Benda Makes Moves Toward American Exchange Listing

| About: Benda Pharmaceutical, (BPMA)

Benda Pharmaceutical (OTC:BPMA) announced that it has begun to explore strategic alternatives, having signed up CRT Capital Group LLC to assist the company. They will explore M&A, joint venture, divestiture, spin-off, financing or other capital market transactions.

Often, “strategic alternatives” implies that the company is seeking a buyer, but Benda announced at the same time that it would seek to exchange its OTC Bulletin Board listing for one on the American Exchange, implying it expects to be a continuing entity. The company is hiring EastGate Financial to help it make the transition, including identifying a suitable AMEX specialist firm. Benda calls the EastGate relationship “complementary” to the CRT initiative.

Benda has good reason to seek an AMEX listing.

In April 2007, Benda bought 60% of SiBiono, the company that developed and won approval in China for Gendicine, a gene therapy drug for cancer. Benda paid 60 million RMB ($8.2 million) for its majority ownership. At the same time, Benda agreed to award 2,189,560 shares of its stock to Super Pioneer International Limited and two shareholders of SiBiono who owned a 2.5% stake in the company that brought Benda’s ownership up to 60%.

The shareholders agreed to a one-year lockup from the time the shares were issued, which could be anytime within three months of the deal. Benda gave the investors the option of redeeming 2.05 million shares at $3.60 each for three months after the lockup. That option would be good if Benda’s shares did not attain a price of $3.60 on the open market and if the shares were not listed on either Nasdaq or the AMEX. Benda closed Monday at $0.63, a long ways from $3.60. But at least the company is doing its part to seek an AMEX listing.

If Benda does not hit the $3.60 mark, it will have to come up with $7.4 million at some point that is six months from April 2008. Or it could make new terms with its investors. At the very least, it behooves the company to make a good-faith effort to live up to the exchange-listing part of the deal. At the end of Q3, Benda has less than $2 million in cash.

The AMEX has three sets of criteria by which a company can qualify for listing. The most basic plan is:

• $3 million in shareholders’ equity
• $750,000 in pre-tax income in two of the last three years
• 800 public shareholders and 500,000 shares publicly held
• a minimum $3 stock price.

With very little work, Benda can meet all of these conditions, except for the stock price, and a reverse split could take care of that. The company will produce a loss in 2007, but that had to do with its purchase of SiBiono.

Benda Pharmaceutical produces traditional Chinese medicines and conventional medications, plus it now also controls Gendicine, the gene therapy drug for cancer. Benda is working hard to increase the use of Gendicine, whose revenues are on the rise.

In praising its new relationships with CRT and EastGate, Benda pointed out that CRT was instrumental in shepherding American Oriental Bioengineering (AOB) to its New York Stock Exchange IPO. Because AOB is in many ways similar to Benda, the company felt CRT would be a good fit.

Disclosure: none.