics. Aida has the exclusive right to the production of this powder for injection and transfusion type and Aida’s subsidiary, Fangyuan, is one of the two producers who exclusively produce the liquid for injection. The patent is protected through 2013. It also has patent certificates from six foreign countries, including USA, Russia and United Kingdom. Etimicin sulfate is suitable for the treatment of various inflammations, such as:

(i)	respiratory infection, such as acute bronchitis, acute onset of chronic bronchitis and pulmonary
	infections;

(ii)	kidney and urinogenital infection, such as acute pyelonephritis or acute onset of chronic cystitis;
(iii)	soft skin tissue infection; and

(iv) trauma and operations (before and after) preventive uses.

In 2005, with the acquisition of Fangyuan, the Company has occupied more than 75% of the total market share of Etimicin in Mainland China. The Company is capable to produce a full series of Etimicin, namely, powder, transfusion and liquid. Emphasis will be placed to develop new products for the market.

Products Under Development

Major new products under developments by Aida include:

Ø

5-Deoxy-Fluorordine.Aida has developed a new liquid for injection type of drug generated from 5-fluroruacil that has displayed better anticancer results and fewer side effects. This new product has been under clinical testing since 1998. Test results showed that it has only nominal side effects, a broad spectrum and is highly effective. The Company has applied for production approval of 5-deoxy-fluororidine for injection from State Food and Drug Administration in the PRC. This new drug will have a 6-year protection period once the approval is obtained.

Ø

Apoptotic Factor (rh-Apo2l). Rh-Apo2l is being evaluated in a Phase I trial as a potential cancer therapeutic. The Phase I clinical trials was completed at the end of June, 2006. Shanghai Qiaer Bio-Technology, which is acquired by Hangzhou Aida, has applied for three patents from the Chinese government authority. One patent has been granted and the other two are currently in process. We plans to complete the second and third stage clinical trials in the second half of 2007 and get production approval in the second half of 2008.

Ø

Methylcanthatidinimide For Injection. It is another new drug being developed by Fangyuan used for cancer treatment. It will be a Category B new drug. The clinical tests are expected to be completed by the first half of 2008 and the production is expected to begin by the end of 2009.

Ø

SYO2. Hangzhou Aida has created one medicine extracted from herbal essence, called SYO2 that has exhibited bioactivity for brain anti-thrombosis. The drug, developed solely by an aligned research center of Hangzhou Aida, has shown to be safe, effective and without side effects. It is believed that stroke patients treated by SYO2 would be fully recovered after administration of the drug. Aida has completed SYO2’s pharmacological study and has applied for a patent. The Company plans to apply for clinical tests within the next 18 months. Hangzhou Aida intends to apply for production approval by the end of 2010.

Ø

Prodigiosin to Treat Pancreatic Cancer. Prodigiosin, a naturally occurring red pigment, is currently in pre-clinical trials for the treatment of pancreatic cancer. Aida Pharmaceuticals is developing a method to utilize the biochemical properties of Prodigiosin to create a non-invasive treatment for pancreatic cancer.

26

Ø

Anti-CD86 Monoclonal Antibody to Treat Immunity Diseases.Certain immunity diseases activate T-cells (a type of white blood cell), causing them to unnecessarily attack healthy tissue. Aida’s goal in developing the Anti-CD86 Monoclonal Antibody is to inhibit T-cells from harming healthy tissue. 

Ø

Anti-CTLA-4 Monoclonal Antibody to Inhibit Tumor Growth. In the case of certain cancers, tumors over-express self-proteins, essentially hiding the tumor from the immune system. Aida Pharmaceuticals is in the development stages of Anti-CTLA-4 Monoclonal Antibody which may relieve the inhibition of T-cells allowing them to identify the over-expressed proteins and in turn naturally attack cancer cells without harming healthy tissues.

Aida is optimistic about the market potential of its products for the following reasons:

Ø

The demand for international quality drugs by the Chinese populace has historically increased as per capita income and the standard of living increase continually;

Ø

The sale of Hangzhou Aida’s Etimicin sulfate is estimated to grow continuously for the next three years after several years of market development;

Ø

Aida is now planning to build up international business relationship with global players gradually in future. The international markets should increase the sales growth;

Ø

Aida has achieved a monopoly status in this industry, with all types of Etimicin products and from the material chain to the final product chain. This is a significant and unique advantage of Aida and

The Company is readying for the production of several new drugs including the commercialization of Shanghai Qiaer Bio-Technology’s Rh-Apo2l within two years, which should boost the sales growth of Aida per annum.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We believe the following is among the most critical accounting policies that impact our consolidated financial statements. We suggest that our significant accounting policies, as described in our consolidated financial statements in the Summary of Significant Accounting Policies, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.

We recognize revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104. All of the following criteria must exist 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.

For fixed-priced refundable contracts, the Company recognizes revenue on a completion basis. Progress payments received/receivables are recognized as revenue only if the specified criteria is achieved, accepted by the customer, confirmed not refundable and continued performance of future research and development services related to the criteria are not required.

We have identified one policy area as critical to the understanding of our consolidated financial statements. The preparation of our consolidated financial statements 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 consolidated financial statements and the reported amounts of sales and expenses during the reporting periods. With respect to net realizable value of the Company's accounts receivable, Long-lived assets and inventories, significant estimation judgments are made and actual results could differ materially from these estimates.

For the six months ended June 30, 2006, management of the Company provided a reserve on its accounts receivable to reflect management’s expectation on the collectibility of aged accounts receivable. Management’s estimation of the reserve on accounts receivable at June 30, 2006 was based on the current facts that there are aged accounts receivable. Management has assessed the customers’ ability to continue to pay the outstanding invoices timely, and whether their financial position will deteriorate significantly in the future which would result in their inability to pay their debts to the Company.

27

For the second quarter ended June 30, 2006, the Company had made no impairments for Long-lived assets. Long-lived assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company also periodically evaluates the amortization periods of its depreciable assets to determine whether subsequent events and circumstances warrant revised estimates of the useful lives.

Management's estimation whether a provision is needed is based on management’s analysis of the current facts of whether potential impairments on the current carrying value of the inventories due to potential obsolescence exist as a result of aged inventories. In making their judgments, management made their estimations of the potential impairments based on the demand for their products in the future and the trends of turnover of the inventories. 

While the Company's management currently believes that there is little likelihood that the actual results of their current estimates will differ materially from such current estimates, if the financial position of its customers deteriorates, if there is a significant reduction in the carrying value of its Long-lived assets, or if, customer demand for its products decreases significantly in the near future, the Company could realize significant write downs for uncollectible accounts receivable, impairment of Long-lived assets or slow moving inventories.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2006 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2005

The following table sets forth selected statements of income data as a percentage of revenues for the three months indicated.

	Three Months Ended June 30,
	2006	2005
Revenues	100.00%	100.00%
Cost of goods sold	(49.14)%	(23.68)%
Gross margin	50.86%	76.32%
Research and development	0.00%	0.00%
Selling and distribution	(25.58)%	(57.50)%
General and administrative	(12.90)%	(18.65)%
Other income (expense)	(4.08)%	(5.13)%
Income taxes	(1.79)%	(1.25)%
Minority interests	(1.03)%	(2.92)%
Gain from discontinued operation	0.00%	0.00%
Net income	5.48%	(3.30)%

Revenues, Cost of Goods Sold and Gross Profit

Revenues for the three months ended June 30, 2006 were $7,284,888 an increase of $2,252,980 from $5,031,908 for the three months ended June 30, 2005. Compared to the second quarter of 2005, the increase in sales revenues from our group of companies engaging in the production of different types of Etimicin for the second quarter of 2006 and 2005 were as follows:

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	Three Months Ended June 30,
Companies	2006		2005		Increase/ (Decrease)
Hangzhou Aida Pharmaceutical Co., Ltd (“Hangzhou Aida”) specializes in the production of Etimicin powder	$	2,735,648	$	3,324,104	$	(588,456	)
Hainan Aike pharmaceutical Co., Ltd (“Aike”) specializes in the production of Etimicin transfusion		3,692,482		1,583,102		2,109,380
Hangzhou Boda Medical Research and Development Co., Ltd. (“Boda”)		-		-		-
Changzhou Fangyuan Pharmaceutical Co., Ltd. (“Fangyuan”) specializes in the production of Etimicin injection		856,758		124,702		732,056
TOTAL	$	7,284,888	$	5,031,908	$	2,252,980

For the three months ended June 30, 2006, the sales of Hangzhou Aida decreased by $588,456 or 17.70% as compared to the same period of 2005. But the decrease percentage of 17.70% has been improved remarkably as compared to the decrease percentage of 47.16% for the first quarter this year. This reason was that Hangzhou Aida has taken some new measures to adapt the new market environment and improve the operation result in sales since the second quarter this year.

For the three months ended June 30, 2006, the sales of Hainan Aike increased by $2,109,380 or 133.24% as compared to the same period of 2005. The increase in sales is the result of the intense marketing and promotion programs of a new Etimicin transfusion product, “Aiyi”. Another reason is that Hainan Aike has establishing several new sales offices in various regions.

For the three months ended June 30, 2006, the sales of Fangyuan increased by $732,056 or 587.04% as compared to the same period of 2005. The increase in sales is the result of the intense marketing and promotion programs of a new Etimicin injection product, “Chuangcheng”.

The cost of goods sold for the second quarter ended June 30, 2006 was $3,579,700 an increase of $2,388,156 from $1,191,544 for the year 2005. The increase in cost of goods sold can be analyzed as follows:

	Three Months Ended June 30,
Companies	2006		2005		Increase/ (Decrease)
Hangzhou Aida Pharmaceutical Co. Ltd (“Hangzhou Aida”) specializes in the production of Etimicin powder	$	532,665	$	595,484	$	(62,819	)
Hainan Aike pharmaceuticalCo. Ltd (“Aike”) specializes in the production of Etimicin transfusion		2,540,028		488,561		2,051,467
Hangzhou Boda Medical Research and Development Co., (“Boda”)		-		-		-
Changzhou Fangyuan Pharmaceutical Ltd. (“Fangyuan”) specializes in the production of Etimicin injection		507,007		107,499		399,508
TOTAL	$	3,579,700	$	1,191,544	$	2,388,156

29

The cost of goods sold of Hangzhou Aida for the three months ended June 30, 2006 decreased by $62,819, or 10.55% compared to $595,484 for the same period in 2005. The decrease in the cost of goods sold can mainly be accounted for by a decrease in sales by 17.70%.

Despite the increase in sales of 133.24%, the cost of goods sold of Aike increased by 419.90% for the three months ended June 30, 2006 compared to for the same period in 2005. The increase can partially be explained by the increase in sales. Another reason is that among Aike’s sale increase, the products with relatively low margin accounted for a larger portion. As a result, the increase rate of the cost of goods exceeded the increase rate of the sales.

The cost of goods sold of Fangyuan for the three months ended June 30, 2006 increased by $399,508, compared to $107,499 for the same period in 2005. The increase is mainly due to the increase in sales.

Despite the increase in total sales revenue of 44.77%, the cost of goods sold increased by 200.43% in the second quarter of 2006 compared to the same period of 2005. The Company has suffered a decrease in the gross profit margin.

Compared to the three months ended June 30, 2005, the percentage gross profit margin for our Company decreased from 76.32% to 50.86% for the second quarter ended July 30, 2006.

The decrease in gross profit margin percentage was mainly attributable to the following factors: Firstly, among Aike’s sale increase, the products with relatively low margin accounted for a larger portion, which lowered down the general margin percentage as Aike contributed over 50% of the company’s total sales in the quarter. Secondly, a slight decrease in the price of Etimicin by approximately 5% in the second half of 2005.

Research and Developments

No research and development cost was incurred for the second quarter of 2006 and 2005.

Selling and Distribution

Selling and distribution expenses decreased from $2,893,166 for the three months ended June 30, 2005 to $1,863,507 for the same period this year, or a 35.59% decrease. Compared to the same period in 2005, our increase in the expenses was because of the following:

	Three Months Ended June 30,
Breakdown of Expenses		2006		2005		Increase/ (Decrease	)
Traveling expenses	$	721,413	$	1,506,425	$	(785,012	)
Sale commissions		211,913		190,861		21,052
Office expenses		363,624		576,468		(212,844	)
Payroll		101,527		98,042		3,485
Conference fees		55,931		65,606		(9,675	)
Rent		35,115		36,495		(1,380	)
Entertainment		21,370		149,386		(128,016	)
Other expenses		196,326		249,617		(53,291	)
Advertising expenses		156,288		20,266		136,022
TOTAL	$	1,863,507	$	2,893,166	$	(1,029,659	)

For the three months ended June 30, 2006 advertising expenses of $156,288 increased by $136,022, compared with the same period last year. The increase can mainly be explained by the increase in sales of 44.77%. To increase the sales, the Company carried out more advertisements, which resulted in the increasing advertising expenses in the second quarter of 2006.

30

For the second quarter of 2006 traveling expenses, office expenses and entertainment expenses decreased by $785,012, $212,844 and $128,016 respectively, compared with the same period last year. The decrease was mainly explained that the Company controlled the selling expenses by effective administration.

General and Administrative

General and administrative expenses decreased from $939,535 for the three months ended June 301, 2005 to $938,671 for the same period this year, representing a 0.09% increase. The details of general and administrative expenses for the three months ended July 30, 2006 and 2005 were as follows:

	Three Months Ended June 30,
Breakdown of Expenses		2006		2005		Increase/ (Decrease	)
Traveling expenses	$	88,409	$	82,346	$	6,063
Office expenses		51,337		48,583		2,754
Payroll		164,277		96,575		67,702
Conference fees		8,908		4,657		4,251
Bad debt provision		13,377		324,509		(311,132	)
Consultancy fees		74,292		30,905		43,387
Entertainment		18,154		25,766		(7,612	)
Depreciation		52,548		45,226		7,322
Social compensation		28,250		30,292		(2,042	)
Amortization of other intangible assets		97,515		64,367		33,148
Amortization of deferred expenses		45,833		-		45,833
Other expenses		296,636		185,445		111,191
TOTAL	$	939,536	$	938,671	$	864

The consultancy fees which the company pays consultants for their consultation service increased from $30,905 for the three months ended June 30, 2005 to $74,292 for the same period this year. The increase was mainly attributable to an increase in consultation service of Fangyuan in the second quarter this year.

Bad debt provision of $13,377 for the three months ended June 30, 2006 decreased by $311,132 from $324,509 for the same period last year. The decrease was explained by that bad debt provision of $294,302 for the second quarter last year occurred to Fangyuan.

Amortization of other intangible assets of $97,515 for the three months ended June 30, 2006 increased by $33,148 from $64,367 for the same period last year. The increase was explained by that amortization of other intangible assets of $76,622 for the second quarter last year occurred to Fangyuan.

31

Other Income (Expenses)

Other income (expenses) increased from $(258,352) for the three months ended June 30, 2005 to $(297,483) for the same period this year. The other income (expenses) for the three months Ended July 30, 2006 and 2005 were as follows:

	Three Months Ended June 30,
Breakdown of Other Income (Expenses)		2006			2005			Increase/ (Decrease	)
Interest expense, net	$	(384,500	)	$	(267,895	)	$	116,605
Government grants		43,124			72,746			(29,622	)
Investment income		12,490			-			12,490
Gain from nonmonetary transaction		-			-			-
Other (loss) income, net		31,403			(63,203	)		94,606
TOTAL	$	(297,483	)	$	(258,352	)	$	(39,131	)

Interest expense for the three months ended June 30, 2006 increased by $116,605 from $267,895 for the same period last year. The increase is due to the increase in bank borrowings as a result of more requirements for working capital with the development of the Company.

Government grants for the three months ended June 30, 2006 decreased by $29,622 from $72,746 for the same period last year. The decrease is due to the decrease in subsidies from the government.

Other income has increased from $(63,203) for the three months ended June 30, 2005 to $31,403 for the three months ended June 30, 2006. The increase is mainly due to the fact that there was a reward from government in the second quarter this year.

Income Taxes

Income tax expense was $130,270 for the three months ended June 30, 2006, as compared to $62,942 for the same period last year.

In accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate is 33%. As a Company registered in Hainan, PRC, Aike is entitled a beneficial corporate income tax rate of 15% in accordance with the relevant tax laws in the PRC. Fangyuan enjoys a beneficial tax rate of 15% as it is registered in a national high-tech development zone. According to the relevant laws and regulations of PRC, the preferential tax rate of 15% is applied to companies established in the national high-tech development zone.

In accordance with the relevant taxation laws in the PRC, from the time that a company has its first profitable tax year, a foreign investment company is exempt from corporate income tax for its first two years and is then entitled to a 50% tax reduction for the succeeding three years. And the foreign investment company income tax rate is 27% in Hangzhou, PRC. Since Hangzhou Aida Pharmaceutical Co., Ltd has been a foreign investment company since 2004, so we are entitled to a 50% tax reduction in 2006.

Net Income

In the second quarter of 2006, our net income increased by $564,785 to a net income of $398,888 from $(165,897) in the same period in 2005. 

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RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2006 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2005

The following table sets forth selected statements of income data as a percentage of revenues for the three months indicated.

	Six Months Ended June 30,
	2006	2005
Revenues	100.00%	100.00%
Cost of goods sold	(52.02)%	(26.72)%
Gross margin	47.98%	73.28%
Research and development	0.00%	(1.23)%
Selling and distribution	(28.10)%	(44.32)%
General and administrative	(12.59)%	(15.90)%
Other income (expense)	(1.09)%	(2.34)%
Income taxes	(1.80)%	(1.25)%
Minority interests	(1.13)%	(2.33)%
Gain from discontinued operation	0.00%	1.91%
Net income	3.27%	7.82%

Revenues, Cost of Goods Sold and Gross Profit

Revenues for the six months ended June 30, 2006 were $12,599,694 an increase of $2,767,115 from $9,832,579 for the same time last year. Compared to the six months of 2005, the increase in sales revenues from our group of companies engaging in the production of different types of Etimicin for the six months of 2006 and 2005 were as follows:

	Six Months Ended June 30,
Companies	2006		2005		Increase/ (Decrease)
Hangzhou Aida Pharmaceutical Co., Ltd (“Hangzhou Aida”) specializes in the production of Etimicin powder	$	4,060,870	$	5,681,335	$	(1,620,465	)
Hainan Aike pharmaceutical Co., Ltd (“Aike”) specializes in the production of Etimicin transfusion		6,747,519		3,622,018		3,125,501
Hangzhou Boda Medical Research  and Development Co., Ltd. (“Boda”)		-		-		-
Changzhou Fangyuan Pharmaceutical Co., Ltd. (“Fangyuan”) specializes in the production of Etimicin injection		1,791,305		529,226		1,262,079
TOTAL	$	12,599,694	$	9,832,579	$	2,767,115

For the six months ended June 30, 2006, the sales of Hangzhou Aida decreased by $1,620,465 or28.52% as compared to the same period of 2005. The decrease is mainly attributable to is that new implementations of government regulations imposed adverse effect on the pharmaceutical distribution of some of our distributors. These regulations demand more strictly on the promotion means of the distributions. As a result, they reduced their orders from the company. Hangzhou Aida has taken some new measures to adapt the new market environment and improve the operation result in sales since the second quarter this year, and the decrease percentage has been improved remarkably.

For the six months ended June 30, 2006, the sales of Hainan Aike increased by $3,125,501 or 86.29% as compared to the same period of 2005. The increase in sales is the result of the intense marketing and promotion programs of a new Etimicin transfusion product, “Aiyi”. Another reason is that Hainan Aike has establishing several new sales offices in various regions.

33

For the six months ended June 30, 2006, the sales of Fangyuan increased by $1,262,079 or 238.48% as compared to the same period of 2005. The increase in sales is the result of the intense marketing and promotion programs of a new Etimicin injection product, “Chuangcheng”.

The cost of goods sold for the six months ended June 30, 2006 was $6,554,934 an increase of $3,927,512 from $2,627,422, for the year 2005. The increase in cost of goods sold can be analyzed as follows:

	Six Months Ended June 30,
Companies	2006		2005		Increase/ (Decrease)
Hangzhou Aida Pharmaceutical Co. Ltd (“Hangzhou Aida”) specializes in the production of Etimicin powder	$	1,014,030	$	1,190,116	$	(176,086	)
Hainan Aike pharmaceuticalCo. Ltd (“Aike”) specializes in the production of Etimicin transfusion		4,219,665		969,396		3,250,269
Hangzhou Boda Medical Research  and Development Co., (“Boda”)		-		-		-
Changzhou Fangyuan Pharmaceutical Ltd.  (“Fangyuan”) specializes in the production of Etimicin injection		1,321,238		467,911		853,327
TOTAL	$	6,554,934	$	2,627,422	$	3,927,512

The cost of goods sold of Hangzhou Aida for the six months ended June 30, 2006 decreased by $176,086, or 14.80% compared to $1,190,116 for the same period in 2005. The decrease in the cost of goods sold can mainly be accounted for by a decrease in sales by 28.52%.

Despite the increase in sales of 86.29%, the cost of goods sold of Aike increased by 335.29% for the six months ended June 30, 2006 compared to for the same period in 2005. The increase can partially be explained by the increase in sales. Another reason is that among Aike’s sale increase, the products with relatively low margin accounted for a larger portion. As a result, the increase rate of the cost of goods exceeded the increase rate of the sales.

The cost of goods sold of Fangyuan for the six months ended June 30, 2006 increased by $853,357, compared to $467,911 for the same period in 2005.The increase is mainly due to the increase in sales. In order to ensure the steady supply of raw materials for the production of Etimicin safeguarded products, Aida acquired Fangyuan in February 2005. Fangyuan is the sole supplier of Etimicin raw material of the Group, and the acquisition has enabled the Group to enjoy the benefit of vertical integration and economies of scale and therefore lead to a lower cost of goods sold.

Despite the increase in total sales revenue of 28.14%, the cost of goods sold increased by 149.48% in the six months of 2006 compared to the same period of 2005. The Company has suffered a decrease in the gross profit margin.

Compared to the six months ended June 30, 2005, the percentage gross profit margin for our Company decreased from 73.28% to 47.98% for the six months ended June 30, 2006. The decrease in gross profit margin percentage was mainly attributable to the following factors: Firstly, among Aike’s sale increase, the products with relatively low margin accounted for a larger portion, which lowered down the general margin percentage as Aike contributed over 50% of the company’s total sales in the quarter. Secondly, the increase in the cost of C1a, a precursor of Etimicin raw materials. Thirdly, a slight decrease in the price of Etimicin by approximately 5% in the second half of 2005.

Research and Developments

Research and development cost was $120,824 for the six months ended June 30, 2005 represented cost incurred for toxicological tests for the Etimicin product with a view of improving the quality of the drugs. No such cost was incurred for the first half of 2006.

34

Selling and Distribution

Selling and distribution expenses decreased from $4,357,773 for the six months ended June 30, 2005 to $3,540,243 for the same period this year, or an 18.76% decrease. Compared to the same period in 2005, our increase in the expenses was because of the following:

	Six Months Ended June 30,
Breakdown of Expenses	2006		2005		Increase/ (Decrease)
Traveling expenses	$	1,216,702	$	1,986,712	$	(770,010	)
Sale commissions		428,877		321,488		107,389
Office expenses		586,883		785,525		(198,642	)
Payroll		195,740		269,673		(73,933	)
Conference fees		125,025		213,890		(88,865	)
Rent		92,590		66,085		26,505
Entertainment		74,457		215,280		(140,823	)
Other expenses		417,635		429,698		(12,063	)
Advertising expenses		402,334		69,422		332,912
TOTAL	$	3,540,243	$	4,357,773	$	(817,530	)

For the six months ended June 30, 2006 advertising expenses of $402,334 increased by $332,912, compared with the same period last year. The increase can mainly be explained by the increase in sales of 28.14%. To increase the sales, the Company carried out more advertisements, which resulted in the increasing advertising expenses in the first year of 2006.

For the first year of 2006 traveling expenses, office expenses and entertainment expenses decreased by $770,010, $198,642 and $140,823 respectively, compared with the same period last year. The decrease was mainly explained that the Company controlled the selling expenses by effective administration.

General and Administrative

General and administrative expenses decreased from $1,586,281 for the six months ended June 301, 2005 to $1,531,353 for the same period this year, representing a 1.47% decrease. The details of general and administrative expenses for the six months ended July 30, 2006 and 2005 were as follows:

	Six Months Ended June 30,
Breakdown of Expenses	2006		2005		Increase/ (Decrease)
Traveling expenses	$	138,894	$	116,872	$	22,022
Office expenses		86,795		71,572		15,223
Payroll		281,700		220,256		61,444
Conference fees		9,794		30,737		(20,943	)
Bad debt provision		13,773		324,509		(310,736	)
Consultancy fees		106,452		31,592		74,860
Entertainment		50,892		51,195		(303	)
Social compensation		53,861		70,224		(16,363	)
Depreciation		147,701		86,609		61,092
Amortization of other intangible assets		181,992		115,975		66,017
Amortization of deferred expenses		45,833		-		45,833
Other expenses		468,594		443,711		24,883
TOTAL	$	1,586,281	$	1,563,252	$	23,029

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The consultancy fees which the company pays consultants for their consultation service increased from $31,592 for the six months ended June 30, 2005 to $106,452 for the same period this year. The increase was mainly attributable to an increase in consultation service of Fangyuan in the first half this year.

Bad debt provision of $13,773 for the six months ended June 30, 2006 decreased by $310,736 from $324,509 for the same period last year. The decrease was explained by that bad debt provision of $294,302 for the first half last year occurred to Fangyuan.

Amortization of other intangible assets of $181,992 for the six months ended June 30, 2006 increased by $66,017 from $115,975 for the same period last year. The increase was explained by that amortization of other intangible assets of $76,622 for the second quarter last year occurred to Fangyuan.

Depreciation and amortization of plant and equipment for the six months ended June 30, 2006 increased by $61,092 from $86,609, compared to the same period in 2005. The increase was mainly due to the increases of Fangyuan of $32,703. The reason was due to an increase in land use right of Fangyuan.

Other Income (Expenses)

Other income (expenses) decreased from $(230,099) for the six months ended June 30, 2005 to $(137,043) for the same period this year. The other income (expenses) for the six months Ended June 30, 2006 and 2005 were as follows:

	Six Months Ended June 30,
Breakdown of Other Income (Expenses)	2006			2005			Increase/ (Decrease)
Interest expense, net	$	(653,191	)	$	(481,877	)	$	171,314
Government grants		503,587			121,640			381,947
Investment income		12,490			-			12,490
Gain from nonmonetary transaction		-			125,097			(125,097	)
Other (loss) income, net		71			5041			(4,970	)
TOTAL	$	(137,043	)	$	(230,099	)	$	93,056

Interest expense for the six months ended June 30, 2006 increased by $171,314 from $481,877 for the same period last year. The increase is due to the increase in bank borrowings as a result of more requirements for working capital with the development of the Company.

Government grants for the six months ended June 30, 2006 increased by $381,947 from $121,640 for the same period last year. The increase is due to the increase in subsidies from the government.

Investment income of $12,490 for the first half of 2006 represented the sold income of 8.33% outstanding shares of Zhejiang Anglikang Pharmaceutical Co., Ltd at a price of $12,490 and no such income occurred for the first half of 2005.

Gain from nonmonetary transaction of $125,097 results from that the Company transferred equipment with an aggregate net book value of $514,133 for settling a liability to Sunshine Group of $639,230 resulting in a gain of $125,097 for the first half of 2005. No such transaction occurred for the same period this year.

Income Taxes

Income tax expense was $227,110 for the six months ended June 30, 2006, as compared to $123,240 for the same period last year.

In accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate is 33%. As a Company registered in Hainan, PRC, Aike is entitled a beneficial corporate income tax rate of 15% in accordance with the relevant tax laws in the PRC. Fangyuan enjoys a beneficial tax rate of 15% as it is registered in a national high-tech development zone. According to the relevant laws and regulations of PRC, the preferential tax rate of 15% is applied to companies established in the national high-tech development zone.

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In accordance with the relevant taxation laws in the PRC, from the time that a company has its first profitable tax year, a foreign investment company is exempt from corporate income tax for its first two years and is then entitled to a 50% tax reduction for the succeeding three years. And the foreign investment company income tax rate is 27% in Hangzhou, PRC. Since Hangzhou Aida Pharmaceutical Co., Ltd has been a foreign investment company since 2004, so we are entitled to a 50% tax reduction in 2006.

Net Income

In the first half of 2006, our net income decreased by $356,305 to a net income of $411,942 from $768,247 in the same period in 2005. 

LIQUIDITY AND CAPITAL RESOURCES

Cash

Our cash balance increased by $2,554,900 to $5,684,350 as of June 30, 2006, as compared to $3,129,450 as of December 31, 2005. The increase was mainly attributable to cash in flow of financing activities and depreciation and amortization of $4,533,022 and $810,053, respectively, an increase in accounts payable of $1,502,800. The increase in cash flow was partially offset by cash out flow of investment activities of $3,134,196, an increase in inventories and accounts receivable of $629,974 and $362,495, respectively and a decrease in other payables and accrued liabilities and due to employees of $295,554 and $280,824, respectively. The net cash flow was $2,554,900 for the first half this year.

Our cash flow from operations amounted to $1,240,499 for the six months ended June 30, 2006, compared to $5,611,398 for the same period last year.

Our cash flow used in investing activities amounted to $(3,134,196) of which $(1,075,350) was lent to related parties. The Company invested $394,169 in the purchase of land use right and $986,915 and $499,749 in deposit for land use right and deposit for long term investment respectively.

The net cash used in financing activities amounted to $4,533,022 of which $2,214,907 and 2,216,169 were the proceeds from short-term debt and notes payable, respectively.

At June 30, 2006, the Company had short-term debt of $23,665,617 of which $17,103,157 was short-term bank borrowings and the remaining $6,562,460 represented notes payable to unrelated parties. The interest for the short-term borrowings varied from 4.575% to 6.975% per annum whereas the notes payable to unrelated parties is interest free. The Company believes that the cash generated from normal operation will be sufficient to pay off its liabilities as the short-term borrowings and commitments fall due.

Working Capital

Our working capital deficiency increased by $206,724 to $(6,058,647) at June 30, 2006, as compared to $(5,851,923) at December 31, 2005. The increase in working capital deficiency at July 30, 2006 was mainly attributable to our increase in short term debt of $2,214,907, accrued expense of 2,162,254 and accounts payable of $1,502,800 and a decrease in notes receivable of $393,479 offset by an decrease in other payables and accrued liabilities of $1,137,807 and an increase in cash of $2,554,900 and due from related parties of $1,075,350.

The Company currently generates its cash flow through operations and the Company believes that its cash flow generated from operations will be sufficient to sustain operations for the next twelve months. Also, from time to time, the Company may require extra funding through financing activities and investments for expansion. Also, from time to time, the Company may come up with new expansion opportunities for which our management may consider seeking external funding and financing. However, as of June 30, 2006, the Company had no solid plan for additional capital through external funding and financing.

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Item 3. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

Within the 90 days prior to the date of this Quarterly Report for the period ended June 30, 2006, we carried out an evaluation, under the supervision and with the participation of our management, including the Company's Chairman and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the "Exchange Act"), which disclosure controls and procedures are designed to insure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified by the SEC's rules and forms. Based upon that evaluation, the Chairman and the Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be incl uded in the Company's period SEC filings.

(b)  Changes in Internal Controls.

Subsequent to the date of such evaluation as described in subparagraph (a) above, there were no significant changes in our internal controls or other factors that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

In December of 2005, the Company filed a legal action against Hainan Haomai Pharmaceutical Co., Ltd for its infringement upon the patent of Etimicin transfusion. As the plaintiff, the Company has claimed compensation of approximately USD 60,000 for the infringement. The judgment is expected to come by the end of the third quarter, 2006.

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

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

Subsequent to the date of this report, on August 8, 2006, the Company accepted the resignation of Mr. Du Chuanwen as the Secretary of the Company and appointed Mr. Jiang Yuejun to hold the position of Secretary. Mr. Jiang, 31 years old, obtained his Bachelor Degree of Chemistry and Master Degree of Business Administration from Tsinghua University. From 1997 to 1999, Mr. Jiang was a technician in Sinopec Zhenhai Refining & Chemical Company Limited. From 1999 to 2002, Mr. Jiang held a position in Zhejiang Pharmaceutical Co., Ltd. Since 2002 and prior to joining the Company in April 2006, Mr. Jiang was the Chief of the Department to general manager, the Secretary and financial manager of Hangzhou Jinou Group. Mr. Jiang is now also the Department Chief of Investment and senior financial manager of the company.

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Item 6. Exhibits and Reports on Form 8-K.

Reports on Form 8-K

Date  Form  Items Reported

4-14-06  8-K  2.02 and 9.01

7-14-06  8-K  1.01, 5.02 and 9.01

Exhibits

  Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-B.

Exhibit No.	SEC Ref. No.	Title of Document	Location
1	31.1	Certification of the Principal Executive Officer
		pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Attached
2.	31.2	Certification of the Principal Financial Officer
		pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Attached
3	32.1	Certification of the Principal Executive Officer
		pursuant to U.S.C. Section 1350 as adopted pursuant
		to Section 906 of the Sarbanes-Oxley Act of 2002*	Attached
4	32.2	Certification of the Principal Financial Officer
		pursuant to U.S.C. Section 1350 as adopted pursuant
		to Section 906 of the Sarbanes-Oxley Act of 2002*	Attached

*The Exhibit attached to this Form 10-QSB shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

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SIGNATURES

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

AIDA PHARMACEUTICALS, INC.

Date: January 31, 2007	/s/ Biao Jin
	Mr. Biao Jin
	Chief Executive Officer
Date: January 31, 2007	/s/ Hui Lin
	Ms. Hui Lin
	Chief Financial Officer

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