UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20-549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~June~~September 30, 2011

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

For the transition period from ______________ to _____________

Commission file number: 333-152286

GLOBAL PHARM HOLDINGS GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-8767223
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

25/F New World Center, No. 6009 Yitian Road, Futian		518026
District, Shenzhen,		(Zip Code)
People’s Republic of China
(Address of principal executive offices)

86-755-83230226

(Registrant’s telephone number, including area ~~ccode~~code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company þ

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

~~Yes ¨~~As Noof þNovember 16, 2011, there are 37,283,185 of $0.001 par value common stock issued and outstanding.

As of August 11, 2011, there are 26,000,000 of $0.001 par value common stock issued and outstanding.

FORM 10-Q

GLOBAL PHARM HOLDINGS GROUP, INC.

INDEX

		Page
	PART I. Financial Information
Item 1.	Condensed Consolidated Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010	2
	Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2011 and 2010	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5 –21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
	PART II. Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Removed and Reserved	40
Item 5.	Other Information	40
Item 6.	Exhibits	40

PART I. Financial Information

		Page

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010	2

	Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2011 and 2010	3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010	4

	Notes to Unaudited Condensed Consolidated Financial Statements	5 –33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52

Item 4.	Controls and Procedures	52

	PART II. Other Information

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56

Item 3.	Defaults Upon Senior Securities	56

Item 4.	Removed and Reserved	56

Item 5.	Other Information	56

Item 6.	Exhibits	56

PART I - FINANCIAL INFORMATION

GLOBAL PHARM HOLDINGS GROUP, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Statements of Income and Comprehensive Income	3
Condensed Consolidated Statements of Cash Flows	4
Notes to Unaudited Condensed Consolidated Financial Statements	5 - 21

GLOBAL PHARM HOLDINGS GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2011
	September 30, 2011
	(Unaudited)		December 31, 2010
	(unaudited)		December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	918,~~144~~570,~~834~~246	$	4,271,498
Accounts receivable		2434,~~918~~069,~~594~~776		19,771,619
Inventories		1829,~~980~~852,~~396~~272		16,058,760
Restricted cash		1,213,714		1,538,251
Due from related party		194,708		-
Other current assets		1,978,407		1,326,660
Restricted cash		3,781,418		1,538,251
Total current assets		56,235,945		42,966,788
Other current assets		5,355,851		1,326,660
Property, plant and equipment, net		676,529		210,665
Total current assets		91,824,271		42,966,788
Intangible assets, net		297,874		-
Property, plant and equipment, net		8,505,797		210,665
Goodwill		374,143		-
Intangible assets, net		33,860,597		-
Total assets	$	57,584,491	$	43,177,453
Goodwill		27,043,851		-
LIABILITIES AND STOCKHOLDERS' EQUITY
Total assets	$	161,234,516	$	43,177,453
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term loans	$	464,145	$	1,972,150
Short-term loan	$	5,003,753	$	1,972,150
Bank acceptance		14,~~528~~805,~~560~~339		21,212
Accounts payable and accrued expenses		22,023,372		20,944,923
Accounts payable and other accrued liabilities		39,900,624		20,944,923
Income and other taxes payable		2,~~076~~959,~~102~~555		1,728,499
Due to related parties		3,813,329		882,505
Due to related party		6,729,332		882,505
Total current liabilities		29,905,508		25,549,289
Deferred income tax liabilities		491,360		-
Stockholders' equity:
Total current liabilities		59,889,963		25,549,289
Common stock, par value, $0.001 per share, 100,000,000 shares authorized, 26,000,000 issued and outstanding.		26,000		26,000
Long-term loan		1,563,673		-
Additional paid-in capital		9,200,623		9,200,623
Bond payable, net		4,436,318		-
Derivative liabilities		5,563,682		-
Contingent consideration, at fair value		5,765,708		-
Deferred income tax liabilities, net of current		7,653,272		-
Total liabilities		84,872,616		25,549,289
Shareholder's equity:
Common stock, par value, $0.001 per share, 100,000,000 shares authorized, 37,283,185 and 26,000,000 issued and outstanding		37,283		26,000
Additional paid-in capital		55,089,340		9,200,623
Statutory surplus reserves		1,310,701		1,310,701
Retained earnings		1519,~~764~~445,~~962~~014		6,546,406
Accumulated other comprehensive income		1137,~~032,115~~618		544,434
Total shareholders' equity - Global Pharm Holdings Group, Inc.		2776,~~334~~019,~~401~~956		17,628,164
Non-controlling interests		~~344~~341,~~582~~944		-
Total stockholders’ equity		27,678,983		17,628,164
Total shareholders' equity		76,361,900		17,628,164
Total liabilities and stockholders’ equity	$	57,584,491	$	43,177,453
Total liabilities and shareholders' equity	$	161,234,516	$	43,177,453

See accompanying notes to unaudited condensed consolidated financial statements.

GLOBAL PHARM HOLDINGS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(~~Unaudited~~unaudited)

	Three months ended June 30,						Six months ended June 30,
	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
Revenues, net	$	4568,~~386~~999,~~335~~093		$	30,~~530~~617,~~977~~820		$	87156,~~490~~167,~~082~~977		$	5990,~~259~~176,~~637~~505
Cost of goods sold		3859,~~003~~427,~~386~~311			24,~~989~~711,~~792~~477			72131,~~279~~405,~~229~~558			4873,~~632~~622,~~162~~656
Gross profit		79,~~382~~571,~~949~~782			5,~~541~~906,~~185~~343			1524,~~210~~762,~~853~~419			1016,~~627~~553,~~475~~849
Expenses:
Operating expenses		~~936~~1,~~732~~100,309			~~233~~360,~~371~~572			12,~~352~~447,~~645~~617			~~364~~725,~~999~~424
General and administrative		~~987~~2,~~391~~370,710			14,~~794~~436,~~759~~082			14,~~720~~136,~~080~~902			26,~~165~~531,~~148~~617
Income from operations		56,~~458~~100,~~826~~763			31,~~513~~109,~~055~~689			1218,~~138~~177,~~128~~900			89,~~097~~296,~~328~~808
Interest income (expense)		843			13,226			(3,381	)		17,874
Other income and expenses
Miscellaneous expense		28,418			-			30,239			-
Interest (expense) income		(99,087	)		2,842			(101,100	)		21,048
Income before income taxes		5,431,251			3,526,281			12,104,508			8,115,202
Miscellaneous (expense) income		(13,511	)		-			(48,110	)		-
Provision for income taxes		1,513,005			1,255,682			2,887,305			2,419,451
Change in fair value of contingent consideration		(665,708	)		-			(665,708	)		-
Net income – including non-controlling interest		3,918,246			2,270,599			9,217,203			5,695,751
Income before income taxes		5,322,457			1,112,531			17,362,982			9,317,856
Net loss – non-controlling interests		1,361			-			1,353			-
Provision for income taxes		1,589,240			1,184,907			4,468,365			3,609,764
Net income - Global Pharm Holdings Group, Inc.		3,919,607			2,270,599			9,218,556			5,695,751
Net income (loss) – including non-controlling interest		3,733,217			(72,376	)		12,894,617			5,708,092
Net loss – non-controlling interests		2,664			-			3,991			-
Net income (loss) - Global Pharm Holdings Group, Inc.		3,735,881			(72,376	)		12,898,608			5,708,092
Other comprehensive income
Foreign currency translation adjustment		~~338~~(351,~~623~~777	)		33(174,~~092~~718	)		~~487~~(406,~~681~~816	)		32(142,~~226~~492	)
Total comprehensive income	$	4,258,230		$	2,303,691		$	9,706,237		$	5,727,977
Total comprehensive income (loss)	$	3,384,104		$	(247,094	)	$	12,491,792		$	5,565,600
Earnings per share of common stock:
Basic and diluted earnings per share	$	0.15		$	0.12		$	0.35		$	0.30
Basic earnings per share	$	0.13		$	-		$	0.48		$	0.22
Basic and diluted weighted average shares		26,000,000			19,094,000			26,000,000			19,094,000
Diluted earnings per share	$	0.12		$	-		$	0.47		$	0.22
Weighted-average outstanding common shares
Basic weighted-average outstanding common shares		28,727,803			26,000,000			26,909,268			26,000,000
Diluted weighted-average outstanding common shares		28,947,583			26,000,000			26,982,528			26,000,000

See accompanying notes to unaudited condensed consolidated financial statements.

GLOBAL PHARM HOLDINGS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~Unaudited~~unaudited)

	Six Months Ended June 30,
	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities
Net income–including non-controlling interest	$	912,~~217~~894,~~203~~617		$	5,~~695~~708,~~751~~092
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		-			1,492,100
Depreciation and amortization		672,729			51,993
Depreciation and amortization		56,018			29,169
Merger cost		-			750,000
Stock-based compensation		-			4,476,300
Change in fair value of contingent consideration		665,708			-
Changes in operating assets and liabilities:
Accounts receivable		(46,~~214~~236,~~512~~658	)		(14,~~431~~683,~~800~~793	)
Inventories		(17,~~550~~390,~~865~~787	)		(514,~~409~~211,~~249~~786	)
Restricted cash		329,540			-
Due from related party		(29,576	)		-
Other current assets		473,282			(1,304,551	)
Restricted cash		(2,161,403	)		-
Accounts payable and other accrued liabilities		(232,917	)		7,380,555
Other current assets		(2,968,622	)		(199,796	)
Income and other taxes payable		305,186			(776,305	)
Accounts payable and other accrued liabilities		5,139,874			11,014,731
Due from related party		-			(33,983	)
Income and other taxes payable		183,235			294,485
Due to related parties		875,411			132,940
Due to related party		5,348,883			-
Net cash provided by operating activities		5,258,346			5,774,627
Deferred tax expenses		(85,477	)		-
Net cash provided by operating activities		6,032,523			3,200,226
Cash flows from investing activities
Purchase of property, plant and equipment		(~~302~~432,~~718~~647	)		(922,~~063~~044	)
Acquisition of subsidiaries, net of cash acquired		(567,391	)		-
Proceeds on sale of assets		41,606			-
Net cash used in investing activities		(870,109	)		(9,063	)
Acquisition of subsidiaries, net of cash acquired		(555,305	)		-
Net cash used in investing activities		(946,346	)		(22,044	)
Cash flows from financing activities:
Short-term loan borrowing		-			~~365~~366,~~001~~763
Short-term loan repayments		(12,~~529~~616,~~073~~506	)		-
Bank acceptance		1,~~483~~308,~~968~~357			(~~219~~199,~~000~~545	)
Dividend paid to the former shareholders		-			(3,208,521	)
Due from related party		-			24,603
Due from shareholders		-			24,484
Due to related party		-			1,168,986
Dividend paid to the former shareholders		-			(4,309,377	)
Cash received from convertible bond		10,000,000			-
Contribution from non-controlling interest		344,835			-
Net cash provided by (used in) financing activities		~~299~~9,~~730~~036,686			(32,~~038~~948,~~036~~570	)
Net increase in cash and cash equivalents		414,~~687~~122,~~967~~863			2229,~~727,528~~612
Effect of exchange rate changes on cash and cash equivalents		~~185~~175,~~369~~885			~~(12~~145,~~852~~532	)
Cash and cash equivalents - beginning of period		4,271,498			7,455,147
Cash and cash equivalents - end of period	$	918,~~144~~570,~~834~~246		$	107,~~169~~830,~~823~~291
Supplemental disclosure of cash flow information:
Cash paid for interest	$	20148,~~662~~866		$	1220,~~908~~655
Cash paid for income taxes	$	23,~~549~~927,~~041~~576		$	2,~~743~~994,~~066~~851
Supplemental disclosure of non-cash financing activities:
Supplemental disclosure of financing activities
Accrued purchase price included in due to related parties	$	1,639,978		$	-
Deferred Bond issuance costs in accounts payable	$	287,500		$	-
Common stock issued for acquisitions	$	51,000,000		$	-

See accompanying notes to unaudited condensed consolidated financial statements.

GLOBAL PHARM HOLDINGS GROUP, INC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~JUNE~~SEPTEMBER 30, 2011

1. Description of Business and Merger

Global Pharm Holdings Group, Inc. (“Global Pharm” or the “Company”) was incorporated in Delaware on February 9, 2007. As ofThe ~~June 30, 2011, the~~ Company engages in the wholesale and distribution of pharmaceutical-related products, ~~and~~ herbal cultivation, ~~business~~and Traditional Chinese Medicine (“TCM”) processing in China through its ~~seven~~11 indirectly owned Chinese subsidiaries, including Tonghua Tongdetang Pharmaceutical and Medicinal Material Co., Ltd. (“Tongdetang”), Anhui Xuelingxian Pharmaceutical Co., Ltd. (“Xuelingxian”), Shandong Global Pharm Co., Ltd. (“Shandong Global”), Anhui Sino-Green TCM Tech Development Co., Ltd. (“Anhui Sino-Green TCM Tech”), Shandong Sino-Green TCM Tech Development Co., Ltd. (“Shandong Sino-Green TCM Tech”), Zibo Global Pharm Co., Ltd. (“Zibo Global,” formerly “Zibo Hongmao Pharmaceutical Sales Co., Ltd.”), Bozhou Xinghe Pharmaceutical Co., Ltd. (“Bozhou Xinghe”), Guangdong Sinopharm Pharmaceutical Franchises Co., Ltd (“GDGY”), Shandong Huawei Pharmaceutical Co., Ltd. (“Shandong Huawei”), Qingdao Likang Pharmaceutical Co., Ltd (“Qingdao Likang”), and Tai’an Global Pharm Co., Ltd. (“Tai’an Global,” formerly “Tai’an Senlin Pharmaceutical Co., Ltd.” and, together with Tongdetang, Xuelingxian, Shandong Global, Anhui Sino-Green TCM Tech, Shandong Sino-Green TCM Tech, Zibo Global, Bozhou Xinghe, GDGY, Shandong Huawei, and Qingdao Likang, the “PRC Subsidiaries”).

Joint Ventures

On April 6, 2011, the Company obtained the business license of Anhui Sino-Green TCM. Tech, a joint venture established by Hong Kong Wisdom Fortune Medicine Holding Group Limited, a subsidiary of the Company (“Wisdom Fortune”), together with Anhui Qianyi Pharmaceutical Co., Ltd. (“Qianyi Pharmaceutical”), a PRC company, ~~established the joint venture, Anhui Sino-Green TCM Tech,~~ in Bozhou City, Anhui Province. Anhui Sino-Green TCM Tech is primarily focused on the herbal cultivation business. The registered capital of Anhui Sino-Green TCM Tech is $10 million. Wisdom Fortune invested $9.7 million and Qianyi Pharmaceutical invested $0.3 million, which ~~reflects~~reflect a 97 percent and 3 percent ownership interest in Anhui Sino-Green TCM Tech, respectively. As of ~~July~~September 630, 2011, the Company paid $1.5 million of the registered capital and the remaining $8.2 million is due by April 6, 2013. The Company will fund the remaining registered capital from its working capital ~~and future financing~~.

On April 21, 2011, the Company obtained the business license of Shandong Sino-Green TCM Tech., a joint venture established by Shandong Global together with Jinan Linong TCM Plantation Co., Ltd. (“Jinan Linong”), a PRC company, ~~established the joint venture, Shandong Sino-Green TCM Tech,~~ in Jinan City, Shandong Province. Shandong Sino-Green TCM Tech is primarily focused on the herbal cultivation business. The registered capital of Shandong Sino-Green TCM Tech is ~~RMB 10 million (approximately US~~ $1.56 million). Shandong Global invested ~~RMB 9.7 million (approximately US~~ $1.5 million) and Jinan Linong invested ~~RMB 0.3 million (approximately US~~ $0.1 million), which ~~reflects~~reflect a 97 percent and 3 percent ownership interest in Shandong Sino-Green TCM Tech, respectively. On April 20, 2011, Shandong Global paid ~~RMB 9.7 million (approximately US~~ $1.5 million) of the registered capital.

Establishing joint ventures with local companies in Bozhou City and Mashan town, represent a new stage for the Company’s development of the TCM cultivation base projects. In addition, both projects are a further step to obtain the quality TCM variety that is certified with National Geographical Place of Origin Trademark. The savings related to obtaining TCM herbal related raw materials directly from the place of origin will significantly enhance the Company’s products portfolio, and create a significant synergy between the Company’s herbal cultivation business and pharmaceutical products distribution business.Acquisitions

~~Acquisition~~During ofthe ~~Zibo~~nine ~~Global~~months ~~and~~ended ~~Tai’an~~September ~~Global~~30, 2011 the Company completed five business combinations that are summarized in the table below:

On May 30, 2011, the Company acquired the 100% equity interest of Tai’an Global through its subsidiary, Shandong Global, for cash consideration of RMB 7 million (approximately US $1.1 million). As of June 30, 2011, the Company had paid RMB 2.3 million (approximately US $0.4 million) to the former shareholder of Tai’an Global with the remaining RMB 4.7 million (approximately US $0.7 million) to be paid before September 15, 2011. The Company will fund the remaining balance from working capital.

Company Name	Acquisition Date	Total Consideration
Tai’an Global Pharm Co., Ltd.	May 30, 2011	$	1.1 million
Zibo Global Pharm Co., Ltd.	May 31, 2011	$	1.2 million
Bozhou Xinghe Pharmaceutical Co., Ltd.	July 4, 2011	$	4.7 million
Pacific Asia Pharm Investment Group Co., Limited	August 1, 2011	$	42.0 million
Quantum Magic Integrator Capital Co., Limited	August 3, 2011	$	9.0 million

OnThe ~~May~~acquisitions ~~31,~~continue ~~2011,~~ the Company’s ~~acquired~~focus ~~the~~on ~~100%~~building ~~equity~~regional ~~interest~~distribution ~~of Zibo Global through its subsidiary~~channels, ~~Shandong~~as ~~Global,~~well ~~for~~as alocal ~~cash~~capillary ~~consideration~~sales ofnetwork ~~RMB~~with 8high-margin ~~million~~products ~~(approximately~~portfolio. USCurrently ~~$1.2~~as ~~million).~~a Asresult of ~~June~~these 30acquisitions, ~~2011,~~ the Company’s ~~had~~sales ~~paid~~network ~~RMB~~covers ~~2.1~~Shandong, ~~million~~Jilin, ~~(approximately~~Anhui USand $0Guangdong provinces.3 ~~million)~~The toCompany ~~the~~seeks ~~former~~to ~~shareholder~~establish ofan ~~Zibo~~integrated ~~Global~~value ~~with~~chain in the ~~remaining~~pharmaceutical ~~RMB~~industry ~~5.9~~through ~~million~~strategic ~~(approximately~~acquisitions USwithin ~~$0.9~~TCM ~~million)~~production, topharmaceutical bedistribution ~~paid~~and ~~before~~the ~~September~~retail ~~30, 2011~~sectors. ~~The~~ ~~Company~~Please ~~will~~see ~~fund~~Note ~~the~~17 ~~remaining~~for ~~balance~~further ~~from~~details ~~working~~of ~~capital~~each acquisition.

With the acquisition of Tai’an Global and Zibo Global, the Company enhanced the depth and breadth of its sales coverage in Shandong Province and the expansion of its distribution network into the cities of Tai'an and Zibo in Shandong. In addition, the two newly acquired entities will broaden their products portfolios by having access to the Shandong Global and Shandong Sino-Green TCM Tech’s product lines.

Accounting Treatment of the Merger; Financial Statement Presentation

The Company was incorporated in Delaware on February 9, 2007 under the name “Top Flight Game Birds, Inc.” Prior to the merger as described below, the Company was a non-operating shell company. On August 12, 2010, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Global Pharm BVI Enterprise Group Limited, a British Virgin Islands company formed on June 14, 2010 (“Global Pharm BVI”). Pursuant to the Share Exchange Agreement, the Company issued 1,800,000 of its restricted shares to acquire all of the issued and outstanding shares of Global Pharm BVI. Immediately subsequent to the merger, the former stockholders and key management of Global Pharm BVI were given certain call rights to acquire an aggregate of 80.36% of the outstanding common stock of the Company ~~at four different occurrence dates~~, contingent on the attainment of various ~~targets~~milestones. In addition, all of the officers and directors of Global Pharm BVI were appointed as officers and directors of the Company immediately following the merger. On September 20, 2010, the Company changed its name to Global Pharm Holdings Group, Inc. Subsequent to the merger, all of the ~~targets~~milestones were attained and, upon the exercise of the call rights, the former stockholders and key management of Global Pharm BVI owned an aggregate of 80.36% of the outstanding common stock of the Company.

The merger of a private operating company into a non-operating public shell company with nominal net assets is considered to be a capital transaction in substance, rather than a business combination, for accounting purposes. Accordingly, the Company treated this transaction as a reverse merger (the “Reverse Merger”). These transactions are considered to be capital transactions in substance, rather than business combinations. Accordingly, the Share Exchange Agreement has been accounted for as a recapitalization and, for accounting purposes, Global Pharma BVI is considered the acquirer in the Reverse Merger. The historical consolidated financial statements are those of Global Pharma BVI.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q adopted under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the financial position, results of operations and cash flows of the Company at the dates and for the periods indicated. The interim results for the period ended ~~June~~September 30, 2011 are not necessarily indicative of results for the full 2011 fiscal year or any other future interim periods. Because the merger was accounted for as a reverse acquisition under generally accepted accounting principles, the financial statements for periods prior to August 12, 2010 reflect only the operations of Global Pharm BVI.

These unaudited Condensed Consolidated Financial Statements have been prepared by management and should be read in conjunction with the Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates and assumptions principally relate to services performed by third parties but not yet invoiced, estimates of the fair value and forfeiture rates of stock options issued to employees and consultants, and estimates of the probability and potential magnitude of contingent liabilities. Actual results could differ from those estimates.

Summary of Significant Accounting Policies

Purchase Accounting and Business Combinations

The Company accounts for its business combinations using the purchase method of accounting which requires that intangible assets be recognized apart from goodwill if they are contractual in nature or separately identifiable. Acquisitions are measured on the fair value of consideration exchanged and, if the consideration given is not cash, measurement is based on the fair value of the consideration given or the fair value of the assets acquired, whichever is more reliably measurable. The excess of cost of an acquired entity over the fair value of identifiable acquired assets and liabilities assumed is allocated to goodwill.

The valuation and allocation process relies on significant assumptions made by management. In certain situations, the allocations of excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when the Company receives updated information, including appraisals and other analyses, which are completed within one year of the acquisition. Revisions to the fair values, which may be significant, are recorded when pending information is finalized, within one year from the acquisition date.

Goodwill

Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. Amortization of goodwill is not permitted. Goodwill is tested annually for impairment by comparing the fair value of the reporting unit to its carrying amount including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized. The amount of impairment loss is determined by comparing the implied fair value of reporting unit goodwill with the carrying amount. If the carrying amount exceeds the implied fair value then an impairment loss is recognized equal to that excess. ~~No impairment charges have been recorded as a result of the Company’s annual impairment assessments.~~

Intangible Assets

Purchased intangible assets with finite lives are amortized using ~~the~~either accelerated or straight-line amortization ~~method~~methods over the estimated economic lives of the assets. The Company’s finite-lived intangible assets consist of internal use software, customer relationships, ~~contractor~~trademark, ~~and~~non-compete ~~resume databases~~agreements, ~~trade~~GMP ~~name~~certificate, and ~~internal~~drugstore ~~use~~chain ~~software~~franchise and are being amortized over periods ranging from ~~five~~two to ~~nine~~twenty years.

Purchased intangible assets with indefinite lives are reviewed periodically for impairment losses whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If required, an impairment loss is recognized as the difference between the carrying value and the fair value of the assets.

Revenue Recognition

~~The Company’s revenue recognition policies are in compliance with Staff Accounting Bulletin 104.~~ Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk of loss and title passes to the customer. The Company’s ~~four~~three segments have the same revenue recognition policy. Revenues are recorded net of value-added taxes.

New Accounting Standards

In December 2010, the Financial Accounting Standards Board (“FASB”) issued guidance which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In reviewing that determination, an entity must consider whether there are any adverse qualitative factors indicating impairment may exist. This guidance is effective for fiscal years and interim periods within those years, beginning after December 15, 2010. This guidance is therefore effective for the Company’s fiscal year ending December 31, 2011.

In June 2011, the FASB amended its guidance on the presentation of comprehensive income in financial statements to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items that are recorded in other comprehensive income. The new accounting guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The provisions of this new guidance are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Global Pharm Holdings Group, Inc. and its direct and indirect majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fair Value Measurements and Fair Value of Financial Instruments

The Company defines fair value as the amount at which an asset or liability could be bought or incurred or sold or settled in a current transaction between willing parties, that is, other than in a forced or liquidation sale. The fair value estimates presented in the table below are based on information available to the Company as of September 30, 2011.

The accounting standard regarding fair value measurements discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable and inputs derived from or corroborated by observable market data.

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The Company has determined the fair value of certain liabilities using the market approach: the following table presents the Company’s fair value hierarchy for these liabilities measured at fair value on a recurring basis as of September 30, 2011:

			Quoted Market
	Fair Value		Prices in Active		Significant Other		Significant
	September 30,		Markets		Observable Inputs		Unobservable Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Liabilities
Derivative liabilities	$	5,563,682	$	-	$	-	$	5,563,682
Contingent consideration		5,765,708		-		-		5,765,708
Total	$	11,329,390	$	-	$	-	$	11,329,390

Estimating the fair value of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. The assumptions used to value the Company’s derivatives, which had a direct effect on the fair values described above, are more fully described in Notes 14 and 17. In addition, valuation techniques are sensitive to changes in the trading market price of the Company’s Common Stock and its estimated volatility interest rate changes and other variables or market conditions not within the Company’s control that can significantly affect its estimates of fair value and changes in fair value. Because derivative financial instruments are initially and subsequently carried at fair value, the Company’s net income may include significant charges or credits as these estimates and assumptions change.

The carrying amounts of the Company’s financial instruments, which principally include accounts receivable, accounts payable, bank acceptance and short-term loans approximate their fair values due to the relatively short maturity of such instruments.

The carrying amount of the Company’s short-term borrowing approximates their fair value based upon current rates and terms available to the Company for similar debt.

Foreign Currency Translation

The Company’s functional currency is the Renminbi (“RMB”). The unaudited condensed consolidated financial statements of the Company are translated from RMB into United States dollars (“US $”). Accordingly, all assets and liabilities are translated at the exchange rates prevailing at the balance sheet dates, all income and expenditure items are translated at the average rates for each of the periods and equity accounts, except for retained earnings, are translated at the rate at the transaction date. Retained earnings reflect the cumulative net income (loss) translated at the average rates for the respective periods since inception less dividends translated at the rate aton the transaction date.

8RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People's Bank of China (the "PBOC") or other institutions authorized to buy and sell foreign exchange in the PRC. The exchange rates adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into US $ has been made at the following exchange rates for the respective periods:

RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People's Bank of China (the "PBOC") or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective periods:

	Nine Months Ended September 30,
	2011	2010
Assets and liabilities	1 US $: 6.39520 RMB	1 US $: 6.69810 RMB
Statement of income	1 US $: 6.49722 RMB	1 US $: 6.81640 RMB

	Six Months Ended June 30,
	2011		2010
Assets and liabilities		1 US $: 6.46350RMB		1 US $: 6.84930RMB
Statement of income		1 US $: 6.53991RMB		1 US $: 6.84930RMB

The resulting translation adjustments are recorded as other comprehensive income in the unaudited condensed consolidated statement of income and comprehensive income and as a separate component of stockholders’ equity.

Basic and Diluted Earnings per Share

The Company’s basic earnings per share is computed using the weighted-average number of shares outstanding for the periods presented.

Diluted earnings per share is based on the assumption that any dilutive options, warrants or other instruments were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding ~~stock~~convertible ~~options~~bonds are assumed to be exercised, and funds thus obtained are assumed to be used to purchase common stock at the average market price during the period. AsDiluted ofshares ~~each~~underlying ofconvertible ~~June~~debt ~~30,~~obligations ~~2011~~are ~~and~~included ~~December~~in ~~31,~~the ~~2010,~~determination ~~the~~of ~~Company~~diluted ~~has~~earnings noper ~~dilutive~~share ~~securities~~using the “if converted” method .

3. Short-Term Loans

Short-term loans including accrued interest as of June 30, 2011 and December 31, 2010 consist of the following:

Date obtained	Term	Interest			Loan amount	Payment	June 30, 2011		December 31, 2010
12/28/10	December 28, 2010 - March 27, 2011		5.89	%	$1,365,335 (RMB 9 million)	Interest payable monthly, principle due at maturity	$	-	$	1,365,335
12/31/10	December 30, 2010 - December 31, 2011		6.97	%	$455,111 (RMB 3 million)	Interest payable monthly, principle due at maturity		464,145		455,111
5/7/10	June 1, 2010 - May 31, 2011		5.58	%	$151,704 (RMB 1 million)	Interest payable quarterly, principle due at maturity		-		151,704
					Total		$	464.145	$	1,972,150

On December 28, 2010, the Company entered into a credit agreement with Shandong Qilu Bank for a loan in the principal amount of $1,365,335, which is secured by a guarantee by the Company to maintain a bank deposit balance of $1,517,039 with Shandong Qilu Bank. The bank deposit is presented as restricted cash on the Company’s balance sheet at December 31, 2010. As of June 30, 2011, the loan balance has been paid in full.

On December 30, 2010, the Company entered into a credit agreement with Shandong Qilu Bank for a loan in the principal amount of $455,111, which is secured by a pledge by the Company of its inventory, valued at RMB 6 million, or $910,223. Shandong Qilu Bank has authorized a third party to monitor the pledged inventory.

On June 1, 2010, the Company entered into a credit agreement with Construction Bank of China for a loan in the principal amount of $151,704, which is secured by a guarantee by two of its shareholders and the property owned by Bozhou City Herb Research Institute, valued at RMB 4 million or $606,815. As of June 30, 2011, the loan balance has been paid in full.

Interest expense was $20,662 and $12,908 for the six months ended June 30, 2011 and 2010, respectively. Interest expense was $10,798 and $7,706 for the three months ended June 30, 2011 and 2010, respectively.

4. Income and Other Taxes Payable

Income and other taxes payable consist of the following:

	June 30, 2011		December 31, 2010
Income tax payable	$	1,515,703	$	1,177,439
Value-added tax payable		513,446		445,052
City construction tax payable		40,135		31,154
Stamp duty payable		6,529		5,054
Individual tax payable		289		69,800
Total income and other taxes payable	$	2,076,102	$	1,728,499

5. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence.

The following table sets forth the amounts due to related parties as of June 30, 2011 and December 31, 2010.

Related Party	Relationship	Nature	June 30, 2011		December 31, 2010
Yunlu Yin	Director, Chairman	Business expenses	$	1,466,840	$	821,005
		paid personally
	CEO	Accrued salary		66,000		30,000
		Business expenses		4,155		-
An Fu	Director, CFO	paid personally
		Accrued salary		29,000		19,000
Dan Li	Board secretary	Accrued salary		27,500		12,500
Yanliang Song	Vice president	Accrued salary		4,000		-
Anhui Qianyi Pharmaceutical	Non-controlling interest shareholder	Operating expenses		140,713		-
Xinjuan Lv, Lingjin Kong	Managements	Unpaid purchase price - Tai'an Global		727,160		-
Jiang Yanqiu	Management	Working capital - Tai'an Global		187,357		-
Hongsheng Chen	Management	Unpaid purchase price - Zibo Global		912,818		-
		Working capital - Zibo Global		239,503		-
Other Directors	Directors	Accrued salary		8,283		-
Total			$	3,813,329	$	882,505

The amounts due to related parties are unsecured, non-interest bearing and payable on demand. The Company anticipates paying the remaining balance due to Mr. Yin in the third quarter in 2012. The Company will pay the unpaid purchase price of $727,160 before September 15, 2011 and $912,818 before September 30, 2011. The working capital is due on demand and the Company anticipates paying the remaining balance $426,860 by the end of 2011.

6. Statutory Reserve

The laws and regulations of the People’s Republic of China (the “PRC”) require that before a foreign invested enterprise can legally distribute profits, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations, in proportions determined at the discretion of the board of directors, to the statutory reserve. The statutory reserves include the surplus reserve fund.

The Company is required to transfer 10% of its net income, as determined in accordance with PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the Company's PRC subsidiaries registered capital. The transfer to this reserve must be made before distribution of any dividends to shareholders. Transfers to the statutory surplus reserve fund were nil for the six months ended June 30, 2011 and 2010. As of June 30, 2011, the Company has fulfilled the reserve requirement.

The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 50% of the registered capital of the Company’s PRC subsidiaries.

~~7. Commitments~~The following is a reconciliation of the basic and diluted earnings per share computation:

Capital Commitments

	For the nine months ended September 30,
	2011		2010
Numerator:
Net income attributable to the Company	$	12,898,608	$	5,708,092
Write-off of unamortized debt issuance costs of $287,500		287,500		-
Net income attributable to the Company’s common shareholders - Diluted		12,611,108		5,708,092
Denominator:
Weighted average ordinary shares outstanding - Basic		26,909,268		26,000,000
Dilutive effect of convertible bonds		73,260		-
Denominator for dilutive income per share - Diluted		26,982,528		26,000,000
Net income per share attributable to the Company’s common shareholders
Basic	$	0.48	$	0.22
Diluted	$	0.47	$	0.22

On April 6, 2011, the Company obtained the business license of Anhui Sino-Green TCM Tech, Wisdom Fortune together with Qianyi Pharmaceutical, a PRC company, established the joint venture, Anhui Sino-Green TCM Tech, in Bozhou City, Anhui Province. The registered capital of Anhui Sino-Green TCM Tech is US $10 million. Wisdom Fortune will invest US $9.7 million and Qianyi Pharmaceutical will invest US $0.3 ~~million, which reflects a 97 percent and 3 percent ownership interest in Anhui Sino-Green TCM Tech, respectively~~. The Company is required to pay US $8,245,000 within two years of April 6, 2011. As of July 6, 2011, the Company has paid the first payment of registered capital amount of US $1,455,000. The Company will fund the remaining registered capital requirement from working capital and future financing.Inventories

~~On May 30, 2011, the Company acquired the 100% equity interest of Tai’an Global through its subsidiary, Shandong Global, for cash consideration of RMB 7 million (approximately US $1.1 million).~~ As of ~~June~~September 30, 2011, ~~the~~and ~~Company~~December ~~had~~31, ~~paid~~2010, ~~RMB~~inventories ~~2.3~~consisted ~~million (approximately US $0.4 million) to the former shareholder~~ of ~~Tai’an Global with~~ the ~~remaining RMB 4.7 million (approximately US $0.7 million) to be paid before September 15, 2011. The Company will fund the remaining registered capital requirement from working capital.~~following:

On May 31, 2011, the Company acquired the 100% equity interest of Zibo Global through its subsidiary, Shandong Global, for cash consideration of RMB 8 million (approximately US $1.2 million). As of June 30, 2011, the Company had paid RMB 2.1 million (approximately US $0.3 million) to the former shareholder of Zibo Global with the remaining RMB 5.9 million (approximately US $0.9 million) to be paid before September 30, 2011. The Company will fund the remaining registered capital requirement from working capital.

	September 30, 2011		December 31, 2010
Raw materials	$	638,845	$	84,316
Work-in-progress		4,197,468		-
Finished goods		25,015,959		15,974,444
Total	$	29,852,272	$	16,058,760

~~Lease~~4. ~~Commitments~~Property, plant and equipment

~~As of June 30~~Property, ~~2011,~~plant ~~the Company has entered into or assumed the following lease agreements subsequent to December 31, 2010. The following table sets forth the lessor, term, payment~~ and ~~purpose~~equipment consisted of the ~~leased property~~following:

	September 30, 2011			December 31, 2010
Buildings	$	5,059,061		$	-
Operating equipment		2,210,474			184,670
Office equipment		612,904			122,532
Transportation equipment		406,721			10,632
Leasehold improvements		5,979			51,872
Land use right		709,907			-
Sub-total		9,005,046			369,706
Less: Accumulated depreciation and amortization		(499,249	)		(159,041	)
Property, plant and equipment, net	$	8,505,797		$	210,665

Lessor	Term	Rent per year				Description
		RMB		US $
Mengwang Village Committee of Dayang County, Qiaocheng District, Bozhou City, Anhui Province, PRC	January 1, 2011-December 31, 2015		6,820,000	$	1,041,204	Used for herbal cultivation, totaling 791 acres.
Limenlou Village Committee of Shijiuli County, Qiaocheng Dictrict, Bozhou City, Anhui Province, PRC	January 1, 2011-December 31, 2015		5,280,000	$	806,095	Used for herbal cultivation, totaling 1,021 acres.
Tai'anDabaiyu Community Committee	May 30, 2011 - February 28, 2014		103,680	$	15,951	Used as office, totaling 1,744 square feet; Used for warehouse, totaling 13,175 square feet
Shandong Zibo Pharmaceutical Supply Station	May 31, 2011 - December 31, 2011		61,400	$	9,446	Used as warehouse, totaling 10,656 square feet
Zibo Professional Tech School	May 31, 2011- December 31, 2011		73,820	$	11,357	Used as office and workforce dormitory , totaling 8,352 square feet
Zibo Professional Tech School	May 31, 2011 - December 31, 2011		24,000	$	3,692	Used as warehouse, totaling 2,863 square feet
Shandong Province Changqing district, Masha town People's Government	April 10, 2011- April 9, 2021		40,000	$	6,154	Used as office, totaling 10,764 square feet
Shandong Province Changqing district, Masha town People's Government	April 29,2011 - April 28 2041		1,349,677	$	207,645	Used for TCM cultivation land, totaling 352.9 acres
	June 10, 2011 - June 9 2021		1,710,000	$	263,081	Used for TCM Cultivation land, totaling 330 acres
Bozhou City Qiaocheng District Shibali Town Government	October 10, 2011 - October 9, 2021		6,840,000	$	1,052,322	Used for TCM Cultivation land, totaling 1,318 acres
	January 1, 2012 - December 31, 2021		8,550,000	$	1,315,403	Used for TCM Cultivation land, totaling 1,647 acres
Wan Zhi Li	May 20, 2011 - December 31, 2011		3,244	$	499	Used as office, warehouse and workforce dormitory, totaling 2,153 square feet

5. Intangible assets

8. Concentrations

	Pharmaceutical products distribution		TCM processing and distribution		Gross intangible		Accumulated amortization		Net intangible
Indefinite life intangibles:
Trade name	$	8,747,228	$	-	$	8,747,228	$	-	$	8,747,228
Finite life intangibles:
Trademarks (1)		1,320,723		-		1,320,723		22,367		1,298,356
Customer relationships (2)		2,341,978		-		2,341,978		96,007		2,245,971
Non-compete agreements (3)		1,158,451		-		1,158,451		63,762		1,094,689
Drugstore chain franchise (4)		19,352,055		-		19,352,055		159,772		19,192,283
Software (5)		8,411		-		8,411		1,381		7,030
Other (5)		-		1,359,593		1,359,593		84,553		1,275,040
Total finite life intangibles		24,181,618		1,359,593		25,541,211		427,842		25,113,369
Total intangible assets	$	32,928,846	$	1,359,593	$	34,288,439	$	427,842	$	33,860,597

~~Hainan~~As ~~Lingkang Pharmaceutical Co., Ltd (“Lingkang”) accounted for approximately 26.0%~~ of ~~the~~September ~~Company’s purchases for the six months ended June~~ 30, 2011~~; Lingkang and Bozhou Zhongzheng Herb Pieces Co.~~, ~~Ltd~~intangible ~~(“Zhongzheng”)~~assets ~~accounted~~consisted ~~for approximately 32.6% and 11.6%~~ of the ~~Company’s purchases for the six months ended June 30, 2010, respectively.~~following:

(1)	The useful lives of the trademarks are 9.8 years and are being amortized on a straight-line basis;

(2)	The useful lives of the customer relationships range from 5 to 10 years and are being amortized on an accelerated basis;

(3)	The useful lives of the non-compete agreements are 3 years and are being amortized on a straight-line basis;

(4)	The useful life of the drugstore chain franchise is 20 years and is being amortized on a straight-line basis;

(5)	The useful life of software and other identified intangible assets range from 2 to 4 years and are being amortized on a straight-line basis.

The Company recorded amortization expenses of $416,294 and $426,461 for the three and nine months ended September 30, 2011.

6. Goodwill

As of September 30, 2011, goodwill consisted of the following:

	Pharmaceutical products distribution		TCM processing and distribution		Total
Balance at January 1, 2011	$	-	$	-	$	-
Goodwill acquired, net of purchase price adjustments		24,336,502		2,707,349		27,043,851
Impairment loss recognized during the period		-		-		-
Balance at September 30, 2011	$	24,336,502	$	2,707,349	$	27,043,851

~~Lingkang~~7. ~~accounted~~Short-Term ~~for approximately 25% and 31% of the Company’s outstanding accounts payable as of June 30, 2011 and December 31, 2010.~~Loans

~~There~~Short-term ~~were~~loans no customers who accounted for greater than 10% of the Company’s sales for each of the six months ended June 30, 2011 and 2010. There were no customers that accounted for greater than 10% of outstanding accounts receivable as of ~~June~~September 30, 2011, and December 31, 2010. consist of the following:

9. Acquisitions

Date obtained	Maturity date	Interest			Principal		Payment	Segment	September 30, 2011		December 31, 2010
July 4, 2011	August 13, 2012		5.40	%	$	938,204	Interest payable monthly, principle due at maturity	TCM processing and distribution	$	938,204	$	-
June 1, 2010	May 31, 2011		5.58	%	$	151,704	Interest payable monthly, principle due at maturity	TCM processing and distribution		-		151,704
December 28, 2010	March 27, 2011		5.89	%	$	1,365,335	Interest payable monthly, principle due at maturity	Pharmaceutical products distribution		-		1,365,335
December 30, 2010	December 31, 2011		6.97	%	$	469,102	Interest payable monthly, principle due at maturity	Pharmaceutical products distribution		469,102		455,111
July 4, 2011	May 11, 2012		6.31	%	$	938,204	Interest payable monthly, principle due at maturity	TCM processing and distribution		938,204		-
July 4, 2011	May 12, 2012		8.20	%	$	977,295	Interest payable monthly, principle due at maturity	TCM processing and distribution		977,295		-
July 4, 2011	May 12, 2012		8.20	%	$	273,643	Interest payable monthly, principle due at maturity	TCM processing and distribution		273,643		-
July 4, 2011	May 22, 2012		6.31	%	$	781,836	Interest payable monthly, principle due at maturity	TCM processing and distribution		781,836		-
July 4, 2011	June 8, 2012		6.31	%	$	625,469	Interest payable monthly, principle due at maturity	TCM processing and distribution		625,469		-
					Total				$	5,003,753	$	1,972,150

As previously discussed in Note 1, the Company completed the acquisitions of Tai’an Global and Zibo Global on May 30, 2011 and May 31, 2011, respectively. The pro forma condensed combined financial statements reflect the accounting for the transactions under the acquisition method; as such the purchase prices are allocated to the assets acquired and liabilities assumed based on the Company’s estimate of fair value by utilizing a third-party valuation report, with any excess of the purchase prices acquired over the fair value of the identifiable net assets recorded as goodwill. The Company acquired gross accounts receivable of $490,206 that also represents the fair value.

The following is the purchase price allocation for Tai’an Global and Zibo Global:

	Tai'an Global			Zibo Global			Total
Consideration
Cash	$	1,083,005		$	1,237,720		$	2,320,725
Fair value of total consideration transferred		1,083,005			1,237,720			2,320,725
Acquisition-related costs		-			-			-
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalent		12,477			100,879			113,356
Accounts receivable		102,374			387,832			490,206
Other receivable and current assets		464,145			640,276			1,104,421
Inventories		250,392			783,305			1,033,697
Property, plant and equipment		143,248			51,402			194,650
Software		3,945			4,466			8,411
Customer relationship		139,553			168,533			308,086
Total liabilities		(200,577	)		(1,105,668	)		(1,306,245	)
Total identifiable net assets		915,557			1,031,025			1,946,582
Goodwill		167,448		$	206,695		$	374,143

The following table sets forth the net cash outflow on acquisition:

	Zibo Global		Tai'an Global		Total
Consideration
Cash	$	1,237,720	$	1,083,005	$	2,320,725
Acquisition payable to former shareholders (Note 5)		912,818		727,160		1,639,978
Cash and cash equivalent in subsidiaries acquired		100,879		12,477		113,356
Net cash outflow on acquisition		224,023		343,368		567,391

The fair value of the intangible assets and the estimated useful lives over which they are being amortized on an accelerated basis are:

		Fair Value			Estimated Useful life
Customer relationships		$	308,086		5 years

The Company recorded amortization expenses of $10,212 for the three and six months ended June 30, 2011.

~~The~~On ~~transaction~~June ~~resulted in a purchase price allocation of $374~~1,~~143~~ ~~to goodwill~~2010, ~~representing~~ the ~~financial,~~Company ~~strategic~~entered ~~and~~into ~~operational~~a ~~value~~credit ofagreement ~~the~~with ~~transaction~~Construction toBank ~~the~~of ~~Company.~~China ~~Goodwill~~for isa ~~attributed~~loan toin the ~~premium~~principal ~~that~~amount ~~the~~of ~~Company~~$151,704, ~~was~~which ~~willing~~is tosecured ~~pay~~by toa ~~obtain~~guarantee ~~the~~by ~~value of~~ the ~~business~~Company’s ofshareholders ~~each of Tai'an Global~~ and ~~Zibo Global and~~ the ~~synergies~~property ~~created~~owned ~~with~~by ~~the~~Bozhou ~~integration~~City ofHerb ~~key~~Research ~~components~~Institute, ofvalued aat ~~commercial infrastructure~~$606,815. ~~The~~As ~~total amount~~ of ~~the~~September ~~goodwill~~30, ~~acquired is not deductible for tax purposes. Goodwill of $374~~2011,~~143~~ isthe ~~allocated~~loan tobalance ~~the~~has ~~pharmaceutical~~been ~~products~~paid ~~distribution~~in ~~segment~~full.

~~The~~On ~~following~~December ~~table~~28, ~~sets~~2010, ~~forth~~the ~~revenue~~Company ~~and~~entered ~~earnings~~into ~~for~~a ~~Tai’an~~credit ~~Global~~agreement ~~and~~with ~~Zibo~~Shandong ~~Global~~Qilu ~~included~~Bank for a loan in the ~~Company’s~~principal ~~unaudited~~amount ~~condensed~~of ~~consolidated~~$1,365,335, ~~statements~~which ofis ~~income~~secured ~~and~~by ~~comprehensive~~a ~~income~~guarantee ~~for~~by the ~~six~~Company ~~months~~to ~~ended~~maintain ~~June~~a ~~30,~~bank ~~2011~~deposit balance of $1, ~~and~~517,039 ~~the~~with ~~revenue~~Shandong ~~and~~Qilu ~~earnings~~Bank. ofThe ~~the~~bank ~~combined~~deposit ~~entities~~is ~~had~~presented ~~the~~as ~~acquisitions~~restricted ~~occurred~~cash on ~~either~~the ~~January~~Company’s 1,condensed ~~2011~~consolidated orbalance ~~January~~sheet 1at December 31, 2010:. As of September 30, 2011, the loan balance has been paid in full.

	Revenue (Unaudited)		Earning (Unaudited)
Tai'an Global	USD		USD
Actual from 5/30/2011 to 6/30/2011		363,820		(11,223	)
Supplemental pro forma from 1/1/2011 to 6/30/2011		1,356,200		(20,474	)
Supplemental pro forma from 1/1/2010 to 6/30/2010		871,431		(14,419	)
	Revenue (Unaudited)		Earning (Unaudited)
Zibo Global	USD		USD
Actual from 5/31/2011 to 6/30/2011		1,400,596		(53,104	)
Supplemental pro forma from 1/1/2011 to 6/30/2011		5,664,506		(106,909	)
Supplemental pro forma from 1/1/2010 to 6/30/2010		2,143,110		(28,327	)

On December 30, 2010, the Company entered into a credit agreement with Shandong Qilu Bank for a loan in the principal amount of $469,102, which is secured by a pledge by the Company of its inventory, valued at $938,204. Shandong Qilu Bank has authorized a third party to monitor the pledged inventory.

10On July 4, 2011, as part of the acquisition of Bozhou Xinghe, the Company assumed a credit agreement with Agricultural Development Bank of China for a loan in the principal amount of $1,563,673, which is secured by a guarantee by a former shareholder of Bozhou Xinghe. ~~Segment~~ ~~Reporting~~As of September 30, 2011, the Company had repaid $625,469.

~~The~~On ~~Company~~July ~~uses~~4, ~~the~~2011, ~~management~~as ~~approach~~part ~~model~~of ~~for~~the ~~segment~~acquisition ~~reporting. The~~of ~~management~~Bozhou ~~approach~~Xinghe, ~~model~~the isCompany ~~based~~assumed ona ~~how~~credit ~~management~~agreement ~~organizes~~with ~~segments~~Agricultural ~~within~~Development aBank ~~company~~of China for ~~making~~a ~~operating~~loan ~~decisions~~in ~~and~~the ~~assessing~~principal ~~performance. Reportable~~amount ~~segments~~of ~~are based on products and services~~$938, ~~geography~~204, ~~legal~~which ~~structure,~~is ~~management~~secured ~~structure~~by ora ~~any~~guarantee ~~other~~by a ~~manner~~former inshareholder ~~which~~of ~~management~~Bozhou ~~disaggregates~~Xinghe and a ~~company. Based~~mortgage on ~~this model,~~ the Company ~~has four reportable segments. The Company~~’s ~~principal businesses are pharmaceutical products distribution~~properties, ~~TCM~~valued ~~processing~~at ~~and distribution~~$3, ~~herbal cultivation and sales~~587, ~~and flower tea bags~~253. ~~All sales were sold to customers in the PRC.~~

~~Based~~On onJuly 4, 2011, as part of the ~~various~~acquisition ~~operation~~of ~~activities~~Bozhou Xinghe, the Company’s ~~reportable~~assumed ~~segments~~two credit agreements with Minsheng Bank for loans in the principal amounts of $977,295 and $273,643, respectively, which are assecured ~~follows:~~by a pledge by a former shareholder of Bozhou Xinghe to maintain a bank deposit balance of not more than $250,188 with Minsheng Bank.

¨On ~~Pharmaceutical~~July ~~products~~4, ~~distribution~~2011, –as part of the ~~sale~~acquisition of ~~healthcare~~Bozhou ~~products~~Xinghe, tothe ~~hospitals~~Company ~~and~~assumed ~~pharmacy~~a ~~shops~~credit agreement with Agricultural Development Bank of China for a loan in the principal amount of $781,836, which is secured by a guarantee by two former shareholders of Bozhou Xinghe.

¨On ~~TCM~~July ~~processing~~4, ~~and~~2011, ~~distribution~~as –part ~~rough~~of ~~processing~~the ~~and~~acquisition ~~sale~~of Bozhou Xinghe, the Company assumed a credit agreement with Agricultural Development Bank of ~~TCM~~China ~~product~~for a loan in the principal amount of $625,469, which is secured by a guarantee by two former shareholders of Bozhou Xinghe.

¨Interest ~~Herbal~~expenses ~~cultivation~~were $107,102 and ~~sales~~$7,736 –for the ~~planting~~three months ended September 30, ~~processing~~2011 and ~~selling~~2010, ofrespectively, ~~herbs~~and inwere ~~China~~$126,228 and $20,655 for the nine months ended September 30, 2011 and 2010, respectively.

¨ Flower tea bags – manufacture and sale of flower tea bags.

In April 2011, the Company's management decided to reclassify operations of OEM products from the TCM processing and distribution segment to the pharmaceutical products distribution segment in order to better manage the OEM products sales8. ~~The~~Long-Term ~~three and six months periods ended June 30, 2010 segment reporting for the TCM processing and distribution segment and pharmaceutical products distribution segment have been reclassified accordingly.~~Loans

For the six months ended June 30, 2011 (unaudited)
US $	Pharmaceutical products distribution		TCM processing and distribution		Herbal cultivation and sales		Flower tea bags		Corporate			Total
Revenue, net		72,169,822		10,365,812		4,679,373		275,075	-				87,490,082
Net income - Global Pharm Holdings Group, Inc.		7,306,147		1,314,860		1,299,417		76,759		(778,627	)		9,218,556
Total assets		41,910,549		13,549,858		1,950,706		-		173,378			57,584,491

Long-term loans consisted of the following:

For the six months ended June 30, 2010 (unaudited) (reclassified)
Date obtained	Maturity		Interest				Loan amount			Payment	Segment		September 30, 2011			December 31, 2010
US $	Pharmaceutical products distribution				TCM processing and distribution				Herbal cultivation and sales			Flower tea bags			Corporate			Total
July 4, 2011	July 30, 2014			5.76	%		$	1,563,673		Interest payable monthly, 60% of principle due at July 30, 2013 and 40% of principle due at maturity	TCM processing and distribution		$	1,563,673		$	-
Revenue, net		47,360,171				9,000,270				-			2,899,196		-				59,259,637
							Total						$	1,563,673		$	-
Net income		5,586,817				1,115,455				-			529,936			(1,536,457	)		5,695,751
Total assets		26,852,037				12,502,743				-			-			257,818			39,612,598

For the three months ended June 30, 2011 (unaudited)
US $	Pharmaceutical products distribution		TCM processing and distribution		Herbal cultivation and sales			Flower tea bags		Corporate			Total
Revenue, net		39,738,572		5,647,763		-			-	-				45,386,335
Net income- Global Pharm Holdings Group, Inc.		3,769,281		696,485		(44,000	)		-		(502,159	)		3,919,607

On July 4, 2011, as part of the acquisition of Bozhou Xinghe, the Company assumed a credit agreement with Agricultural Development Bank of China for a loan in the principal amount of $1,563,673, which is secured by a guarantee by a former shareholder of Bozhou Xinghe.

For the three months ended June 30, 2010 (unaudited) (reclassified)
US $	Pharmaceutical products distribution		TCM processing and distribution		Herbal cultivation and sales		Flower tea bags		Corporate			Total
Revenue, net		24,338,686		4,314,919		-		1,877,372	-				30,530,977
Net income		2,893,228		547,607		-		321,864		(1,492,100	)		2,270,599

Interest expenses were $22,638 and nil for the three and nine months ended September 30, 2011 and 2010, respectively.

9.	Taxes Payable

Provision for income taxes consisted of the following:

	For the nine months ended September 30,
	2011			2010
Income tax expenses	$	4,553,842		$	3,609,764
Deferred tax benefit		(85,477	)		-
Total income tax expenses	$	4,468,365		$	3,609,764

Income and other taxes payable consisted of the following:

	September 30, 2011		December 31, 2010
Income tax payable	$	1,803,705	$	1,177,439
Value-added tax payable		1,022,160		445,052
Other taxes payable		133,690		106,008
Total income and other taxes payable	$	2,959,555	$	1,728,499

Deferred income tax liabilities reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of those amounts shown on the condensed consolidated balance sheets are as follows:

	September 30, 2011		December 31, 2010
Deferred tax liabilities:
Intangible assets, net	$	8,144,632	$	-

1110. ~~Subsequent~~ ~~Event~~Related Party Transactions

~~Bozhou~~Parties ~~Xinghe~~are ~~Acquisition~~considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence.

OnAs July 4, 2011, Shandong Global, entered into a merger and acquisition agreement (the “Merger and Acquisition Agreement”), as thereafter amended on July 5, 2011 pursuant to a supplemental agreement (“the Supplemental Agreement”), with Bozhou Xinghe Pharmaceutical Co., Ltd (“Bozhou Xinghe”) and the stockholders of ~~Bozhou~~September ~~Xinghe to purchase the 100% equity interest of Bozhou Xinghe for cash consideration of RMB~~ 30 ~~million (approximately US $4.6 million). Bozhou Xinghe was incorporated on April 16~~, ~~2009 under the laws of the PRC and is a Traditional Chinese Medicine (“TCM”) herb processing manufacturer. On July 5,~~ 2011, the Company ~~obtained~~had ~~the~~receivables ~~new~~from ~~business~~related ~~license~~parties of ~~Bozhou Xinghe and completed the acquisition. After the completion of the acquisition~~$194,708 ~~Bozhou~~for ~~Xinghe became a wholly owned subsidiary of~~ the ~~Company. Under~~advance ~~the~~payment ~~terms~~ of the Merger and Acquisition Agreement, as thereafter amended, the Company is required to pay the former stockholders of Bozhou Xinghe an amount of RMB 20 million (approximately US $3.1 million) within 15 business ~~days after the Company receives the new business license and another RMB 10 million (approximately US $1~~expenses.5 ~~million)~~As ~~within nine months after the date~~ of ~~completion.~~December ~~On August 8~~31, ~~2011~~2010, the Company had ~~paid~~no ~~RMB~~related 10party ~~million (approximately US $1~~receivable.5 million) and will pay another RMB 10 million to the former shareholders of Bozhou Xinghe before August 30, 2011 with the remaining RMB 10 million to be paid before April 5, 2012. The Company will fund the unpaid acquisition cost from working capital.

~~Under~~The ~~the~~amounts ~~terms~~due offrom ~~the~~related ~~Merger~~parties ~~and~~are ~~Acquisition Agreement and the Supplemental Agreement~~unsecured, ~~the~~non-interest ~~Company~~bearing ~~will only acquire the fixed assets, land uses right,~~ and Good Manufacturing Practice (“GMP”) certificates, and will assume the bank loans and the registered capital of Bozhou Xinghe. The former stockholders will be entitled to Bozhou Xinghe’s bank deposits, accounts receivable, ~~prepayments~~on ~~and other current assets, accounts payable, taxes payable and other current liabilities, and intangible assets including customer relationships and sales network~~demand.

~~The~~For ~~following~~the ~~table~~nine ~~sets~~months ~~forth~~ended September 30, 2011, the Company’s ~~best~~had ~~estimate~~related ofparty ~~fair~~sales ~~value~~to ofWeifang ~~the~~Lishengyuan ~~assets~~Pharmaceutical ~~acquired~~Chain ~~and~~Co., ~~liabilities~~Ltd ~~assumed. The~~(“Lishengyuan”), ~~Company~~which is inowned ~~the~~by ~~process of obtaining~~ a ~~third-party~~member ~~valuation~~of ~~for~~ the ~~assets~~management ~~acquired~~of ~~and~~Shandong ~~liabilities~~Huawei. ~~assumed,~~The ~~and~~following ~~will~~table ~~refine~~sets ~~fair~~forth ~~value estimates when~~ the ~~valuation~~sales isto ~~completed~~Lishengyuan ~~using~~for the ~~balances~~nine asmonths ofended ~~the~~September ~~closing date~~30, ~~July~~2011 5,and ~~2011~~2010.

	Bozhou Xinghe
	For the nine months ended September 30,
Consideration
	2011			2010
Cash	$	4,640,371
Revenues, net	$	400,156		$	-
Fair value of assets transferred		4,640,371
Cost of goods sold		398,318			-
Acquisition related costs (appraisal, audit, legal) - estimated		76,566
Gross profit	$	1,838		$	-
Property, plant and equipment		7,835,422
Gross margin		0.46	%		-
Vehicles		54,082
Land use rights		1,173,248
GMP certificates		773,193
Bank loans		(7,115,236	)
Total identifiable net assets		2,720,709
Goodwill	$	1,919,662

The ~~acquisition~~following oftable ~~Bozhou~~sets ~~Xinhe~~forth ~~represents~~the aamounts ~~direct~~due ~~complement~~ to ~~the~~related ~~Company’s~~parties ~~TCM~~as ~~plantation business in the cities~~ of ~~Bozhou~~September ~~and Jinan by the addition of a critical production capacity~~30, so2011 ~~that~~and ~~the~~December ~~Company’s cultivated raw herbs can be processed directly at its own plant. In addition~~31, ~~this facility offers the Company a potential platform to produce TCM pharmaceutical products in the near future~~2010. Such direct-processing capacity with its stringent quality control would serve to further guarantee our product quality, which will reward the Company a premium price in the market. The new plant will also allow the Company to customize some herbal pieces products upon distribution customers' request, therefore, expanding its distributed product portfolio.

The Company will apply acquisition accounting to the Bozhou Xinghe acquired business and its results of operations will be included in the Company’s consolidated results of operations following the respective acquisition date. The contributed businesse of Bozhou Xinghe will be recorded at its fair value.

Related Party	Relationship	Nature	September 30, 2011		December 31, 2010
Yunlu Yin	Director, Chairman, CEO	Business expenses paid personally	$	3,726,393	$	851,005
Shareholders	Shareholders	Operating expenses		2,173,442		-
Weifang Lishengyuan Pharmaceutical Chain Co., Ltd	Owned by the management of the Company’s subsidiary	Short term borrowings		582,775		-
Anhui Qianyi Pharmaceutical Co., Ltd	Minority shareholder	Operating expenses		142,184		-
Officers	CFO and vice presidents	Accrued salary		90,500		31,500
Directors	Independent Directors	Accrued salary		14,038		-
Total			$	6,729,332	$	882,505

~~Due~~The toamounts ~~the~~due ~~recent~~to ~~nature~~related ofparties ~~the~~are ~~Bozhou~~unsecured, ~~Xinghe~~non-interest ~~acquisition~~bearing and ~~limitations~~payable on ~~access~~demand. toThe ~~Bozhou~~increase ~~Xinghe’s~~in ~~information~~related ~~prior~~party topayable ~~the~~is ~~acquisition~~due ~~date,~~to the ~~initial~~increase ~~accounting for the business acquisition is incomplete as~~ of ~~the~~operating ~~date~~expenses ofpaid ~~this~~by ~~report~~Mr. ~~The~~Yunlu ~~Company~~Yin isof ~~unable~~$2,875,388, payables to ~~provide~~shareholders ~~amounts~~of ~~recognized~~$1,639,039 assumed as part of the ~~acquisition~~acquisitions, ~~date~~operating ~~for~~expenses ~~major classes~~ of ~~assets~~$534,403 ~~and~~paid ~~liabilities~~by ~~acquired and resulting from~~ the ~~transaction~~shareholders, ~~including~~and ~~the~~short-term ~~information~~borrowings ~~required~~from ~~for~~related ~~intangible~~parties ~~assets~~of ~~and goodwill~~$582,775. The Company isanticipates inrepaying the ~~process~~remaining balance of ~~obtaining~~$3,726,393 ~~third-party~~due ~~valuation~~to ~~for~~Mr. ~~the~~Yin ~~assets~~in ~~acquired~~the ~~and~~first ~~liabilities~~quarter ~~assumed,~~of ~~and~~2013 ~~will~~from ~~refine~~its ~~fair~~working ~~value~~capital. ~~estimates~~The ~~when~~Company ~~the~~anticipates ~~valuation~~repaying ~~is completed using~~ the ~~balances~~operating asexpenses of ~~the closing date~~$2,315,626 ~~July~~due 5,to ~~2011.~~shareholders ~~The~~and ~~Company~~a ~~also~~minority ~~cannot~~shareholder, ~~provide~~and the ~~supplemental~~accrued ~~pro~~salary ~~forma revenue and earnings~~ of ~~the~~$104,538 ~~combined entity~~ due to ~~the~~directors ~~incomplete~~and ~~initial~~officers ~~accounting~~in ~~for the transaction~~2011. The Company ~~will~~anticipates ~~include~~repaying ~~this~~the ~~information~~short-term inborrowings ~~its~~of ~~Quarterly~~$582,775 ~~Report~~due onto ~~Form~~Lishengyuan ~~10-Q~~in ~~for~~ the ~~three~~first ~~months~~quarter ~~ending~~of ~~September 30, 2011~~2012.

~~Quantum~~11. ~~Acquisition~~Statutory Reserve

OnThe ~~August~~laws 3,and ~~2011,~~regulations ~~the Company entered into a Share Purchase Agreement (the “Acquisition Agreement”) with each~~ of the ~~persons~~PRC ~~set~~require ~~forth~~that inbefore ~~Schedule B-1 thereto (each~~ a ~~“Quantum~~foreign ~~Seller”~~invested ~~and~~enterprise ~~collectively~~can ~~the~~legally ~~“Quantum~~distribute ~~Sellers”). Pursuant to the Acquisition Agreement~~profits, ~~the~~it ~~Sellers~~must ~~agreed~~first tosatisfy ~~sell~~all ~~and~~tax ~~the Company agreed to purchase the aggregate of 50~~liabilities,~~000~~ ~~ordinary~~provide ~~shares~~for ~~(“Sale~~losses ~~Shares”)~~ in ~~Quantum~~previous ~~Magic Integrator Fund Co.~~years, ~~Limited, a company incorporated~~ and ~~existing~~make ~~under the laws of the British Virgin Islands (“Quantum”)~~allocations, ~~representing the entire issued share capital of Quantum. The consideration for the Sale Shares is US $9,000,000, to be paid~~ in ~~full~~proportions bydetermined the Company by issuing the Consideration Shares (as defined under the Acquisition Agreement) to the Quantum Sellers within 90 days after the Closing Date (as defined under the Acquisition Agreement). The number of the Consideration Shares to be issued to the Quantum Sellers shall be equal to US $9,000,000 divided by the fair market value of the Company’s issued and outstanding common stock as at the ~~Closing Date, as determined by a third-party appraiser selected by the Company at its~~ discretion. As of the ~~date~~board of ~~this report~~directors, ~~the Company is in the process of obtaining third-party valuation for its common stock as of such date of execution. Under the Quantum Share Purchase Agreement, 80% of the total shares~~ to ~~be issued will be issued to~~ the ~~original~~statutory ~~stockholders of Quantum within 90 days after the date of the Quantum Share Purchase Agreement and the remaining 20% to be pledged to the Company~~reserve. The ~~pledged~~statutory ~~shares~~reserves ~~shall~~include ~~be transferred to~~ the ~~original~~surplus ~~shareholders~~reserve ~~of Quantum if Shandong Hua Wei Pharmaceutical Co~~fund.~~, Ltd. (“Shandong Hua Wei”) achieves certain revenue targets for 2011.~~

OnThe ~~the~~Company ~~date~~is required to transfer 10% of ~~the~~its ~~Acquisition~~net ~~Agreement~~income, ~~the~~as ~~Company~~determined ~~and~~in ~~the~~accordance ~~Quantum~~with ~~Sellers~~PRC ~~also~~accounting ~~entered~~rules ~~into~~and regulations, to a ~~Share~~statutory ~~Pledge~~surplus ~~Agreement~~reserve ~~pursuant~~fund tountil ~~which~~such ~~the~~reserve ~~Sellers~~balance ~~pledge~~reaches 1050% of the ~~Consideration~~Company's ~~Shares~~PRC subsidiaries registered capital. The transfer to ~~Global~~this ~~Pharm~~reserve must be made before distribution of any dividends to ~~secure~~shareholders. Transfers to the ~~Sellers’~~statutory ~~covenants~~surplus reserve fund were nil for the nine months ended September 30, 2011 and ~~undertakings~~2010. inAs ~~relation~~of toSeptember ~~Quantum’s~~30, ~~financial~~2011, ~~performance~~the Company has fulfilled the reserve requirements, except for the ~~fiscal~~newly ~~year~~formed ~~ending~~and ~~December~~acquired ~~31,~~companies in 2011, asfor ~~set~~which ~~forth~~required statutory reserves amount to $4,688,016. The required statutory reserves will be funded, in accordance with applicable PRC requirements for minimum funding requirements, from future earning of the ~~Acquisition~~applicable ~~Agreement~~subsidiary.

~~Quantum,~~The ~~incorporated~~surplus inreserve ~~the~~fund ~~British~~is ~~Virgin~~non-distributable ~~Islands~~other onthan ~~April~~during ~~19,~~liquidation ~~2010,~~and ~~held~~can ~~the~~be ~~100%~~used ~~equity~~to ~~interest~~fund ofprevious ~~Hong~~years’ ~~Kong~~losses, ~~Celestial~~if ~~Asia~~any, ~~Pharmaceutical~~and ~~Investment~~may ~~Group~~be ~~Limited~~utilized ~~(“Celestial~~for ~~Asia~~business ~~Pharm”). Celestial~~expansion ~~Asia~~or ~~Pharm,~~converted ainto ~~Hong~~share ~~Kong~~capital ~~holding~~by ~~company,~~issuing ~~was~~new ~~incorporated~~shares onto ~~August~~existing ~~24,~~shareholders ~~2009~~in ~~under~~proportion ~~the~~to ~~laws~~their ofshareholding ~~Hong~~or ~~Kong,~~by ~~and~~increasing ~~held~~ the ~~100％~~par ~~equity~~value ~~interest~~ of ~~Shandong~~the ~~Hua~~shares ~~Wei.~~currently ~~Shandong~~held ~~Hua~~by ~~Wei was incorporated on March 18~~them, ~~1998~~provided ~~under~~that the ~~laws~~remaining ofreserve ~~the~~balance ~~PRC~~after ~~and~~such ~~engages~~issue inis ~~the~~not ~~pharmaceutical-related~~less ~~products~~than ~~distribution~~50% ~~business in China. Upon execution~~ of the ~~Quantum~~registered ~~Share~~capital ~~Purchase Agreement, Shandong Hua Wei became an indirectly wholly owned subsidiary~~ of the Company’s PRC subsidiaries.

~~The acquisition of Quantum will expand the Company’s sales coverage in Shandong Province~~12. Commitments

~~The~~Capital following table set forth Quantum’s revenue and earnings included in the Company’s unaudited condensed consolidated statements of income and comprehensive income for the six months ended June 30, 2011, and the revenue and earnings of the combined entity had the acquisition of Quantum occurred on either January 1, 2011 or January 1, 2010. The information presented below is based on the Company’s initial estimates and does not consider amortization expense of intangible assets:Commitments

	Revenue (unaudited)		Earning (unaudited)
Quantum	USD		USD
Actual from 6/1/2011 to 6/30/2011		-		-
Supplemental pro forma from 1/1/2011 to 6/30/2011		25,804,650		6,599
Supplemental pro forma from 1/1/2010 to 6/30/2010		20,321,782		13,849

On April 6, 2011, the Company obtained the business license of Anhui Sino-Green TCM Tech, a joint venture established by Wisdom Fortune together with Qianyi Pharmaceutical, a PRC company, in Bozhou City, Anhui Province. The registered capital of Anhui Sino-Green TCM Tech is $10 million. Wisdom Fortune invested $9.7 million and Qianyi Pharmaceutical invested $0.3 million, which reflect a 97 percent and 3 percent ownership interest in Anhui Sino-Green TCM Tech, respectively. As of September 30, 2011, the Company paid $1.5 million of the registered capital and the remaining $8.2 million is due by April 6, 2013. The Company will fund the remaining registered capital from its working capital.

The Company will apply acquisition accounting to the Quantum acquired businesses and their results of operations will be included in the Company’s consolidated results of operations following the acquisition date. The acquired businesses of Quantum will be recorded at its fair value.

Due to the recent nature of the Quantum acquisition and limitations on access to Quantum’s information prior to such acquisition date, the initial accounting for the business acquisition is incomplete as of the date of this report. The Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired and resulting from the transactions, including the information required for indemnification assets and goodwill since the incomplete initial accounting for the transactions. The Company is in the process of obtaining third-party valuation for the assets acquired and liabilities assumed, and will refine fair value estimates when the valuation is completed using the balances as of the closing date, August 3, 2011.

Pacific Asia Acquisition

On August 1, 2011, the Company entered into a Share Purchase Agreement (the “Acquisition Agreement”) with each of the persons set forth in Schedule B-1 thereto (each a “Pacific Asia Seller” and collectively the “Pacific Asia Sellers”). Pursuant to the Acquisition Agreement, the Pacific Asia Sellers agreed to sell and the Company agreed to purchase the aggregate of 50,000 ordinary shares (“Sale Shares”) in Pacific Asia Pharm Investment Group Co., Limited, a company incorporated and existing under the laws of the British Virgin Islands (“Pacific Asia”), representing the entire issued share capital of Pacific Asia. The consideration for the Sale Shares is US $42,000,000, to be paid in full by Global Pharm by issuing the Consideration Shares (as defined under the Acquisition Agreement) to the Pacific Asia Sellers within 90 days after the Closing Date (as defined under the Acquisition Agreement). The number of the Consideration Shares to be issued to the Pacific Asia Sellers shall be equal to US $42,000,000 divided by the fair market value of the Company’s issued and outstanding common stock as at the Closing Date, as determined by a third-party appraiser selected by the Company at its discretion.

On the date of the Acquisition Agreement, the Company and the Pacific Asia Sellers also entered into a Share Pledge Agreement pursuant to which the Pacific Asia Sellers pledge 10% of the Consideration Shares to Global Pharm to secure the Pacific Asia Sellers’ covenants and undertakings in relation to Pacific Asia’s financial performance for the fiscal year ending December 31, 2011 as set forth in the Acquisition Agreement.

~~Pacific~~Lease Asia, incorporated in the British Virgin Islands on April 8, 2010, held the 100% equity interest of Hong Kong Rich Fortune Chain Drugstores Assets Management Co., Ltd. (“Rich Fortune”). Rich Fortune, a Hong Kong holding company, was incorporated on January 12, 2009 under the laws of Hong Kong, held the 100％ equity interest of Guangzhou Hairui Xiexin Investment Consulting Co., Ltd. (“Hairui Xiexin”). Hairui Xiexin was incorporated on June 3, 2011 under the laws of the PRC.Commitments

~~Guangdong Guo Yao Pharmaceutical Franchises Co. Ltd. (“GDGY”), a pharmaceutical-related products distributor, was incorporated on June 6, 2001 under the laws of the PRC.~~ As of ~~August~~September 130, 2011, ~~GDGY manages a chain of 1,234 drug stores in~~ the ~~Guangdong~~Company ~~Province~~has ~~and manages these drug stores through a target management contract~~ entered into ~~with~~or assumed the ~~manager~~following oflease ~~each~~agreements ~~store,~~subsequent ~~pursuant~~ to ~~which~~December ~~the~~31, ~~managers are the primary beneficiary of each drug store and assume full responsibility for the operating and legal risks of each drug store~~2010. The ~~drug~~following ~~stores~~table ~~shall~~sets ~~purchase~~forth ~~pharmaceutical-related~~the ~~products~~lessor, ~~from GDGY directly at market price; otherwise~~term, ~~the~~payment ~~drug~~and ~~stores~~purpose ~~must pay a franchise fee~~ of athe ~~pre-determined~~leased ~~sum to GDGY.~~property:

Effective as of July 11, 2011, Hairui Xiexin entered into a series of contractual arrangements with GDGY and the shareholders of GDGY, pursuant to which Hairui Xiexin will act as the management company and operation trustee for GDGY, while GDGY conducts the principal operations of the business. The contractual agreements effectively transferred the economic benefits of GDGY’s business to Hairui Xiexin, and Hairui Xiexin assumed effective control and management of GDGY. The contractual agreements include the following:

No.	Lessor	Entity	Term	Rent per Year (US$)		Description
1	Bozhou City Qiaocheng District Shibali Town Government	Anhui Sino-Green	June 10, 2011 - June 9 2021	$	267,388	Used for TCM cultivation land, totaling 330 acres
			October 10, 2011 - October 9, 2021	$	1,069,552	Used for TCM cultivation land, totaling 1,318 acres
			January 1, 2012 - December 31, 2021	$	1,336,940	Used for TCM cultivation land, totaling 1,647 acres
2	General Tobacco Group Co., Ltd	Shandong Global	February 25, 2011 - February 24, 2012	$	131,270	Used as warehouse, totaling 75,347 square feet
3	Guangzhou Juli Stationery Co., Ltd.	GDGY	July 15, 2011 - July 14, 2014	$	312,404	Used as warehouse and office, totaling 98,248 square feet
			July 15, 2014 to July 14, 2015	$	328,024
			July 15, 2015 to July 14, 2016	$	344,425
4	Limenlou Village Committee of Shijiuli County, Qiaocheng Dictrict, Bozhou City, Anhui Province, PRC	Xuelingxian	January 1, 2011-December 31, 2015	$	825,619	Used for herbal cultivation, totaling 1,021 acres
5	Medicine Supply Center Of Zibo City Shandong Province	Zibo Global	May 31, 2011 - December 21, 2011	$	8,381	Used as warehouse, totaling 9,687 square feet
6	Mengwang Village Committee of Dayang County, Qiaocheng District, Bozhou City, Anhui Province, PRC	Xuelingxian	January 1, 2011-December 31, 2015	$	1,066,425	Used for herbal cultivation, totaling 791 acres
7	Office of Civil Air Defense of Weifang City	Shandong Huawei	August 3, 2011 to November 30, 2013	$	109,457	Used to open medicine retail supermarket; totaling 30,019 square feet
8	Shandong Zibo Pharmaceutical Supply Station	Zibo Global	May 31, 2011 - December 31, 2011	$	1,220	Used as warehouse, totaling 10,764 square feet
9	Shandong Province Changqing District, Masha Town People's Government	Shandong Sino-Green	April 21, 2011- April 9, 2021	$	6,255	Used as office, totaling 10,764 square feet
10	Shandong Province Changqing District, Masha Town People's Government	Shandong Sino-Green	April 29,2011 - April 28 2041	$	211,045	Used for TCM cultivation land, totaling 353 acres
11	Shandong Yulin Storage Co., Ltd.	Zibo Global	May 31, 2011 –July 31, 2016	$	71,303	Used as warehouse, totaling 40,364 square feet

12	Tai'an Dabaiyu Community Committee	Tai'an Global	May 30, 2011 - February 28, 2014	$	16,212	Used as office, totaling 1,744 square feet; Used for warehouse, totaling 13,175 square feet;
13	Wan Zhi Li	Anhui Sino-Green	May 20, 2011 - December 31, 2011	$	489	Used as office, warehouse and workforce dormitory, totaling 2,153 square feet
14	Weifang Lishengyuan Pharmaceutical Chain Co., Ltd	Shandong Huawei	August 3, 2011 to June 30, 2012	$	180,604	Used for warehouse, totaling 114,119 square feet
			July 1, 2012 to June 30, 2013	$	206,874
			July 1, 2013 to June 30, 2014	$	217,218
15	Zibo Professional Technical School	Zibo Global	May 31, 2011 - December 31, 2011	$	11,543	Used as office and workforce dormitory, totaling 7,276 square feet
16	Zibo Professional Technical School	Zibo Global	May 31, 2011 - December 31, 2011	$	3,752	Used as warehouse, totaling 2,863 square feet

13.	Concentrations

Hainan Lingkang Pharmaceutical Co., Ltd (“Lingkang”), a pharmaceutical manufacturer which mainly supplies prescription injections to Shandong Global, accounted for approximately 22.9% and 27.0% of the Company’s purchases for the nine months ended September 30, 2011 and 2010, respectively.

Lingkang accounted for approximately 16.3% and 31.0% of the Company’s outstanding accounts payable as of September 30, 2011 and December 31, 2010, respectively.

14.	Convertible Bonds Payable

On September 19, 2011, the Company entered into a subscription agreement (the “Subscription Agreement”) with Mr. Yunlu Yin and Blazer Delight Limited, an investment company (the “Bondholder”), pursuant to which the Company will issue redeemable convertible bonds (the “Bonds”) in the aggregate principal amount of $15,000,000. In connection with the completion of the transactions contemplated by the Subscription Agreement, the Company issued Bonds in the aggregate principal amount of $10,000,000 and $5,000,000 and also entered into several other agreements on September 21, 2011 and October 20, 2011, respectively, including the Bond Instruments, the Investor Rights Deed, and the Assignment Agreement.

The proceeds from the issuance of these Bonds are for the expansion of the Company’s distribution network, the acquisitions of pharmaceutical companies in China and general working capital purposes. The Convertible Bonds do not bear any interest and they mature on the second anniversary from the date of issuance (the “Maturity Date”).

The holder of the Bonds may elect at any time on or prior to the Maturity Date to convert all or part of the outstanding principal amount of the Bonds. At such option of the holder or in the event of a mandatory conversion upon the occurrence of a Liquidity Event (as defined in the Subscription Agreement), the Bonds are convertible into common stock of the Company at a price of $5.00 per share, which conversion price is subject to weighted average and stock-based anti-dilution protection.

The Company is required to redeem the Bonds in whole in favor of the holder at a redemption amount which is equal to the sum of (i) the whole principal amount of all of the Bonds and (ii) a premium representing a 25% IRR (as defined in the Investor Rights Deed) per annum from the date of issue of the Bonds up to the time of receipt by all of the holders of the Bonds of such premium payment, calculated based on the aggregate principal amount of the Bonds originally issued, in the event that a QIPO (as defined in the Bond Instrument) has not been completed by the date falling nine months from the date of the Bond Instrument. Any amount of the Bonds which remain outstanding on the Maturity Date shall be redeemed thereon at its then outstanding principal amount. Furthermore, upon occurrence of certain events of default such as the Company’s dissolution, bankruptcy, default in repayment of the Bonds, default in performance of any obligation or the Company’s major shareholder ceases to serve as Chairman or CEO of the Company, the Bonds are immediately due and repayable at the principal amount plus interest at the rate of 3% per annum, compounded semi-annually.

The Company’s functional currency is different from the denomination of the Bonds and the Company’s contingent put option provides the Bondholders a substantial premium of return when a QIPO is not completed within nine months. The Company accounted for the conversion feature and contingent put option (together, “Embedded Derivatives”) as a freestanding instrument included in derivative liabilities in the condensed consolidated balance sheets.

Bondholder’s Call Option

Concurrent with the issuance of the Bonds on September 21, 2011, the Company’s major shareholder, Mr. Yunlu Yin, granted the Bondholder the option to acquire 333,333 shares from his personal shareholding in the Company at an aggregate nominal consideration of $1 if the Company’s audited consolidated net income for the year ending December 31, 2011 is less than 90% of the target net income of $26,900,000. Alternatively, the Company’s major shareholder may elect to pay an amount equal to the Bondholder’s call option share price based on the pre-determined formula. The Bondholder’s call option can only be exercised in whole and not in part. The option is exercisable within 90 days following the publication of the Company’s audited consolidated financial statements for the year ending December 31, 2011.

Post-QIPO IRR Payment

As part of the arrangement, the Company’s major shareholder also guaranteed the Company’s share price performance post-QIPO. The major shareholder has committed that, in the event that the holders of the Bonds dispose of some or all of its conversion shares in one or more transactions following the completion of a QIPO, but on or prior to the 90th day immediately following the Free to Trade Date, and receives an aggregate consideration for such disposal that is less than the Target IRR Price (as defined in the Investor Rights Deed) in respect of that part of the principal amount of the Bonds that was converted into the conversion shares that are the subject of such disposal, to pay to such holder the difference by which the consideration it received falls short of the Target IRR Price. The Company’s major shareholder may also elect to pay the shortfall amount in the form of shares for nominal consideration of $1. The number of shares is determined by dividing the shortfall amount by the average of the closing prices for the ordinary shares for the five trading days immediately prior to the request by the holders of the Bonds.

The Company’s functional currency is different from the denomination of the Company’s ordinary shares and the denomination of the payment. In addition the embedded conversion option that is embedded in the Company’s Convertible Bonds Payable does not meet certain anti-dilution protections that are based on input to the fair value of a fixed-for-fixed option. Therefore, in accordance with ASC 815, Derivatives and Hedging, the Company accounted for the Bondholder’s Call Option, Post-QIPO IRR Payment and the anti-dilution protections (together, “Freestanding Derivatives”) as a freestanding instrument included in derivative liabilities in the consolidated balance sheets, to be measured at fair value at each reporting period, with changes reflected in earnings, until the Bonds are settled.

The Bonds are recorded at a discount equal to the combined value of the bifurcated Embedded Derivatives and Freestanding Derivatives at the transaction date and are accreted to the redemption value of the Bonds over the life of the Bonds. The Embedded Derivatives and Freestanding Derivatives are recorded at fair value at each reporting date with changes in fair value reflected in earnings. The fair value of the Embedded Derivatives for the quarter ended September 30, 2011 has not changed since September 21, 2011.

The following table shows the allocation of the fair value of the debt feature, embedded derivatives and the Bonds as a whole:

	Convertible Notes Payable
Value allocated to debt	$	4,436,318
Compound Embedded Derivative		5,563,682
Face value of Convertible Notes payable		10,000,000
Unamortized discount		5,563,682
Unamortized value as of September 30, 2011	$	4,436,318

The debt discount of $5,563,682 will be amortized over two years using the effective interest rate method.

15.	Derivative Liabilities

The Company’s derivative financial instruments (liabilities) consisted of an embedded derivative that originated in connection with its Convertible Bonds Payable (as described in Note 14), and contingent consideration in connection with a business combination (as described in Note 17). The derivative liabilities are carried at fair value.

The following table summarizes the fair value of derivative liabilities as of September 30, 2011:

	September 30, 2011
Financial Instrument
Derivative liabilities	$	5,563,682
Contingent consideration		5,765,708
Total	$	11,329,390

Changes in the fair value of derivative liabilities are recorded in gain (loss) on change in fair value of derivative in the income statement. The following tables summarize the changes in Level 3 items measured at fair value on a recurring basis on the unaudited condensed consolidated balance sheet for the period ended September 30, 2011.

	Derivative		Contingent
	Liability		Consideration
Beginning at July 1, 2011	$	-	$	-
Transfers in		-		-
Issuance		5,563,682		5,100,000
Realized/unrealized (gains)/losses		-		665,708
Transfer out		-		-
Balance at September 30, 2011	$	5,563,682	$	5,765,708

Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of the Company’s common stock, which has a high estimated volatility. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s income will reflect the volatility in these estimate and assumption changes.

The following table sets forth the range of inputs for each significant assumption and the equivalent, or averages, of each significant assumption as of September 30, 2011:

	Equivalent
September 30, 2011 Assumptions:
Volatility		47.5	%
Market adjusted interest rates		12.9	%
Credit risk adjusted rates		12.4	%
Implied expected life (years)		2.6
Risk free rate		1.2	%

The Company has adopted the Binomial model as the principle methodology to calculate the fair values of the derivative liabilities. The Binomial model requires the use of inputs that range across all levels in the fair value hierarchy. As a result, the technique is a Level 3 valuation technique in its entirety. The calculations of fair value utilized the Company’s estimated fair value on the calculation dates. The contractual conversion prices were adjusted to give effect to the value associated with the QIPO scenario. Expected volatility for each interval in the Binomial model analysis process was established based upon the Company’s historical volatility for historical periods consistent with the term of each interval in the calculation. Market adjusted interest rates give effect to expected trends or changes in market interest rates by reference to historical trends in LIBOR. Credit risk adjusted rates, or yields, were developed using bond curves, risk free rates, market and industry adjustment factors for companies with similar credit standings as the Company’s.

The Company’s acquisition-related contingent consideration liability was incurred with the acquisitions of Pacific Asia and Quantum, see Note 17. The fair value of the acquisition-related contingent consideration liability was based on a probability-weighted approach derived from management’s own estimates of net revenue targets with changes recognized in the Condensed Consolidated Statement of Operations.

16.	Debt Issue Costs

The Company incurred total placement fees of $300,000 in connection with its private placement of the Bonds (see Note 14) that occurred on September 21, 2011. The placement fees are being amortized on a straight-line basis, which approximate to the effective interest method, over the two-year expected life of the Bonds, starting on the date of closing, September 21, 2011. The debt issuance cost were paid subsequent to September, 30, 2011.

	For the nine months ended
	September 30, 2011
	2011		2010
Beginning balance	$	300,000	$	-
Accumulated amortization		12,500		-
Ending balance	$	287,500	$	-

17.	Acquisitions

Tai’an and Zibo acquisitions

On May 30, 2011 and May 31, 2011, the Company acquired the 100% equity interest of Tai’an Global and Zibo Global through its subsidiary, Shandong Global, for cash consideration of $1.1 million and $1.2 million, respectively.

Bozhou Xinghe acquisition

On July 4, 2011, the Company acquired the 100% equity interest of Bozhou Xinghe through its subsidiary, Shandong Global, for cash consideration of $4.7 million. Under the terms of the Merger and Acquisition Agreement and the Supplemental Agreement entered into between the parties, the Company acquired the fixed assets, land use right, Good Manufacturing Practice (“GMP”) certificates, and assumed the bank loans and the registered capital of Bozhou Xinghe. The former stockholders were entitled to Bozhou Xinghe’s bank deposits, accounts receivable, prepayments, other current assets, accounts payable, taxes payable and other current liabilities, and intangible assets including customer relationships and sales network.

Pacific Asia acquisition

On August 1, 2011 (the “Pacific Asia Acquisition Date”), the Company acquired the 100% equity interest of Pacific Asia Pharm Investment Group Co., Limited (“Pacific Asia”) for $42,000,000, paid in full by the Company’s newly issued common stock. The fair value at the Pacific Asia Acquisition Date based on the Company’s estimate of fair value by utilizing a third-party valuation report was $4.52 per share and the Company issued 9,292,035 shares of its common stock (the “Pacific Asia Consideration Shares”) to the former shareholders of Pacific Asia (the “Pacific Asia Sellers”) as payment in full of the consideration.

On the Pacific Asia Acquisition Date, the Company and the Pacific Asia Sellers also entered into a Share Pledge Agreement pursuant to which the Pacific Asia Sellers pledge 10% of the Pacific Asia Consideration Shares (“Pacific Asia Pledged Shares”) to the Company to secure the Pacific Asia Sellers’ covenants and undertakings in relation to Pacific Asia’s financial performance for the fiscal year ending December 31, 2011 as set forth in the Share Purchase Agreement entered into between the Company and Pacific Asia (the “Pacific Asia Acquisition Agreement”). The Company will release the Pacific Asia Pledged Shares to the Pacific Asia Sellers subjects to the following terms:

all of the Pacific Asia Pledged Shares will be released by the Company, if the consolidated net revenue of Pacific Asia for the year ending December 31, 2011, according to Pacific Asia’s financial statements for the fiscal year 2011 is no less than $46.2 million;

ii.

50% of the Pacific Asia Pledged Shares will be released by the Company, if the consolidated net revenue of Pacific Asia for the year ending December 31, 2011, according to Pacific Asia’s financial statements for the fiscal year 2011 is below $46.2 million but no less than $43.1 million; or

iii.

none of the Pacific Asia Pledged Shares will be released by the Company, if the consolidated net revenue of Pacific Asia for the year ending December 31, 2011, according to Pacific Asia’s financial statements for the fiscal year 2011 is below $43.1 million.

Under the terms of the Share Pledge Agreement, 929,204 shares of consideration transferred to the sellers is contingent upon Pacific Asia meeting certain revenue targets as described above. As a result the settlement amount of the contingent consideration is not considered to be indexed to the Company’s common stock because the settlement provisions are affected by the amount of revenue of Pacific Asia. The Company recorded an initial liability of $4,200,000 or $4.52 per share related to the 929,204 contingent shares which was the fair value on the date of acquisition. In accordance with ASC 805-10-30, Contingent Consideration, the Company remeasures the contingent consideration at each reporting date until the contingency is resolved with changes in the fair value reflected in earnings in the condensed consolidated statement of operations. As of September 30, 2011 the Company has recognized $548,230 in expense related to the increase in the fair value of the Company’s common stock from $4.52 to $5.11 as of September 30, 2011.

Pacific Asia, incorporated in the British Virgin Islands on April 8, 2010, held the 100% equity interest of Hong Kong Rich Fortune Chain Drugstores Assets Management Co., Ltd. (“Rich Fortune”). Rich Fortune, a Hong Kong holding company incorporated on January 12, 2009 under the laws of Hong Kong, held the 100％equity interest of Guangzhou Hairui Xiexin Investment Consulting Co., Ltd. (“Hairui Xiexin”) Hairui Xiexin was incorporated on June 3, 2011 under the laws of the People’s Republic of China (the “PRC”).

GDGY, a pharmaceutical-related products distributor, was incorporated on June 6, 2001 under the laws of the PRC. As of September 30, 2011, GDGY manages a chain of over one thousand drugstores in Guangdong Province, which are classified into direct stores and franchise stores. Unlike direct stores, franchise stores are independently owned, but GDGY is contractually responsible for providing management and training services as well as the supply of products to such stores. GDGY enters into a franchise management contract with the manager of each such store, pursuant to which the managers assume full responsibility for the operating and legal risks of the store. The franchise stores are required to purchase their pharmaceutical-related product inventory from GDGY directly at market price; otherwise, they must pay a pre-determined fee to GDGY.

On July 11, 2011, Hairui Xiexin entered into a series of contractual arrangements with GDGY and the shareholders of GDGY, pursuant to which Hairui Xiexin will act as the management company and operation trustee for GDGY, while GDGY conducts the principal operations of the business. The contractual agreements effectively transferred all the economic benefits of GDGY’s business to Hairui Xiexin, and Hairui Xiexin assumed effective control and management of GDGY. The contractual agreements include the following:

(i)	Entrusted Management Agreement

The ~~Entrust~~Entrusted Management Agreement, entered into by and between Hairui Xiexin, ~~and~~ GDGY, and the shareholders of GDGY, provides that Hairui Xiexin shall provide exclusive technical, business and management consulting services to GDGY. GDGY shall timely pay the service fees to Hairui Xiexin in the manner and at the time designated by Hairui Xiexin.

(ii)	Proxy Agreement

The Proxy Agreement, entered into by and between Hairui Xiexin, GDGY and the shareholders of GDGY, provides that the GDGY shareholders shall irrevocably ~~entrust~~appoint a designee of Hairui Xiexin with such shareholders’ voting rights and the right to represent such shareholders to exercise such shareholders’ rights at any shareholders’ meeting of GDGY or with respect to any shareholder action to be taken in accordance with the applicable laws and GDGY’s articles of association. The terms of the ~~agreement~~Proxy Agreement are binding on the parties for as long as ~~the~~ GDGY’s shareholders continue to hold any equity interest in GDGY. ~~Any~~A GDGY shareholder will cease to be a party to the ~~agreement~~Proxy Agreement once itsuch shareholder transfers its equity interests with the prior approval of Hairui Xiexin.

(iii)

Exclusive Option Agreement

The Exclusive Option Agreement, entered into by and between Hairui Xiexin, GDGY and the shareholders of GDGY, grants Hairui Xiexin an irrevocable exclusive purchase option to purchase all or part of the shares of GDGY currently owned by the shareholders of GDGY at the lowest price which is permitted under the laws of the PRC. Without Hairui Xiexin’s prior consent, GDGY shall not distribute any dividend to its shareholders. With Hairui Xiexin’s consent, GDGY ~~could~~would be permitted to distribute a dividend to its shareholders and Hairui Xiexin shall be entitled to receive all the dividends or proceeds distributed.

1926

(iv)	Share Pledge Agreement

The Share Pledge Agreement entered into by and between Hairui Xiexin, GDGY, and the shareholders of GDGY, provides that the shareholders of GDGY shall pledge all of their equity interests in GDGY to Hairui Xiexin as security against their obligations under the other management agreements described in this ~~section~~Note 17 under “Acquisitions.” Under the terms of the Share Pledge Agreement, the shareholders of GDGY shall not transfer any of the pledged shares without the permission of Hairui Xiexin and Hairui Xiexin shall be entitled to receive all proceeds (if any) resulting from the pledged shares, including but not limited to any bonus, dividend and any other returns on the pledged equity.

(v)	Management Fee Payment Agreement

The Management Fee Payment Agreement, entered into by and between Hairui Xiexin, GDGY and the shareholders of GDGY, provides that the shareholders of GDGY shall pay the management fees to Hairui Xiexin in accordance with the Proxy Agreement and the Exclusive Option Agreement. The amount of the management fee shall be equal to the amount Hairui Xiexin is to pay to GDGY or the shareholders of GDGY in the event that Hairui Xiexin exercises the exclusive option pursuant to the Exclusive Option Agreement.

As a result of the Pacific Asia ~~Share~~Acquisition ~~Exchange~~ Agreement and the above contractual agreements, Pacific Asia, Rich Fortune and GDGY became directly and indirectly controlled companies by the Company, and GDGY continued to function as the Company’s operating entity.

~~With~~Quantum ~~the~~ acquisition of Pacific Asia, the Company will have opportunity to extend its integrated value chain into the pharmaceutical retailing sector. The acquisition will also enhance the Company’s goods purchase power and increase the sales volume of high profit TCM products. The acquisition of Pacific Asia will increase the value for the Company’s distribution business segment and offers extensive retail channel for its quality TCM herb products obtained directly from its TCM business entities in Bozhou City.

~~The~~On ~~Company~~August ~~will~~3, ~~apply~~2011 ~~acquisition~~(the ~~accounting~~“Quantum toAcquisition Date”), the ~~Pacific~~Company ~~Asia~~ acquired ~~businesses~~the ~~and~~100% ~~their~~equity ~~results~~interest of ~~operations~~Quantum ~~will~~Magic beIntegrator ~~included~~Capital Co., Limited (“Quantum”) for $9,000,000, paid in full by the Company’s ~~consolidated~~newly ~~results~~issued ofcommon ~~operations~~stock. ~~following~~The fair value at the ~~acquisition~~Quantum ~~date~~Acquisition Date based on the Company’s estimate of fair value by utilizing a third-party valuation report was $4.52 ~~The~~per ~~acquired~~share ~~business~~and the Company issued 1,991,150 shares of ~~Pacific~~its ~~Asia~~common ~~will~~stock be(the ~~recorded~~“Quantum atConsideration ~~fair~~Shares”) ~~value~~to the former shareholders of Quantum (the “Quantum Sellers”) as payment in full of the consideration.

~~The~~Quantum, ~~following~~incorporated ~~table~~in ~~sets~~the ~~forth~~British ~~Pacific~~Virgin ~~Asia’s~~Islands ~~revenue~~on ~~and~~April ~~earnings~~19, ~~included~~2010, inheld the ~~Company’s~~100% ~~unaudited~~equity ~~condensed~~interest ~~consolidated~~of ~~statements~~Hong ofKong ~~income~~Celestial ~~and~~Asia ~~comprehensive~~Pharmaceutical ~~income~~Investment ~~for~~Group ~~the~~Limited ~~six~~(“Celestial ~~months~~Asia ~~ended~~Pharm”). ~~June~~Celestial 30Asia Pharm, ~~2011~~a Hong Kong holding company, ~~and~~was ~~the~~incorporated ~~revenue~~on ~~and~~August ~~earnings~~24, of2009 under the ~~combined~~laws ~~entity~~of ~~had~~Hong Kong, and held the ~~acquisition~~100％ equity interest of ~~Pacific~~Shandong ~~Asia~~Huawei. ~~occurred~~Shandong onHuawei ~~either~~was ~~January~~incorporated 1on March 18, ~~2011~~1998 orunder ~~January~~the 1,laws ~~2010.~~of ~~The~~the ~~information~~PRC ~~presented~~and ~~below~~engages isin ~~based~~the onpharmaceutical-related products distribution business in China. Upon the ~~Company’s~~completion ~~initial~~of ~~estimates~~the ~~and~~acquisition, ~~does~~Shandong ~~not~~Huawei ~~take~~became ~~into~~an ~~consideration~~indirectly ~~amortization~~wholly ~~expense~~owned subsidiary of ~~intangible~~the ~~assets:~~Company.

20On the Quantum Acquisition Date, the Company and the Quantum Sellers also entered into a Share Pledge Agreement pursuant to which the Quantum Sellers pledge 10% of the Quantum Consideration Shares (“Quantum Pledged Shares”) to the Company to secure the Quantum Sellers’ covenants and undertakings in relation to Quantum’s financial performance for the fiscal year ending December 31, 2011 as set forth in the Share Purchase Agreement entered into between the Company and Quantum. The Company will release the Quantum Pledged Shares to the Quantum Sellers subject to the following terms:

	Revenue (unaudited)		Earning (unaudited)
Pacific Asia	USD		USD
Actual from 6/1/2011 to 6/30/2011		-		-
Supplemental pro forma from 1/1/2011 to 6/30/2011		26,092,357		2,978,716
Supplemental pro forma from 1/1/2010 to 6/30/2010		22,295,462		2,496,814

~~Due~~i. toall ~~the recent nature~~ of the ~~acquisition~~Quantum ofPledged ~~Pacific~~Shares ~~Asia~~will ~~and~~be ~~limitations~~released onby ~~access to Pacific Asia information prior to~~ the ~~acquisition date~~Company, ~~the~~if ~~initial accounting for~~ the ~~business~~consolidated ~~acquisition~~net isrevenue ~~incomplete as~~ of ~~the~~Quantum ~~date~~for ~~of this report. The Company is unable to provide amounts recognized as of~~ the ~~acquisition~~year ~~date~~ending ~~for~~December ~~major~~31, ~~classes of assets and liabilities acquired and resulting from the transaction~~2011, ~~including~~according ~~the~~to ~~information~~Quantum’s ~~required~~financial ~~for~~statements ~~indemnification assets and goodwill since the incomplete initial accounting~~ for the ~~transaction.~~fiscal ~~The~~year ~~Company~~2011 is inno ~~the~~less ~~process~~than of obtaining third-party valuation for the assets acquired and liabilities assumed, and will refine fair value estimates when the valuation is completed using the balances as of the closing date, August 1, 2011$42.3 million;

21ii. 50% of the Quantum Pledged Shares will be released by the Company, if the consolidated net revenue of Quantum for the year ending December 31, 2011, according to Quantum’s financial statements for the fiscal year 2011 is below $42.3 million but no less than $38.5 million; or

iii.

none of the Quantum Pledged Shares will be released by the Company, if the consolidated net revenue of Quantum for the year ending December 31, 2011, according to Quantum’s financial statements for the fiscal year 2011 is below $38.5 million.

Under the terms of the Share Pledge Agreement, 199,115 shares of consideration transferred to the sellers is contingent upon Quantum meeting certain revenue targets as described above. As a result the settlement amount of the contingent consideration is not considered to be indexed to the Company’s common stock because the settlement provisions are affected by the amount of revenue of Quantum. The Company recorded an initial liability of $900,000 or $4.52 per share related to the 199,115 contingent shares which was the fair value on the date of acquisition. In accordance with ASC 805-10-30, Contingent Consideration, the Company remeasures the contingent consideration at each reporting date until the contingency is resolved with changes in the fair value reflected in earnings in the condensed consolidated statement of operations. As of September 30, 2011 the Company has recognized $117,478 in expense related to the increase in the fair value of the Company’s common stock from $4.52 to $5.11 as of September 30, 2011.

The unaudited condensed consolidated financial statements reflect the accounting for the transactions under the acquisition method; as such the purchase prices are allocated to the assets acquired and liabilities assumed based on the Company’s estimate of fair value by utilizing a third-party valuation report, with any excess of the purchase prices acquired over the fair value of the identifiable net assets recorded as goodwill. Upon the acquisitions, the Company acquired gross accounts receivable amounting to $6,394,518, which also represented the fair value of the accounts receivable.

The following is the purchase price allocation, at estimated fair value, for Tai’an Global, Zibo Global, Bozhou Xinghe, Quantum, and Pacific Asia, subject to adjustment based on final appraisal reports when reviewed:

	Tai'an Global			Zibo Global			Bozhou Xinghe			Pacific Asia			Quantum			Total
	US $			US $			US $			US $			US $			US $
Consideration
Cash		1,083,005			1,237,720			4,640,371			-			-			6,961,096
Common stock		-			-			-			37,800,000			8,100,000			45,900,000
Contingent consideration		-			-			-			4,200,000			900,000			5,100,000
Fair value of total consideration transferred		1,083,005			1,237,720			4,640,371			42,000,000			9,000,000			57,961,096
Identifiable intangible assets
Trademark and trade names (1)		-			-			-			8,747,228			1,320,723			10,067,951
Customer relationships (2)		139,553			168,533			-			-			2,033,892			2,341,978
Non-compete agreements (3)		-			-			-			723,990			434,461			1,158,451
Drugstore chain franchise (4)		-			-			-			19,352,055			-			19,352,055
Other (5)		-			-			1,359,593			-			-			1,359,593
Total identifiable intangible assets acquired		139,553			168,533			1,359,593			28,823,273			3,789,076			34,280,028
Cash and cash equivalent		12,477			100,879			-			3,514,159			2,778,276			6,405,791
Accounts receivable		102,374			387,832			-			1,069,465			4,834,847			6,394,518
Other receivable and current assets		464,145			640,276			-			77,996			2,073,751			3,256,168
Inventories		250,392			783,305			-			843,993			3,871,816			5,749,506
Property, plant and equipment		143,248			51,402			7,688,665			21,390			198,370			8,103,075
Software		3,945			4,466			-			-			-			8,411
Total liabilities (6)		(235,465	)		(1,147,801	)		(7,115,236	)		(9,775,139	)		(15,006,611	)		(33,280,252	)
Total identifiable net assets acquired		880,669			988,892			1,933,022			24,575,137			2,539,525			30,917,245
Goodwill		202,336			248,828			2,707,349			17,424,863			6,460,475			27,043,851

(1)	The useful lives of the trademarks are 9.8 years and are being amortized on a straight-line basis;

(2)	The useful lives of the customer relationships range from 5 to 10 years and are being amortized on an accelerated basis;

(3)	The useful lives of the non-compete agreements are 3 years and are being amortized on a straight-line basis;

(4)	The useful life of the drugstore chain franchise is 20 years and is being amortized on a straight-line basis;

(5)	The useful life of software and other identified intangible assets range from 2 to 4 years and are being amortized on a straight-line basis.

(6)	Total liabilities include $8,230,109 in temporary deferred tax liabilities as a result of the acquisitions.

The transaction resulted in a purchase price allocation of $27,043,851 to goodwill, representing the financial, strategic and operational value of the transaction to the Company. Goodwill is attributed to the premium that the Company paid to obtain the value of the business of each of Tai’an Global, Zibo Global, Bozhou Xinghe, Pacific Asia, and Quantum and the synergies created with the integration of key components of a commercial infrastructure. The total amount of the goodwill acquired is not deductible for tax purposes. Goodwill of $24,336,502 and $2,707,349 are allocated to the pharmaceutical products distribution segment and TCM processing and distribution segment, respectively.

The following table sets forth revenue and earnings for Bozhou Xinghe, Pacific Asia, Quantum, Tai’an Global,and Zibo Global, included in the Company’s unaudited condensed consolidated statements of income and comprehensive income for the nine months ended September 30, 2011, and the pro forma revenue and earnings of the combined entities had the acquisitions occurred on either January 1, 2011 or January 1, 2010:

Revenue US $	Global Pharm		Zibo Global		Tai'an Global		Bozhou Xinghe		Pacific Asia		Quantum		Total
Actual from 7/1/2011 to 9/30/2011		42,140,341		5,032,609		1,102,579		2,567,019		6,841,517		11,315,028		68,999,093
Supplemental pro forma from 1/1/2011 to 9/30/2011		127,822,948		10,845,925		2,494,550		9,663,770		37,035,027		40,715,800		228,578,020
Supplemental pro forma from 1/1/2010 to 9/30/2010		90,176,505		3,771,241		1,178,572		-		33,598,830		34,040,134		162,765,282

Earning US $	Global Pharm		Zibo Global			Tai'an Global			Bozhou Xinghe		Pacific Asia		Quantum			Total
Actual from 7/1/2011 to 9/30/2011		2,775,863		34,034			8,508			230,571		692,843		(5,938	)		3,735,881
Supplemental pro forma from 1/1/2011 to 9/30/2011		12,146,689		(59,954	)		1,553			1,614,922		4,021,890		32,404			17,757,504
Supplemental pro forma from 1/1/2010 to 9/30/2010		5,708,092		10,667			(853	)		-		3,641,333		(419,683	)		8,939,556

18.	Segment Reporting

The Company uses the management approach model for segment reporting. The management approach model is based on how management organizes segments within a company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure or any other manner in which management disaggregates a company. Based on this model, the Company has three reportable segments. The Company’s principal businesses are pharmaceutical products distribution, TCM processing and distribution, and herbal cultivation and sales. All sales were sold to customers in the PRC.

Based on the various operation activities, the Company’s reportable segments are as follows:

	Pharmaceutical products distribution – the sale of pharmaceutical and healthcare products to hospitals and pharmacy shops.

	TCM processing and distribution – rough processing and sale of TCM products.

	Herbal cultivation and sales – the planting, processing and selling of herbs in China.

In April 2011, the Company’s management decided to reclassify operations of Original Equipment Manufacturer, or OEM, products from the TCM processing and distribution segment to the pharmaceutical products distribution segment in order to better manage the OEM products sales. The three and nine months ended September 30, 2010 segment reporting for the TCM processing and distribution segment and pharmaceutical products distribution segment have been reclassified accordingly.

In September 2011, the Company’s management decided to restructure the flower tea bag segment and relocate the flower tea bag operations to Bozhou Xinghe. The Company’s management also decided to combine the flower tea bag segment with the TCM processing and distribution segment since the new facility of Bozhou Xinghe is suitable for processing flower tea bags and both segments are similar in operations and management. The three and nine months ended September 30, 2010 segment reporting for the TCM processing and distribution segment has been reclassified accordingly.

For the three months ended September 30, 2011 (unaudited)

All amounts in US $

	Pharmaceutical products distribution		TCM processing and distribution		Herbal cultivation and sales		Corporate			Total
Revenue, net		62,651,819		5,564,765		782,509		-			68,999,093
Net income less minority interests		4,571,886		438,148		424,751		(1,698,904	)		3,735,881
Total assets		124,126,213		22,500,151		6,145,643		8,462,509			161,234,516

For the three months ended September 30, 2010 (unaudited)

All amounts in US $

	Pharmaceutical products distribution		TCM processing and distribution		Herbal cultivation and sales		Corporate			Total
Revenue, net		24,810,775		4,465,935		1,341,110		-			30,617,820
Net income less minority interests		3,034,340		482,486		419,097		(4,008,299	)		(72,376	)
Total assets		31,189,024		6,104,341		11,654,901		2,639			48,950,905

For the nine months ended September 30, 2011 (unaudited)

All amounts in US $

	Pharmaceutical products distribution		TCM processing and distribution		Herbal cultivation and sales		Corporate			Total
Revenue, net		134,481,832		16,238,510		5,447,635		-			156,167,977
Net income less minority interests		11,853,480		1,837,053		1,705,852		(2,497,777	)		12,898,608
Total assets		124,126,213		22,500,151		6,145,643		8,462,509			161,234,516

For the nine months ended September 30, 2010 (unaudited)

All amounts in US $

	Pharmaceutical products distribution		TCM processing and distribution		Herbal cultivation and sales		Corporate			Total
Revenue, net		68,183,762		20,646,774		1,345,969		-			90,176,505
Net income less minority interests		8,131,687		2,726,304		420,615		(5,570,514	)		5,708,092
Total assets		31,189,024		6,104,341		11,654,901		2,639			48,950,905

19.	Subsequent Event

On October 20, 2011, the Company issued an additional Bond in the aggregate principal amount of $5,000,000 to Blazer Delight Limited, under the terms of the Subscription Agreement and the relevant Bond Instrument as provided in Note 14.

Qingdao Likang Acquisition

On September 26, 2011, Shandong Global entered into a merger and acquisition agreement, with Qingdao Likang Pharmaceutical Co., Ltd (“Qingdao Likang”) and the stockholders of Qingdao Likang to purchase the 100% equity interest of Qingdao Likang for cash consideration of $1.6 million. Qingdao Likang was incorporated in July 1998 under the laws of the PRC and is a city-level pharmaceutical related products distributor. On October 31, 2011, Shandong Global entered into a supplement merger and acquisition agreement with Qingdao Likang and paid $0.9 million to the stockholders of Qingdao Likang and completed the acquisition, with the remaining $0.7 million to be paid before July 31, 2012. After the completion of the acquisition, Qingdao Likang became a wholly owned subsidiary of the Company.

The unaudited condensed consolidated financial statements reflect the accounting for the transactions under the acquisition method; as such the purchase prices are allocated to the assets acquired and liabilities assumed based on the Company’s estimate of fair value by utilizing a third-party valuation report, with any excess of the purchase prices acquired over the fair value of the identifiable net assets recorded as goodwill. Upon completion of the acquisition, the Company acquired gross accounts receivable amounting to $672,314, which also represented the fair value of the accounts receivable.

The following is the purchase price allocation for Qingdao Likang:

	Qingdao Likang
Consideration
Cash	$	1,644,091
Fair value of total consideration transferred		1,644,091
Identifiable intangible assets acquired
Customer relationships		199,789
Total identifiable intangible assets acquired		199,789
Cash and cash equivalent		720,099
Accounts receivable		672,314
Other receivable and current assets		259,193
Inventories		426,765
Property, plant and equipment		66,725
Total liabilities (1)		(1,330,122	)
Total identifiable net assets acquired		1,014,763
Goodwill	$	629,328

(1) Total liabilities include $49,947 in temporary deferred tax liabilities as a result of the acquisitions.

The transaction resulted in a purchase price allocation of $629,328 to goodwill, representing the financial, strategic and operational value of the transaction to the Company. Goodwill is attributed to the premium that the Company paid to obtain the value of the business of Qingdao Likang and the synergies created with the integration of key components of a commercial infrastructure. The total amount of the goodwill acquired is not deductible for tax purposes. Goodwill of $629,328 is allocated to the pharmaceutical products distribution segment.

The following table sets forth revenue and earnings for Qingdao Likang included in the Company’s unaudited condensed consolidated statements of income and comprehensive income for the nine months ended September 30, 2011, and the revenue and earnings of the combined entities had the acquisitions occurred on either January 1, 2011 or January 1, 2010:

Revenue US $	Global Pharm		Qingdao Likang			Total
Actual from 7/1/2011 to 9/30/2011		42,226,090		-			42,226,090
Supplemental pro forma from 1/1/2011 to 9/30/2011		156,167,977		4,312,298			160,480,275
Supplemental pro forma from 1/1/2010 to 9/30/2010		90,176,505		6,372,885			96,549,390

Earnings US $	Global Pharm		Qingdao Likang			Total
Actual from 7/1/2011 to 9/30/2011		3,214,119		-			3,214,119
Supplemental pro forma from 1/1/2011 to 9/30/2011		12,898,608		(23,495	)		12,875,113
Supplemental pro forma from 1/1/2010 to 9/30/2010		5,708,092		2,547			5,710,639

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward-Looking Information

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes to those unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. We have tried, wherever possible, to identify these forward-looking statements by using words such as “forecast,” “project,” “anticipate,” “plan,” “strategy,” “intend,” “potential,” “outlook,” “target,” “seek,” “continue,” “believe,” “could,” “estimate,” “expect,” “may,” “probable,” “should,” “will” or other words of similar meaning. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on April 13, 2011 and elsewhere in this Report.

Overview

We were incorporated in Delaware on February 9, 2007, under the name “Top Flight Gamebirds, Inc.” Our principal executive offices are located at Room 2503-2505, New World Center, No. 6009 Yitian Road, Futian District, Shenzhen, Guangdong 518026, People’s Republic of China, or the PRC. On September 20, 2010, we changed our name to Global Pharm Holdings Group, Inc. Prior to the merger as described below, we were a non-operating shell company.

On August 12, 2010, we entered into a Share Exchange Agreement (referred to as the Share Exchange Agreement) with Global Pharm BVI Enterprise Group Limited (referred to as Global Pharm BVI), a British Virgin Islands company formed on June 14, 2010. Pursuant to the Share Exchange Agreement, we issued 1,800,000 of our restricted shares to acquire all of the issued and outstanding shares of Global Pharm BVI. Immediately subsequent to the merger, the former stockholders and key management of Global Pharm BVI were given certain call rights to acquire an aggregate of 80.36% of our outstanding common stock at four different occurrence dates, contingent on the attainment of various ~~targets~~milestones. In addition, all of the officers and directors of Global Pharm BVI were appointed as our officers and directors immediately following the merger. Subsequent to the merger, all of the ~~targets~~milestones were attained and, upon the exercise of the call rights, the former stockholders and key management of Global Pharm BVI owned an aggregate of 80.36% of our outstanding common stock.

The merger of a private operating company into a non-operating public shell company with nominal net assets is considered to be a capital transaction in substance, rather than a business combination, for accounting purposes. Accordingly, we treated this transaction as a ~~reverse merger, referred to as the~~ Reverse Merger~~. These transactions are considered to be capital transactions in substance~~, ~~rather~~and ~~than business combinations. Accordingly,~~ the Share Exchange Agreement has been accounted for as a recapitalization and, for accounting purposes, Global Pharma BVI is considered the acquirer in the Reverse Merger. The historical consolidated financial statements are those of Global Pharma BVI.

2234

We are engaged in the wholesale and distribution of pharmaceutical-related products, Traditional Chinese Medicine, or TCM, processing and herbal cultivation ~~business~~and sales in China through our indirectly owned Chinese subsidiaries, including Tonghua Tongdetang Pharmaceutical and Medicinal Material Co., Ltd. (referred to as Tongdetang), Anhui Xuelingxian Pharmaceutical Co., Ltd. (referred to as Xuelingxian), Shandong Global Pharm Co., Ltd. (referred to as Shandong Global), Zibo Global Pharm Co., Ltd. (referred to as Zibo Global), Tai’an Global Pharm Co., Ltd. (referred to as Tai’an Global), Bozhou Xinghe Pharmaceutical Co., Ltd (referred to as Bozhou Xinghe), Shandong ~~Hua~~Huawei ~~Wei~~ Pharmaceutical Col, Ltd. (referred to as Shandong ~~Hua Wei~~Huawei), Guangdong ~~Guoyao~~Sinopharm Pharmaceutical Franchises Co., Ltd. (referred to as GDGY), Anhui Sino-Green TCM Tech Development Co., Ltd. (referred to as Anhui Sino-Green TCM Tech) and Shandong Sino-Green TCM Tech Development Co., Ltd. (referred to as Shandong Sino-Green TCM Tech), Qingdao Likang Pharmaceutical Co., Ltd. (referred to as Qingdao Likang, together with Tongdetang, Xuelingxian, Shandong Global, Zibo Global, Tai’an Global, Bozhou Xinghe, Shandong ~~Hua Wei~~Huawei, GDGY, Anhui Sino-Green TCM Tech and ~~Anhui~~Shandong Sino-Green TCM Tech, referred to as the PRC Subsidiaries).

We measure our operating performance primarily through revenues and operating income from our three business segments as follows:

Pharmaceutical Product Distribution Segment

Our products include prescription drugs, over-the-counter, or OTC, drugs and nutritional supplements. For the ~~six~~nine months ended ~~June~~September 30, 2011, we sold ~~approximately~~over 11,800 ~~different~~ types of products and had more than 4,250 clients that spanned hospitals, clinics, pharmacies, ~~and~~ drugstores, and other healthcare institutions.

For the ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, the sales from our pharmaceutical ~~product~~ distribution segment accounted for 8286.51% and 7975.96% of our total sales, respectively. Our operating subsidiaries, Shandong Global, Tongdetang, Tai’an Global, Zibo Global, Shandong ~~Hua~~Huawei ~~Wei~~ and GDGY are focused primarily on the pharmaceutical distribution business. They purchase pharmaceutical~~-related~~ and healthcare products from manufacturers and wholesalers and sell the products to hospitals, other distributors, health clinics, chain and individual drug stores, among others.

In January 2011, we renewed the exclusive distribution agreements with each of Xiuzheng Pharmaceutical Group Marketing Co., Ltd., or Xiuzheng, ~~and~~ Hainan Lingkang Pharmaceutical Co., Ltd., or Lingkang, Branch of Beijing for a one-year term.

TCM Processing and Distribution Segment

We process approximately ~~500~~600 varieties of Chinese natural herbs that are either purchased from the ~~Bozhou TCM~~ raw materials ~~transaction~~ market in Bozhou from local farmers, ~~and~~or ~~sell~~cultivated ~~these~~by ~~processed~~us ~~herbs~~on our plantations, for sale to pharmaceutical distributors, hospitals or various types of medical institutions. These treated herbs are ~~often~~Chinese ~~called~~herbal medicine in the form of “prepared slices” ~~and~~for ~~can~~immediate beuse ~~immediately~~as ~~used~~ingredients asin the preparation of herbal ~~medicine~~medicinal concoctions. The kind of processing treatment applied to the herbs varies according to the type of herb. Our subsidiaries, Xuelingxian and Bozhou Xinghe, are focused on the TCM processing and distribution business. ~~For the six months ended June 30, 2011 and 2010, the sales from our TCM processing and distribution segment accounted for 11.9% and 15.2% of our total sales, respectively.~~

23On April 25, 2011, we suspended our flower tea bags production and sales operations. This was because the relevant land on which Xuelingxian is situated was to be expropriated by the local government which resulted in the lease for our factory buildings not being renewed, as well as our gradual de-emphasis on this business in our overall operations. After the acquisition of Bozhou Xinghe, we decided that in the event we resume our flower tea bag business, our operations in respect of this segment will be integrated into Bozhou Xinghe’s business. Our Company’s TCM processing and distribution segment will then include the production of flower tea bags.

For the nine months ended September 30, 2011 and 2010, the sales from our TCM processing and distribution segment accounted for 10.4% and 22.9% of our total sales, respectively.

Herbal Cultivation and Sales Segment

We also grow for sale several varieties of Chinese herbs such as Chrysanthemum, Salvia, ~~Saposhnikoviadivaricata angelica dahurica,~~ Cortex, and similar items~~, and sell them at the Bozhou TCM raw materials transaction market~~. On January 1, 2011, we leased two parcels of land from Mengwang Village Committee and Limenlou Village Committee ~~of Boxhou City~~ in Bozhou, Anhui Province, into ~~replacement~~replace ofthe two parcels of land we had previously leased in 2010 to continue conducting our herbal cultivation business. The aggregate area for both parcels of land was approximately 1,800 acres, with each lease for a term of five years. On April 29, 2011, we leased one parcel of land, ~~approximately~~with an approximate site area of 353 acres, from Mashan Town, in Shandong ~~with~~Province for a 30-year term for herbal planting purposes. On June 10, 2011, we leased another 330 acres of land ~~from~~in Qiaocheng District, Shibali Town, in Anhui Province ~~with~~for a 10-year term for ~~purposes~~the expansion of ~~expanding~~ our herbal cultivation business in that ~~location~~area. The aggregate area of the combined parcels of land ~~consisted~~is of 2,480 acres. Most of our herbal products are harvested in September, October, and November. None of the parcels generated revenue for the ~~six~~nine months ended ~~June~~September 30, 2011. Our subsidiaries, Xuelingxian, Anhui Sino-Green TCM Tech and Shandong Sino-Green TCM Tech, are focused on the herbal cultivation and sales business. For the ~~six~~nine months ended ~~June~~September 30, 2011, ~~the~~and 2010, sales from our herbal cultivation and sales segment, ~~which related to the land that Xuelingxian leased in 2010,~~ accounted for 3.5% and 1.35% of our total sales~~. There were no sales for the six months ended June 30~~, ~~2010~~respectively.

According to the statistics report of ~~China~~World ~~Association~~Network of Traditional Chinese Medicine released on ~~April~~September 1516, 2011 (http://www.zyctd.com/info-item-345116-1-1.html), the retail price of ~~399~~296 of the 537 most commonly used herbal products increased during the 12-month period from ~~April~~September 2010 to ~~March~~September 2011. The ~~prices~~price of 8625 herbal products increased infrom ~~amounts~~1% ~~ranging~~to 5%. The prices of 93 herbal products increased from 5% to 20% and the prices of ~~154~~104 herbal products increased ~~in amounts ranging~~ from 21% to 50%. The prices of 9651 herbal products increased ~~in amounts ranging~~ from 50% to 100% and prices of 5723 herbal products increased inover ~~amounts in excess of~~ 101%. In the same period, the prices of ~~the~~another ~~100~~207 most commonly used herbal products decreased, in amounts ranging from 1% to ~~100~~99%~~. The~~ ~~prices~~and ofthe ~~all~~prices of ~~our~~the ~~herbal~~remaining ~~products~~34 ~~cultivated~~most incommonly ~~2010~~used ~~increased~~herbal ~~during~~products remained the ~~last 12 months~~same.

Flower Tea Bags Segment

The current production of flower tea bags includes basic processing, screening and bagging. For the six months ended June 30, 2011, the sales from the flower tea bags segment accounted for 0.3% of our total sales, a decrease of $2.6 million or 90.5% as compared to the comparable period in 2010, which accounted for 4.9% of our total sales. The decrease was primarily due to the entry and expansion of competitive products, the geographical limitation of our products, and the rough and plain design and packaging of our products that was less attractive to the consumer compared to competitors’ products, as well as our insufficient marketing. On April 25, 2011, we decided to suspend our flower tea bags sales and operations. Our decision was based on the intentions of the local government of Bozhou, in conjunction with another pharmaceutical company, to expand the industry development park in Bozhou, that would utilize the site where Xuelingxian is currently located. The factory buildings and relevant land on which Xuelingxian is situated will be expropriated and Xuelingxian will be required to relocate to a new commercial address. We are currently evaluating potential new locations and undergoing market research on the flower tea bags market. Since we recently completed the acquisition of Bozhou Xinghein July 2011, management is considering relocating the flower tea bags business to Bozhou Xinghe if the new facility is suitable for processing flower tea bags. Management is evaluating the situation, and will either re-commence or permanently cease the flower tea bags business after research and evaluation is completed, which we contemplate will be the end of 2011.

Recent Developments

Joint Ventures

On April 6, 2011, we obtained the business license of Anhui Sino-Green TCM Tech., ~~Hong~~a ~~Kong~~joint ~~Wisdom~~venture ~~Fortune~~established ~~Medicine~~by ~~Holding~~our ~~Group~~subsidiary, ~~Limited (referred to as~~ Wisdom Fortune), together with ~~Anhui~~ Qianyi Pharmaceutical ~~Co., Ltd. (referred to as Qianyi Pharmaceutical) established the joint venture, Anhui Sino-Green TCM Tech,~~ in Bozhou ~~City~~, Anhui Province. Anhui Sino-Green TCM Tech is primarily focused on the herbal cultivation business. The registered capital of Anhui Sino-Green TCM Tech is $10 million. Wisdom Fortune invested US $9.7 million and Qianyi Pharmaceutical invested US $0.3 million, which reflect a 97 percent and 3 percent ownership interest of Anhui Sino-Green TCM Tech, respectively. As of ~~July~~September 630, 2011, we paid US $1.5 million of the registered capital and the remaining $8.2 million is due by April 6, 2013. We will fund the remaining registered capital byfrom ~~using~~ our working capital.

On April 21, 2011, we obtained the business license of Shandong Sino-Green TCM Tech. Shandong Global together with Jinan Linong TCM Plantation Co., Ltd. (referred to as Jinan Linong) established the joint venture, Shandong Sino-Green TCM Tech, in Jinan City, Shandong Province. Shandong Sino-Green TCM Tech is primarily focused on herbal cultivation business. The registered capital of Shandong Sino-Green TCM Tech is RMB 10 million (approximately US $1.4 million). Shandong Global invested RMB 9.7 million (approximately US $1.4 million) and Jinan Linong invested RMB 0.3 million (approximately US $0.1 million), which reflect a 97 percent and 3 percent ownership interest of Shandong Sino-Green TCM Tech, respectively. On April 20, 2011, Shandong Global paid RMB 9.7 million (approximately US $1.5 million) in registered capital.36

On April 2521, 2011, we ~~suspended~~obtained ~~our~~the ~~flower~~business ~~tea~~license ~~bags~~of ~~and~~Shandong ~~sales~~Sino-Green ~~operations.~~TCM ~~Our~~Tech, ~~decision~~a ~~was~~joint ~~based~~venture onestablished ~~the~~by ~~intentions~~Shandong ofGlobal ~~the~~together ~~local~~with ~~government~~Jinan ofLinong ~~Bozhou~~in Jinan, inShandong ~~conjunction~~Province. ~~with~~Shandong ~~another~~Sino-Green ~~pharmaceutical~~TCM ~~company,~~Tech tois ~~expand~~primarily ~~the~~focused ~~industry~~on ~~development~~the ~~park~~herbal incultivation ~~Bozhou~~business. ~~that~~The ~~will~~registered ~~utilize~~capital ~~the~~of ~~site~~Shandong ~~where~~Sino-Green ~~Xuelingxian~~TCM Tech is ~~currently~~$1.6 ~~located~~million. ~~The~~Shandong ~~factory~~Global ~~buildings~~invested $1.5 million and ~~relevant~~Jinan ~~land~~Linong oninvested ~~which~~$0.1 ~~Xuelingxian~~million, iswhich ~~situated~~reflect ~~will~~a be97 ~~expropriated~~percent and ~~Xuelingxian~~3 ~~will~~percent ~~relocate~~ownership tointerest ain ~~new~~Shandong ~~commercial~~Sino-Green ~~address~~TCM Tech, respectively. On April 20, 2011, Shandong Global paid $1.5 million of the registered capital.

Establishing joint ventures with local companies in Bozhou ~~City~~ and ~~Mashan~~Jinan ~~town,~~represents ~~represent~~ a new stage for ~~the~~ our development of ~~the~~ TCM cultivation base projects. ~~In addition, both projects are a further step to obtain the quality TCM variety that is certified with National Geographical Place of Origin Trademark.~~ The savings related to obtaining quality TCM herbal ~~related~~ raw materials directly from the place of origin will significantly enhance ~~the~~ our products portfolio, and create aan ~~significant~~important synergy between our herbal cultivation business and pharmaceutical ~~products~~ distribution business.

Acquisitions

OnAs ~~May~~part ~~30,~~of ~~2011~~our overall growth strategy, we ~~acquired~~have ~~the~~recently ~~100%~~made ~~equity~~several ~~interest~~significant acquisitions, each of ~~Tai’~~which has enhanced our operations. The addition of GDGY provided us with an ~~Global~~opportunity to extend our distribution coverage in Guangdong Province. Our existing network in Shandong Province, one of our primary markets, is further expanded through our ~~subsidiary~~newly acquired subsidiaries, ~~Shandong~~Zibo Global, ~~for~~Tai’an ~~cash~~Global ~~consideration~~and ofShandong ~~RMB~~Huawei. 7These ~~million~~three (companies distribute in aggregate approximately US17,000 ~~$1.1~~pharmaceutical ~~million).~~and AsTCM products to a combined customer base of ~~June~~more 30than 3,000 ~~2011~~hospitals, weclinics, ~~have~~drugstores, ~~paid~~healthcare ~~RMB~~institutions 2and pharmaceutical distributors.3 ~~million~~We ~~(approximately~~also USgained ~~$0.4~~a ~~million)~~critical toproduction ~~the~~capability ~~former~~through ~~shareholder~~our acquisition of ~~Tai’an~~Bozhou ~~Global~~Xinghe, which operates a herb processing plant with advanced equipment in close proximity to our plantation bases and the ~~remaining~~raw ~~RMB~~materials ~~4.7~~market ~~million~~in ~~(approximately~~Bozhou USfrom ~~$0.7~~which ~~million)~~we tosource bethe ~~paid~~Chinese ~~before~~natural ~~September~~herbs ~~15,~~we ~~2011~~process. We believe this will ~~fund~~substantially ~~the~~increase ~~remaining~~operational ~~balance~~and ~~with~~cost efficiencies of our ~~working~~TCM ~~capital~~processing and sales business.

OnTai’an ~~May 31, 2011, we acquired the 100% equity interest of Zibo~~ Global ~~through our subsidiary~~, ~~Shandong Global, for cash consideration of RMB 8 million (approximately US $1.2 million). As of June 30, 2011, we have paid RMB 2.1 million (approximately US $0.3 million) to the former shareholder of~~ Zibo Global ~~with~~and ~~the~~Bozhou ~~remaining RMB 5.9 million (approximately US $0.9 million) to be paid to before September 30, 2011. We will fund the remaining balance with our working capital.~~Xinghe

~~With~~On May 30, 2011, we acquired the ~~acquisition~~100% equity interest of Tai’an Global ~~and~~through ~~Zibo~~our subsidiary, Shandong Global, for cash consideration of $1.1 million, which had been paid in full as of September 30, 2011. On May 31, 2011, we ~~enhanced~~acquired the ~~depth~~100% ~~and~~equity ~~breadth~~interest of ~~our~~Zibo ~~sales~~Global ~~coverage~~through inour subsidiary, Shandong ~~Province~~Global, ~~and~~for ~~the~~cash ~~expansion~~consideration of ~~our~~$1.2 ~~distribution~~million, ~~network~~which ~~into~~had ~~the~~been ~~cities~~paid in full as of ~~Tai'an~~September ~~and~~30, ~~Zibo~~2011. InOn ~~addition~~July 4, 2011, we completed the ~~two~~acquisition ~~newly~~of ~~acquired~~the ~~companies~~100% ~~will~~equity ~~broaden~~interest ~~their~~of ~~products~~Bozhou ~~portfolios~~Xinghe byfor ~~having~~cash ~~access~~consideration toof ~~our~~$4.6 ~~other~~million, ~~product~~which ~~lines~~had been paid in full as of September 30, 2011.

On July 4, 2011, we completed the acquisition of the 100% equity interest of Bozhou Xinhe for cash consideration of RMB 30 million (approximately US $4.6 million). On August 8, 2011, we had paid RMB 10 million (approximately US $1.5 million) and will pay another RMB 10 million to the former shareholders of Bozhou Xinghe before August 30, 2011 with the remaining RMB 10 million to be paid before April 5, 2012. We will fund the unpaid acquisition cost from working capital.37

25Quantum

~~The~~On ~~acquisition~~August of3, ~~Bozhou~~2011, ~~Xinghe~~we ~~represents~~entered into a ~~direct~~Share ~~complement~~Purchase Agreement (referred to ~~our~~as ~~TCM~~the ~~plantation~~Quantum ~~business~~Acquisition inAgreement) with the ~~cities~~shareholders (referred to as the Quantum Sellers) of ~~Bozhou~~Quantum Magic Integrator Capital Co., Limited (referred to as Quantum), a company incorporated and ~~Jinan~~existing byunder the ~~addition~~laws of athe ~~critical~~British ~~production~~Virgin ~~capability~~Islands, soto ~~that~~purchase ~~our~~the ~~cultivated~~aggregate ~~raw~~of ~~herbs~~50,000 ~~can~~ordinary beshares ~~processed~~in ~~directly~~Quantum at(referred ~~our~~to ~~own~~as ~~plant~~Quantum Sale Shares), representing the entire issued share capital of Quantum. InThe ~~addition~~consideration for the Quantum Sale Shares is $9,000,000, ~~this~~to ~~facility~~be ~~offers~~paid in full by us aby ~~potential~~issuing ~~platform~~the Consideration Shares (as defined under the Quantum Acquisition Agreement) to ~~produce~~the ~~TCM~~Quantum ~~pharmaceutical~~Sellers ~~products~~within in90 days after the ~~near~~Closing ~~future.~~Date (as defined under the Quantum Acquisition Agreement). The ~~combination~~number of ~~this~~the ~~direct-processing~~Consideration ~~capability~~Shares ~~and~~to ~~our~~be ~~stringent~~issued ~~quality~~to ~~control~~the ~~will~~Quantum ~~serve~~Sellers shall be equal to ~~further~~$9,000,000 ~~enhance~~divided by the fair market value of our ~~product~~issued ~~quality~~and outstanding common stock as at the Closing Date based on the our estimate of such fair value by utilizing a third-party valuation report. The fair value at the Closing Date was $4.52 per share and on September 9, ~~which~~we ~~enables~~issued us1,991,150 shares of our common stock to ~~command~~the Quantum Sellers as payment in full of the consideration. Quantum, a ~~premium~~company ~~price~~incorporated in the ~~market~~British Virgin Islands on April 19, 2010, held the 100% equity interest of Hong Kong Celestial Asia Pharmaceutical Investment Group Limited, or Celestial Asia Pharm. ~~The~~Celestial ~~new~~Asia ~~plant~~Pharm, ~~will~~a ~~also~~Hong ~~allow~~Kong usholding tocompany, ~~customize~~was ~~some~~incorporated ~~herbal~~on ~~pieces~~August ~~products~~24, ~~upon~~2009 ~~distribution~~under ~~customers'~~the ~~request~~laws of Hong Kong, ~~therefore~~and ~~expanding~~held ~~our~~the ~~distributed~~100% ~~product~~equity ~~portfolio~~interest of Shandong Huawei. WeShandong ~~believe~~Huawei wewas ~~will~~incorporated beon ~~able~~March to18, ~~offer~~1998 ~~more~~under ~~quality~~the laws of the PRC and engages in the pharmaceutical and healthcare products ~~for~~distribution ~~our~~business ~~rapidly~~in ~~growing~~China. ~~sales~~Upon ~~channels~~execution of the Quantum Acquisition Agreement, Shandong Huawei became our wholly owned subsidiary.

OnPacific August 3, 2011, we entered into a Share Purchase Agreement (referred to as the Acquisition Agreement) with each of the persons set forth in Schedule B-1 thereto (each a “Quantum Seller” and collectively referred to as the Quantum Sellers). Pursuant to the Acquisition Agreement, the Quantum Sellers agreed to sell and we agreed to purchase the aggregate of 50,000 ordinary shares (referred to as Sale Shares) in Quantum Magic Integrator Fund Co., Limited, a company incorporated and existing under the laws of the British Virgin Islands, or Quantum, representing the entire issued share capital of Quantum. The consideration for the Sale Shares is US $9,000,000, to be paid in full by us by issuing the Consideration Shares (as defined under the Acquisition Agreement) to the Quantum Sellers within 90 days after the Closing Date (as defined under the Acquisition Agreement). The number of the Consideration Shares to be issued to the Quantum Sellers shall be equal to US $9,000,000 divided by the fair market value of our issued and outstanding common stock as at the Closing Date, as determined by a third-party valuer selected by us at our discretion. As of the date of this report, we are in the process of obtaining third-party valuation for our common stock as of such date of execution. Under the Quantum Share Purchase Agreement, 80% of the total shares to be issued will be issued to the original stockholders of Quantum within 90 days after the date of the Quantum Share Purchase Agreement and the remaining 20% to be pledged to the Company. The pledged shares shall be transferred to the original shareholders of Quantum if Shandong Hua Wei achieves certain revenue targets for 2010 and 2011.Asia

On ~~the~~August ~~date~~1, of2011, we entered into a Share Purchase Agreement (referred to as the Pacific Asia Acquisition Agreement,) wewith ~~and~~the shareholders (referred to as the ~~Quantum~~Pacific Asia Sellers) ~~also~~of ~~entered~~Pacific ~~into~~Asia Pharm Investment Group Co., Limited (referred to as Pacific Asia), a ~~Share~~company ~~Pledge~~incorporated ~~Agreement~~and ~~pursuant~~existing under the laws of the British Virgin Islands, to ~~which~~purchase the ~~Sellers~~aggregate ~~pledge~~of ~~10%~~50,000 ordinary shares in Pacific Asia (referred to as Pacific Asia Sale Shares) , representing the entire issued share capital of Pacific Asia. The consideration for the ~~Consideration~~Pacific Asia Sale Shares is $42,000,000, to be paid in full by us by issuing the Consideration Shares (as defined under the Pacific Asia Acquisition Agreement) to ~~secure~~the Pacific Asia Sellers within 90 days after the Closing Date (as defined under the Pacific Asia Acquisition Agreement). The number of the Consideration Shares to be issued to the Pacific Asia Sellers’ ~~covenants~~was equal to $42,000,000 divided by the fair market value of our issued and ~~undertakings~~outstanding incommon ~~relation~~stock toas ~~Quantum’s~~at ~~financial~~the ~~performance~~Closing ~~for~~Date based on our estimate of such fair value by utilizing a third-party valuation report. The fair value at the ~~fiscal~~Closing ~~year~~Date ~~ending~~was ~~December~~$4.52 31per share and on September 9, 2011, we issued 9,292,035 shares of our common stock to the Pacific Asia Sellers as ~~set~~payment ~~forth~~in full of the consideration. Pacific Asia, a company incorporated in the ~~Acquisition~~British ~~Agreement~~Virgin Islands on April 8, 2010, held the 100% equity interest of Hong Kong Rich Fortune Chain Drugstores Assets Management Co., Ltd., or Rich Fortune. Rich Fortune, a Hong Kong holding company, was incorporated on January 12, 2009 under the laws of Hong Kong, held the 100% equity interest of Guangzhou Hairui Xiexin Investment Consulting Co., Ltd., or Hairui Xiexin. Hairui Xiexin was incorporated on June 3, 2011 under the laws of the PRC.

~~Quantum,~~ Effective aas ~~company~~of ~~incorporated~~July ~~in the British Virgin Islands on April 19~~11, ~~2010~~2011, ~~held~~Hairui ~~the~~Xiexin ~~100%~~entered ~~equity~~into ~~interest~~a series of ~~Hong~~contractual ~~Kong~~arrangements ~~Celestial~~with ~~Asia~~Guangdong Pharmaceutical ~~Investment~~Franchises ~~Group~~Co. ~~Limited~~Ltd., or ~~Celestial Asia Pharm. Celestial Asia Pharm~~GDGY, aand ~~Hong Kong holding company, was incorporated on August 24, 2009 under~~ the ~~laws~~shareholders of ~~Hong Kong~~GDGY, ~~and~~pursuant ~~held~~to ~~the~~which ~~100%~~Hairui ~~equity~~Xiexin ~~interest~~will ofact ~~Shandong~~as ~~Hua~~the ~~Wei).~~management ~~Shandong~~company ~~Hua~~and ~~Wei~~operation ~~was~~trustee ~~incorporated~~for ~~on March 18~~GDGY, ~~1998~~while ~~under~~GDGY ~~the~~conducts ~~laws of~~ the ~~PRC~~principal ~~and~~operations ~~engages~~of in the ~~pharmaceutical-related~~business. ~~products~~The ~~distribution~~contractual ~~business~~agreements ineffectively ~~China.~~transferred ~~Upon~~the ~~execution~~economic benefits of ~~the~~GDGY’s ~~Quantum~~business ~~Share~~to ~~Purchase~~Hairui ~~Agreement~~Xiexin, ~~Shandong~~and ~~Hua~~Hairui ~~Wei~~Xiexin ~~became~~assumed ~~our~~effective ~~wholly~~control ~~owned~~and ~~subsidiary~~management of GDGY.

26GDGY, a pharmaceutical and healthcare products distributor, was incorporated on June 6, 2001 under the laws of the PRC. As a result of the contractual agreements between Hairui Xiexin and GDGY, GDGY became our indirect 100% controlled subsidiary.

On August 1, 2011, we entered into a Share Purchase Agreement (referred to as the Acquisition Agreement) with each of the persons set forth in Schedule B-1 thereto (each a “Pacific Asia Seller” and collectively referred to as the Pacific Asia Sellers). Pursuant to the Acquisition Agreement, the Pacific Asia Sellers agreed to sell and we agreed to purchase the aggregate of 50,000 ordinary shares, or Sale Shares, in Pacific Asia Pharm Investment Group Co., Limited, a company incorporated and existing under the laws of the British Virgin Islands (referred to as Pacific Asia), representing the entire issued share capital of Pacific Asia. The consideration for the Sale Shares is US $42,000,000, to be paid in full by us by issuing the Consideration Shares (as defined under the Acquisition Agreement) to the Pacific Asia Sellers within 90 days after the Closing Date (as defined under the Acquisition Agreement). The number of the Consideration Shares to be issued to the Pacific Asia Sellers shall be equal to US $42,000,000 divided by the fair market value of our issued and outstanding common stock as at the Closing Date, as determined by a third-party valuer selected by us at our discretion.38

OnQingdao the date of the Acquisition Agreement, we and the Pacific Asia Sellers also entered into a Share Pledge Agreement pursuant to which the Sellers pledge 10% of the Consideration Shares to us to secure the Pacific Asia Sellers’ covenants and undertakings in relation to Pacific Asia’s financial performance for the fiscal year ending December 31, 2011 as set forth in the Acquisition Agreement.Likang

~~The~~On September 26, 2011, Shandong Global entered into a merger and acquisition agreement, with Qingdao Liang Pharmaceutical Co., Ltd (referred to as Qingdao Likang) and the stockholders of ~~Hua~~Qingdao ~~Wei~~Likang ~~will~~to ~~continuously~~purchase ~~expand~~the ~~our~~100% ~~sales~~equity ~~coverage~~interest of Qingdao Likang for cash consideration of $1.6 million. Qingdao Likang was incorporated in July 1998 under the laws of the PRC and is a city-level pharmaceutical related products distributor. On October 31, 2011, Shandong ~~Province~~Global entered into a supplement merger and acquisition agreement with Qingdao Likang and paid $0.9 million to the stockholders of Qingdao Likang and completed the acquisition, with the remaining $0.7 million to be paid before October 31, 2012. After the completion of the acquisition, Qingdao Likang became our wholly owned subsidiary.

Pacific Asia, a company incorporated in the British Virgin Islands on April 8, 2010, held the 100% equity interest of Hong Kong Rich Fortune Chain Drugstores Assets Management Co., Ltd., or Rich Fortune. Rich Fortune, a Hong Kong holding company, was incorporated on January 12, 2009 under the laws of Hong Kong, held the 100% equity interest of Guangzhou Hairui Xiexin Investment Consulting Co., Ltd., or Hairui Xiexin. Hairui Xiexin was incorporated on June 3, 2011 under the laws of the PRC.

Guangdong Guo Yao Pharmaceutical Franchises Co. Ltd., or GDGY, a pharmaceutical-related products distributor, was incorporated on June 6, 2001 under the laws of the PRC. As of August 1, 2011, GDGY manages a chain of 1,234 drug stores in the Guangdong Province and manages these drug stores through a target management contract entered into with the manager of each store, pursuant to which the managers are the primary beneficiary of each drug store and assume full responsibility for the operating and legal risks of each drug stores. The drug stores shall purchase pharmaceutical-related products from GDGY directly at market price; otherwise the drug stores must pay a franchise fee of a pre-determined sum to GDGY.

With the acquisition of Pacific Asia, we will have opportunity to extend our integrated value chain into pharmaceutical retailing sector. The acquisition will also enhance our goods purchase power and increase the sales volume of high profit TCM products. The acquisition of Pacific Asia will increase the value for our distribution business segment and offers extensive retail channel for our quality TCM herbs products obtained directly from our TCM business entities in Bozhou City.

Result of Operations

The following table presents certain information derived from our unaudited condensed consolidated financial statements for the three months ended ~~June~~September 30, 2011 and 2010, respectively.

For the three months ended June 30,
For the three months ended September 30, (unaudited)
in US $ except percentage	2011						2010						Change
				% of net revenue						% of net revenue			Amount			Percentage
				% of revenue						% of revenue			Amount			%
Revenues, net	$	4568,~~386~~999,~~335~~093			100.0		$	30,~~530~~617,~~977~~820			100.0		$	1438,~~855~~381,~~358~~273			48125.74
Cost of goods sold		3859,~~003~~427,~~386~~311			8386.71			24,~~989~~711,~~792~~477			8180.97			1334,~~013~~715,~~594~~834			52140.15
Gross profit		79,~~382~~571,~~949~~782			1613.39			5,~~541~~906,~~185~~343			1819.13			13,~~841~~665,~~764~~439			3362.21
Operating expenses		~~936~~1,~~732~~100,309			2.1.6			~~233~~360,~~371~~572			01.82			~~703~~739,~~361~~737			~~301~~205.42
General and administrative		~~987~~2,~~391~~370,710			23.24			14,~~794~~436,~~759~~082			514.95			(~~807~~2,~~368~~065,372	)		(4546.06	)
Income from operations		56,~~458~~100,~~826~~763			128.08			31,~~513~~109,~~055~~689			113.46			14,~~945~~991,~~771~~074			55449.48
Interest income (expense)		843			0.0			13,226			0.0			(12,383	)		(93.6	)
Interest (expense) income		(99,087	)		(0.1	)		2,842			-			(101,929	)		(3,586.5	)
Miscellaneous (expense)/income		(28,418	)		(0.1	)		-			-			(28,418	)	NA
Miscellaneous (expense)		(13,511	)		-			-			-			(13,511	)
Income before income taxes		5,431,251			11.9			3,526,281			11.4			1,904,970			54.0
Change in fair value of contingent consideration		(665,708	)		(1.0	)		-			-			(665,708	)
Provision for income taxes		1,513,005			3.3			1,255,682			4.1			257,323			20.5
Income before income taxes		5,322,457			7.7			1,112,531			3.6			4,209,926			378.4
Net income		3,918,246			8.6			2,270,599			7.3			1,647,647			72.6
Provision for income taxes		1,589,240			2.3			1,184,907			3.9			404,333			34.1
Less: net loss attributable to non-controlling interest		(1,361	)		0.0			-			0.0			(1,361	)	NA
Net income (loss)		3,733,217			5.4			(72,376	)		(0.2	)		3,805,593			(5,258.1	)
Net income attributable to Global Pharm Holdings Group, Inc.	$	3,919,607			8.6		$	2,270,599			7.3		$	1,649,008			72.6
Less: Net loss attributable to non-controlling interest		2,664			-			-			-			2,664
Net income (loss) attributable to Global Pharm Holdings Group, Inc.	$	3,735,881			5.4		$	(72,376	)		(0.2	)	$	3,808,257			(5,261.8	)

For the three months ended June 30 - Net revenue
in US $ except percentage	2011				2010				Change
			% of net revenue				% of net revenue					%
Pharmaceutical products distribution	$	39,738,572		87.6	$	24,338,686		79.7	$	15,399,886			63.3
TCM processing and distribution		5,647,763		12.4		4,314,919		14.1		1,332,844			30.9
Herbal cultivation and sales		-		-		-		-		-		NA
Flower tea bags		-		0.0		1,877,372		6.1		(1,877,372	)	NA
Total	$	45,386,335		100.0	$	30,530,977		100.0	$	14,855,358			48.7

For the three months ended September 30 – Revenue (unaudited)
in US $ except percentage	2011				2010				Change
			% of revenue				% of revenue					%
Pharmaceutical products distribution	$	62,651,819		90.8	$	24,810,775		81.0	$	37,841,044			152.5
TCM processing and distribution		5,564,765		8.1		4,465,935		14.6		1,098,830			24.6
Herbal cultivation and sales		782,509		1.1		1,341,110		4.4		(558,601	)		(41.7	)
Total	$	68,999,093		100.0	$	30,617,820		100.0	$	38,381,273			125.4

For the three months ended June 30 - Cost of goods sold
For the three months ended September 30 - Cost of goods sold (unaudited)
in US $ except percentage	2011				2010				Change
			% of COGS				% of COGS					%
Pharmaceutical products distribution	$	3354,~~476~~625,~~543~~228		8891.19	$	20,~~072~~098,~~452~~741		8081.3	$	1334,~~404~~526,~~091~~487			66171.8
TCM processing and distribution		4,~~526~~582,~~843~~661		117.97		3,~~547~~705,~~611~~887		1415.20		~~979~~876,~~232~~774			2723.67
Herbal cultivation and sales		-219,422		-0.4		-906,849		-3.7		-(687,427	)	NA	(75.8	)
Flower tea bags		-		-		1,369,729		5.5		(1,369,729	)	NA
Total	$	59,427,311		100.0	$	24,711,477		100.0	$	34,715,834			140.5
Total	$	38,003,386		100.0	$	24,989,792		100.0	$	13,013,594			52.1

For the three months ended June 30 - Net income
For the three months ended September 30 - Net Income (unaudited)
in US $ except percentage	2011						2010						Change
				% of net income						% of net income						%
				% of income						% of income						%
Pharmaceutical products distribution	$	34,~~769~~571,~~281~~886			96122.14		$	23,~~893~~034,~~228~~340			~~127.~~(4,192.5	)	$	~~876~~1,~~053~~537,546			3050.37
TCM processing and distribution		~~696~~438,~~485~~148			1711.87			~~547~~482,~~607~~486			24(666.16	)		~~148~~(44,~~878~~338	)		27(9.2	)
Herbal cultivation and sales		~~(44~~424,~~000~~751	)		(111.14	)		-419,097			-(579.1	)		~~(44~~5,~~000~~654	)	NA	1.3
Flower tea bags		-			-			321,864			14.2			(321,864	)		(100.0	)
Corporate		(1,698,904	)		(45.5	)		(4,008,299	)		5,538.2			2,309,395			(57.6	)
Corporate		(502,159	)		(12.8	)		(1,492,100	)		(65.7	)		989,941			(66.3	)
Total	$	3,735,881		$	100.0		$	(72,376	)		100		$	3,808,257			(5,261.8	)
Total	$	3,919,607			100.0		$	2,270,599			100.0		$	1,649,008			72.6

The increase (decrease) in net revenue and net income was accounted for by an increase (decrease) in certain of our segments as indicated below:

Revenue. Our net revenue increased by $1438.94 million, or 48125.74%, for the three months ended ~~June~~September 30, 2011 compared to the comparable period ended ~~June~~September 30, 2010. The increase in revenue was attributable to our reportable segments as follows:

Pharmaceutical products distribution –The contribution from our pharmaceutical products distribution segment was $3962.7 million, or 8790.68% of our total net revenues, for the three months ended ~~June~~September 30, 2011, compared to $24.38 million, or 7981.70% of our total net revenues, for the comparable period in 2010. The net revenue increased $1537.48 million, or approximately 63152.35%, for the three months ended ~~June~~September 30, 2011, as compared to the comparable period in 2010. The increase was primarily due to the additional revenue contributed by our newly-acquired subsidiaries in 2011, namely Tai’an Global, Zibo Global, Shandong Huawei and GDGY, amounting to $23.6 million, and the increased sales of $11.9 million and $2.3 million by Shandong Global and Tongdetang, respectively, due to a series of marketing activities to promote sales, a broader product portfolio offered to customers, and improved efficiency in fulfilling sales orders.

2940

TCM processing and distribution – Revenue from this segment was $5.6 million for the three months ended ~~June~~September 30, 2011, compared to $4.35 million for the comparable period in 2010, an increase of $1.31 million, or approximately 3024.96%. The increase is mainly due to the $2.5 million in additional revenue from Bozhou Xinghe, offset by an approximately $1.0 million decrease in Xuelingxian’s revenue. Our flower tea bags operations have been suspended since April 25, 2011, as such, we had nil revenue from this business, as compared to sales of $0.8 million for the three months ended September 30, 2010. Subsequent to September 30, 2011, any future results of operations in respect of our flower tea bag business in the event we decide to resume operations, will be consolidated into our TCM processing and distribution segment.

Herbal cultivation and sales – Revenue from our herbal cultivation and sales segment was ~~nil~~$0.8 million for the three months ended ~~June~~September 30, 2011 and ~~June~~$1.3 ~~30,~~million for the comparable period in 2010, ~~respectively~~a decrease of approximately $0.6 Wemillion, ~~sold~~or ~~our~~41.7%. ~~entire~~The ~~herbal~~decrease ~~inventory~~was inmainly ~~the~~due ~~first~~to reduced sales by Xuelingxian for the three months inended ~~2011~~September ~~and~~30, ~~2010.~~2011 ~~All~~because of our ~~herbs~~herbal products were atharvested ~~the~~in ~~cultivation~~late ~~stage~~September ~~for~~2011 ~~the~~due ~~three~~to ~~months~~various ~~ended~~factors ~~June~~and sold after September 30, 2011, ~~and~~as compared to our earlier harvest of herbal products for the comparable period in 2010, of which some sales were recorded in the same quarter.

~~Flower~~Cost ~~tea~~of ~~bags~~Goods –Sold. Our Wecost ~~had~~of ~~nil~~goods ~~revenue~~sold ~~from~~increased ~~our~~by ~~flower~~$34.7 ~~tea~~million, ~~bags~~or ~~segment for the three months ended June 30~~140.5%, ~~2011, as compared~~ to ~~sales of~~ $159.94 million for the three months ended ~~June~~September 30, ~~2010.~~2011 ~~The~~from ~~flower tea bags operations have been suspended since April 25, 2011~~$24. ~~Our~~7 ~~decision~~million ~~was~~for ~~based on~~ the ~~intentions~~comparable ofperiod ~~the local government of Bozhou,~~ in ~~conjunction with another pharmaceutical company~~2010, ~~to expand the industry development park in Bozhou that would utilize the site where Xuelingxian is currently located. The factory buildings and relevant land on~~ which ~~Xuelingxian~~was isconsistent ~~situated~~with ~~will be expropriated and Xuelingxian will be required to relocate to a new commercial address. We are currently evaluating potential new locations and undergoing market research on~~ the ~~flower~~increase ~~tea bags market. Since we recently completed the acquisition of Bozhou Xinghe~~ in ~~July~~our ~~2011, management is considering relocating the flower tea bags business to Bozhou Xinghe if the new facility is suitable for processing flower tea bags~~revenue. ~~Management~~More ~~is evaluating the situation and will either re-commence or permanently cease the flower tea bags business after research and valuation is completed, which we contemplate will be the end of 2011.~~specifically:

~~Cost~~Pharmaceutical ofproducts ~~Goods~~distribution ~~Sold. Our~~–The cost of goods sold ~~increased~~for bythis segment was $1354.06 million, or 5291.19%, toof ~~$38.0~~our ~~million~~total cost of goods sold, for the three months ended ~~June~~September 30, 2011, ~~from~~compared to $2520.01 million, or 81.3% of our total costs of goods sold, for the comparable period in 2010, ~~which~~an increase of $34.5 million, or approximately 171.8%. The increase was primarily due to the additional cost of goods sold attributed to our newly acquired subsidiaries in 2011, amounting to $22.7 million, as well as our greater sales volume for the three months ended September 30, 2011 compared to the comparable period in 2010, consistent with the increase in our revenue of this segment. ~~More~~The ~~specifically:~~increase in cost of goods sold was also a direct result of the increased purchase prices of TCM pharmaceutical products we had to source for our operations.

~~Pharmaceutical~~TCM ~~products~~processing and distribution – The cost of goods sold for this segment was $334.56 million, ~~or 88.1% of our total cost of goods sold,~~ for the three months ended ~~June~~September 30, 2011, compared to $203.17 million, ~~or 80.3% of our total costs of goods sold,~~ for the comparable period in 2010, an increase of $130.49 million, or approximately 6623.87%. The increase ~~was~~is ~~primarily~~mainly due to ~~our greater sales volume for~~ the ~~three~~$2.1 ~~months~~million ~~ended~~in ~~June~~cost ~~30,~~of ~~2011~~sales ~~compared~~attributed to the ~~comparable~~newly ~~period~~acquired inBozhou ~~2010~~Xinghe, ~~consistent~~offset ~~with~~against the ~~increase~~reduced insales ~~revenue~~ of ~~this~~herbal ~~segment. The~~products ~~increase~~and ofnil ~~costs~~sales of ~~goods~~flower ~~sold~~tea ~~was~~bags ~~also~~by ~~a direct result of the increase of the purchase price of TCM type pharmaceutical products~~Xuelingxian.

~~TCM~~Herbal ~~processing~~cultivation and ~~distribution~~sales – The cost of goods sold for this segment was $40.52 million for the three months ended ~~June~~September 30, 2011, as compared to $30.59 million for the comparable period in 2010, ana ~~increase~~decrease of $1.0.7 million, or approximately 2775.68%. The decrease in cost of goods sold was primarily due to the herbal products we sold having lower costs as compared to the herbal products we sold in the comparable period in 2010. The decrease in cost of goods sold was also a result of the decreased sales by Xuelingxian.

~~Herbal cultivation and sales – As there were no sales, the cost of goods sold for our herbal cultivation segment was nil for the three months ended June 30, 2011 and 2010, respectively.~~41

~~Flower~~Gross ~~tea~~Profit. Our ~~bags~~gross –profit Asincreased ~~there~~by ~~were~~$3.7 nomillion, ~~sales~~or ~~due~~62.1%, to ~~the~~$9.6 ~~suspension~~million offor ~~our~~the ~~operations~~three ~~for~~months ~~this~~ended ~~segment~~September 30, ~~the~~2011 ~~cost~~from of$5.9 ~~goods~~million ~~sold~~ for ~~our~~the ~~flower~~comparable ~~tea~~period ~~bags~~in ~~segment~~2010. ~~was~~Our ~~nil~~gross profit margin decreased to 13.9% for the three months ended ~~June~~September 30, 2011 from 19.3% for the comparable period in 2010. The decrease is primarily attributable to the lower gross profit margin of our newly-acquired subsidiaries, namely Zibo Global, Tai’an Global, Shandong Huawei and GDGY, which had an average gross profit margin of 6.47%. The decrease in our gross profit margin was also due to the increased costs of the TCM products we sourced and our downward adjustment of our selling prices as ~~compared~~a result of competition. The decrease was affected by changes in our sales volume in respect of various types of products as well as a shift in our revenue sources from hospital customers to $1health clinics and retail drug stores.4 ~~million~~The gross margin for ~~the~~sales ~~comparable~~to ~~period~~hospital incustomers ~~2010~~is usually higher than for other customers.

~~Gross~~Operating ~~Profit~~Expenses. Our ~~gross~~operating ~~profit~~expenses increased by $10.87 million, or 33205.2%, to $71.41 million for the three months ended ~~June~~September 30, 2011 from $50.54 million for the comparable period in 2010. ~~Our gross profit margin decreased to 16.3% for the three months ended June 30, 2011 from 18.1% for the comparable period in 2010.~~ The ~~decrease~~increase is primarily ~~attributable~~due to the ~~increase~~additional ofoperating ~~cost~~expenses ofattributed to our ~~TCM~~newly ~~products~~acquired ~~and~~subsidiaries ~~the sales price reduction as a result of competition. The decrease was also affected by the change~~ in ~~sales~~2011, ~~volume~~amounting to ~~different~~$153,000, ~~types of products~~ as well as the ~~revenue~~increased ~~shift from hospital customers to health clinic~~advertising, ~~chain~~freight ~~drug stores~~cost, rental and ~~retail~~employment ~~drug~~costs, ~~stores. The~~consistent ~~gross~~with ~~margin~~the ~~for~~increase ~~hospital~~in ~~customers~~our issales ~~usually~~volume ~~higher~~and ~~than~~expansion ~~other~~of ~~customers~~our business.

General and Administrative. Our general and administrative expenses decreased by $2.1 million, or 46.6%, to $2.4 million for the three months ended September 30, 2011 from $4.4 million for the comparable period in 2010. The decrease is due to the stock compensation cost of $3.0 million recorded in the third quarter of 2010, offset against the increase of approximately $0.9 million in operating costs for the three months ended September 30, 2011 attributed to our newly acquired subsidiaries in 2011, as well as the higher sales volume and broader scale of operations, and the increase in professional service fees, such as legal, accounting and investor relations as a result of us becoming a public company.

~~Operating~~Income ~~Expenses~~from Operations. ~~Our~~As ~~operating~~a ~~expenses~~result ~~increased~~of bythe ~~$0.7 million~~foregoing, orour ~~301.4%,~~income from operations increased to $06.91 million for the three months ended ~~June~~September 30, 2011 from $01.21 million for the comparable period in 2010., ~~The~~an increase isof ~~primarily~~$5.0 ~~due to increased advertising~~million, ~~freight~~or ~~cost and employment costs, consistent with the increase in our sales volume and expansion of our business~~449.8%.

~~General~~Income ~~and Administrative~~Taxes. Our ~~general~~income ~~and~~tax ~~administrative~~expense ~~expenses~~increased ~~decreased by $0.8 million, or 45.6%,~~ to $1.06 million for the three months ended ~~June~~September 30, 2011 from $1.82 million for the comparable period in 2010., ~~The~~consistent ~~decrease~~with isthe ~~due~~increased torevenue ~~the~~as ~~stock~~a ~~compensation~~result ~~cost~~ of $1our growth through acquisitions.5 ~~million~~The ~~recorded~~effective inincome tax rate decreased from 106.5% for the ~~second~~three ~~quarter~~months ofended ~~2010~~September 30, ~~offsetting~~2010 ~~against~~to 29.9% for the ~~increase~~comparable ofperiod ~~approximately~~in $02011.7 ~~million~~The indecrease ~~operating~~was ~~costs~~mainly ~~for~~because the ~~three~~nondeductible ~~months~~expenses ~~ended~~for ~~June~~income ~~30,~~tax ~~2011~~purposes ~~during~~were ~~normal~~$4.0 ~~course~~million offor ~~business~~the asthree amonths ~~result~~ended ofSeptember ~~higher~~30, ~~sales~~2010 ~~volume~~as ~~and~~compared ~~broader~~to ~~operation~~$1.4 ~~scales,~~million ~~and~~for the ~~increase~~comparable period in ~~professional~~2011. ~~service~~The ~~fees,~~decrease ~~such~~in asnondeductible ~~legal,~~expenses ~~accounting~~for ~~and~~income ~~investor~~tax ~~relations~~purposes aswill lead to a ~~result~~decrease ofin usthe ~~becoming~~effective aincome ~~public~~tax ~~company~~rate.

Income from Operations. As a result of the foregoing, our income from operations increased to $5.5 million for the three months ended June 30, 2011 from $3.5 million for the comparable period in 2010, an increase of $2.0 million, or 55.7%.42

~~Income~~Net ~~Taxes~~Income. Our net income ~~tax~~increased ~~expense~~by ~~increased~~$3.8 million, to $13.57 million, for the three months ended ~~June~~September 30, 2011 from net loss of $172,376 for the comparable period in 2010. The increase in net income was primarily due to the one time expense of the $3.0 million in stock-based compensation, which was recorded as general and administrative expenses in the three months period ended September 30, 2010, which had a significant impact on our net income. The increase in net income was also due to the additional net income of $0.8 million contributed by our newly-acquired subsidiaries in 2011. Our net profit margin increased to 5.4% for the three months ended September 30, 2011 from (0.2)% of net revenues for the comparable period in 2010. . The net income for the three months ended September 30, ~~consistent~~2011was negatively impacted by the additional legal fees, accounting fees, and appraisal fees incurred in connection with our acquisitions of Bozhou Xinghe, Pacific Asia and Quantum. The profit margin for the ~~increased~~three ~~revenue~~months ended September 30, 2011 was also negatively impacted by the lower profit margin of our newly-acquired subsidiaries, namely Zibo Global, Tai’an Global, Shandong Huawei and GDGY, which had an average profit margin of 3.0% for the three months ended September 30, 2011

~~Net~~The ~~Income. Our~~following ~~net~~table ~~income~~presents ~~increased~~certain byinformation ~~$1.7~~derived ~~million, to $3.9 million, for the three months ended June 30, 2011~~ from ~~$2.3~~our ~~million~~unaudited ~~for~~condensed ~~the~~consolidated ~~comparable~~financial ~~period~~statements ~~in 2010. Our net profit margin increased to 8.7%~~ for the ~~three~~nine months ended ~~June~~September 30, 2011 ~~from~~and ~~7.4% of net revenues for the comparable period in~~ 2010. The slight increase in profit margin was primarily due to our increased sales of certain prescription products and herbal products, which had higher profit margins, in the three months ended June 30, 2011.

The following table presents certain information derived from our consolidated financial statements for the six months ended June 30, 2011 and 2010.

For the nine months ended September 30, (unaudited)
in US $ except percentage	2011						2010				Change
				% of revenue					% of revenue		Amount			%
Revenues, net	$	156,167,977			100.0		$	90,176,505		100.0	$	65,991,472			73.2
Cost of goods sold		131,405,558			84.1			73,622,656		81.6		57,782,902			78.5
Gross profit		24,762,419			15.9			16,553,849		18.4		8,208,570			49.6
Operating expenses		2,447,617			1.6			725,424		0.8		1,722,193			237.4
General and administrative		4,136,902			2.6			6,531,617		7.2		(2,394,715	)		(36.7	)
Income from operations		18,177,900			11.6			9,296,808		10.3		8,881,092			95.5
Interest (expense) income		(101,100	)		(0.1	)		21,048		0.0		(122,148	)		(580.3	)
Miscellaneous (expense)		(48,110	)		(0.0	)		-		0.0		(48,110	)		-
Change in fair value of contingent consideration		(665,708	)		(0.4	)		-		0.0		(665,708	)
Income before income taxes		17,362,982			11.1			9,317,856		10.3		8,045,126			86.3
Provision for income taxes		4,468,365			2.9			3,609,764		4.0		858,601			23.8
Net income		12,894,617			8.3			5,708,092		6.3		7,186,525			126.0
Less: Net loss attributable to non-controlling interest		3,991			0.0			-		0.0		3,991			-
Net income attributable to Global Pharm Holdings Group, Inc.	$	12,898,608			8.3		$	5,708,092		6.3	$	7,190,516			126.0

For the six months ended June 30,
For the nine months ended September 30 – Revenue (unaudited)
in US $ except percentage	2011						2010				Change
				% of net revenue					% of net revenue		Amount			Percentage
				% of revenue					% of revenue					%
Revenues, net	$	87,490,082			100.0		$	59,259,637		100.0	$	28,230,445			47.6
Pharmaceutical products distribution	$	134,481,832			86.1		$	68,183,762		75.6	$	66,298,070			97.2
Cost of goods sold		72,279,229			82.6			48,632,162		82.1		23,647,067			48.6
TCM processing and distribution		16,238,510			10.4			20,646,774		22.9		(4,408,264	)		(21.4	)
Gross profit		15,210,853			17.4			10,627,475		17.9		4,583,378			43.1
Herbal cultivation and sales		5,447,635			3.5			1,345,969		1.5		4,101,666			304.7
Operating expenses		1,352,645			1.5			364,999		0.6		987,646			270.6
Total	$	156,167,977			100.0		$	90,176,505		100.0	$	65,991,472			73.2
General and administrative		1,720,080			2.0			2,165,148		3.7		(445,068	)		(20.6	)
Income from operations		12,138,128			13.9			8,097,328		13.6		4,040,800			49.9
Interest (expense) income		(3,381	)		0.0			17,874		0.0		(21,255	)		(118.9	)
Miscellaneous expense		(30,239	)		(0.0	)		-		0.0		(30,239	)	NA
Income before income taxes		12,104,508			13.9			8,115,202		13.6		3,989,306			49.2
Provision for income taxes		2,887,305			3.3			2,419,451		4.1		467,854			19.3
Net income		9,217,203			10.6			5,695,751		9.5		3,521,452			61.8
Less: net expenses attributable to non-controlling interest		(1,353	)		0.0			-		0.0		(1,353	)	NA
Net income attributable to Global Pharm Holdings Group, Inc.	$	9,218,556			10.6		$	5,695,751		9.5	$	3,522,805			61.8

3143

For the six months ended June 30 - Net revenue
For the nine months ended September 30 - Cost of goods sold (unaudited)
in US $ except percentage	2011				2010				Change
			% of net revenue				% of net revenue					%
			% of COGS				% of COGS					%
Pharmaceutical products distribution	$	72114,~~169~~839,~~822~~489		8287.54	$	4756,~~360~~026,~~171~~658		7976.91	$	2458,~~809~~812,~~651~~831			52105.40
TCM processing and distribution		1013,~~365~~100,~~812~~032		1110.90		916,~~000~~693,~~270~~949		1522.27		1(3,~~365~~593,~~542~~917	)		15(21.25	)
Herbal cultivation and sales		43,~~679~~466,~~373~~037		52.36		-902,049		-1.2		42,~~679~~563,~~373~~988		NA	284.2
Flower tea bags		275,075		0.3		2,899,196		4.9		(2,624,121	)		(90.5	)
Total	$	131,405,558		100.0	$	73,622,656		100.0	$	57,782,902			78.5
Total	$	87,490,082		100.0	$	59,259,637		100.0	$	28,230,445			47.6

For the six months ended June 30 - Cost of goods sold
For the nine months ended September 30 - Net Income (unaudited)
in US $ except percentage	2011						2010						Change
				% of COGS						% of COGS						%
				% of income						% of income						%
Pharmaceutical products distribution	$	6011,~~530~~853,~~364~~480			8391.7		$	398,~~168~~131,~~261~~687			80142.5		$	213,~~362~~721,~~103~~793			5445.58
TCM processing and distribution		81,~~339~~858,~~098~~191			1114.54			72,~~367~~726,~~955~~304			1547.28			~~971~~(868,~~143~~113	)		13(31.28	)
Herbal cultivation and sales		31,~~228~~705,~~238~~852			413.52			-420,615			-7.4			31,~~228~~285,~~238~~237		NA	305.6
Flower tea bags		181,529			0.3			2,095,946			4.3			(1,914,417	)		(91.3	)
Corporate		(2,518,915	)		(19.3	)		(5,570,514	)		(97.6	)		3,051,599			(54.8	)
Total	$	7212,~~279~~898,~~229~~608		$	100.0		$	485,~~632~~708,~~162~~092			100.0		$	237,~~647~~190,~~067~~516			48126.60

For the six months ended June 30 - Net income
in US $ except percentage	2011						2010						Change
				% of net income						% of net income						%
Pharmaceutical products distribution	$	7,306,147			79.3		$	5,586,817			98.1		$	1,719,330			30.8
TCM processing and distribution		1,314,860			14.3			1,115,456			19.6			199,404			17.9
Herbal cultivation and sales		1,299,417			14.1			-			-			1,299,417		NA
Flower tea bags		76,759			0.8			529,936			9.3			(453,177	)		(85.5	)
Corporate		(778,627	)		(8.5	)		(1,536,458	)		(27.0	)		757,831			(49.3	)
Total	$	9,218,556			100.0		$	5,695,751			100.0		$	3,522,805			61.8

The increase (decrease) in net revenue and net income were accounted for by an increase (decrease) in certain of our segments as indicated below:

Revenue. Our net revenue increased by $2866.20 million, or 4773.62%, for the ~~six~~nine months ended ~~June~~September 30, 2011 compared to the ~~six~~nine months ended ~~June~~September 30, 2010. The increase in revenue was attributable to our reportable segments as follows:

Pharmaceutical products distribution –The contribution from our pharmaceutical products distribution segment was $72134.25 million, or 8286.51% of our total net revenues, for the ~~six~~nine months ended ~~June~~September 30, 2011, compared to $4768.42 million, or 7975.96% of our total net revenues, for the comparable period in 2010. The net revenue increased $2466.83 million, or approximately 5297.42%, for the ~~six~~nine months ended ~~June~~September 30, 2011, as compared to the comparable period in 2010. The increase was primarily due to the additional revenue contributed by our newly acquired subsidiaries in 2011, amounting to $25.1 million, and the increased sales of $35.2 million and $6.0 million by Shandong Global and Tongdetang, respectively, due to a series of marketing activities to promote sales, a broader product portfolio offered to customers, and improved efficiency in fulfilling sales orders.

TCM processing and distribution –Revenue from this segment was $1016.42 million for the ~~six~~nine months ended ~~June~~September 30, 2011, compared to $920.06 million for the comparable period in 2010, ana ~~increase~~decrease of $14.4 million, or approximately 1521.24%. The decrease is mainly due to the decrease in Xuelingxian’s revenue from its TCM processing and distribution operations, amounting to $3.2 million, offset against the $2.5 million in additional revenue from Bozhou Xinghe. Our flower tea bags operations have been suspended since April 25, 2011, as such, we had nil revenue from this business, as compared to sales of $3.7 million for the nine months ended September 30, 2010. Subsequent to September 30, 2011, any future results of operations in respect of our flower tea bag business in the event we decided to resume operations, will be consolidated into our TCM processing and distribution segment.

Herbal cultivation and sales –Revenue from our herbal cultivation and sales segment was $4.7 million for the six months ended June 30, 2011 as compared to nil sales for the six months ended June 30, 2010. For the year ended December 31, 2009, we sold all of our herbal products and had no herbal sales for the first six months ended June 30, 2010. We sold our entire herbal inventory in the first three months in 2011 and all of our herbs were at cultivation stage for the three months ended June 30, 2011 and 2010.44

~~Flower~~Herbal ~~tea~~cultivation ~~bags~~and sales –We ~~had~~Revenue ~~net~~from ~~revenue~~our ofherbal ~~$0.3~~cultivation ~~million~~and ~~revenue~~sales ~~from~~segment ~~our~~was ~~flower~~$5.4 ~~tea~~million ~~bags segment~~ for the ~~six~~nine months ended ~~June~~September 30, 2011 as compared to $21.93 million for the ~~six~~nine months ended ~~June~~September 30, 2010., ~~The~~an ~~decrease~~increase ~~was~~of ~~primarily~~approximately ~~due~~$4.1 tomillion, ~~the~~or ~~entry~~304.7%. ~~and~~The ~~expansion~~increase ofwas ~~competitive~~mainly ~~products,~~due ~~the~~to ~~geographical~~sales ~~limitation~~ of our ~~products,~~entire ~~and~~remaining ~~the~~inventory ~~rough and plain design and packaging~~ of ~~our~~herbal products ~~that~~harvested ~~was~~during ~~less~~2010 ~~attractive~~in to the ~~consumer~~first ~~compared~~quarter toof ~~competitors’ products~~2011, asamounting ~~well~~to ~~as our insufficient marketing~~$4.7 ~~In addition, we suspended our flower tea bags operations since April 25, 2011~~million.

33Cost of Goods Sold. Our cost of goods sold increased by $57.8 million, or 78.5%, to $131.4 million for the nine months ended September 30, 2011 from $73.6 million for the comparable period in 2010, which was consistent with the increase in our revenue. More specifically:

~~Cost~~Pharmaceutical ofproducts ~~Goods~~distribution ~~Sold. Our~~– The cost of goods sold ~~increased~~for bythis segment was $23114.68 million, or 4887.64%, toof ~~$72.3~~our ~~million~~total cost of goods sold, for the ~~six~~nine months ended ~~June~~September 30, 2011, ~~from~~compared to $4856.60 million, or 76.1% of our total costs of goods sold, for the comparable period in 2010, ~~which~~an increase of $58.8 million, or approximately 105.0%. The increase was primarily due to the additional cost of goods sold attributed to our newly acquired subsidiaries in 2011, amounting to $23.9 million, and the increased cost of goods sold by Shandong Global due to its increased sales for the same period, amounting to $29.3 million, as well as our greater sales volume for the nine months ended September 30, 2011 compared to the comparable period in 2010, consistent with the increase in our revenue for this segment. ~~More~~The ~~specifically:~~increase in cost of goods sold was also a direct result of the increased purchase prices of TCM pharmaceutical products we had to source for our operations.

~~Pharmaceutical~~TCM ~~products~~processing and distribution – The cost of goods sold for this segment was $6013.51 million, ~~or 83.7% of our total cost of goods sold,~~ for the ~~six~~nine months ended ~~June~~September 30, 2011, compared to $3916.27 million, ~~or 80.5% of our total costs of goods sold,~~ for the comparable period in 2010, ana ~~increase~~decrease of $213.46 million, or approximately 5421.5%. The ~~increase~~decrease ~~was~~is ~~primarily~~ due to ~~our~~the ~~greater~~decreased ~~sales~~cost ~~volume~~of ~~during~~goods ~~the~~sold ~~six~~of ~~months~~$5.6 ofmillion ~~2011~~by ~~compared~~Xuelingxian due to ~~the~~its ~~comparable~~decreased ~~period~~sales inof ~~2010~~$5.9 million, ~~consistent~~offset ~~with~~against the ~~increase in revenue for this segment~~$2. ~~The~~1 ~~increase~~million ofin ~~costs~~cost of goods sold ~~was~~attributed ~~also~~to ~~a direct result of~~ the ~~increase~~newly ofacquired ~~the~~Bozhou ~~purchase price of TCM type pharmaceutical products~~Xinghe.

~~TCM~~Herbal ~~processing~~cultivation and ~~distribution~~sales – The cost of goods sold for this segment was $8.3.5 million for the ~~six~~nine months ended ~~June~~September 30, 2011, as compared to $70.49 million for the comparable period in 2010, an increase of $12.06 million, or approximately 13284.2%. The increase of cost of goods sold is a result of the increased sales by Xuelingxian in the nine months ended September 30, 2011 and lower costs of herbal products we sold in 2011 as compared to those we sold in the previous year.

~~Herbal~~Gross ~~cultivation~~Profit. Our ~~and~~gross ~~sales~~profit –increased ~~The~~by ~~cost~~$8.2 ofmillion, ~~goods~~or ~~sold~~49.6%, to $24.8 million for ~~this~~the ~~segment~~nine ~~was~~months ended September 30, 2011 from $316.26 million for the ~~six~~comparable period in 2010. Our gross profit margin decreased to 15.9% for the nine months ended ~~June~~September 30, 2011, from 18.4% for the comparable period in 2010. The decrease is primarily ~~due~~attributable to the ~~inventories~~lower ~~brought~~gross ~~forward~~profit ~~from~~margin ~~the~~of ~~2010~~our ~~year~~newly-acquired ~~end~~subsidiaries, ~~that~~namely ~~were~~Zibo ~~sold~~Global, ~~during~~Tai’an ~~the~~Global, ~~first~~Shandong ~~quarter~~Huawei, and GDGY, which had an average gross profit margin of ~~2011~~5.9%. AsThe ~~there~~decrease ~~were~~in noour ~~sales~~gross ofprofit ~~the~~margin ~~inventories~~was ~~brought~~also ~~forward~~due ~~from~~to the ~~2009~~increased ~~year~~costs ~~end,~~of the ~~cost~~TCM products we sourced and our downward adjustment of ~~goods~~our ~~sold~~selling ~~for~~prices ~~this~~as ~~segment~~a result of competition. The decrease was ~~nil~~affected by changes in our sales volume in respect of various types of products as well as a shift in our revenue sources from hospital customers to health clinic and retail drug stores. The gross margin for ~~the~~sales ~~six~~to ~~months~~hospital ~~ended~~customers ~~June~~is ~~30,~~usually ~~2010~~higher than for other customers.

Flower tea bags – The cost of goods sold for this segment was $0.2 million for the six months ended June 30, 2011, as compared to $2.1 million for the comparable period in 2010. The decrease of $1.9 million was due to our suspension of operations for this segment since April 25, 2011.45

~~Gross~~Operating ~~Profit~~Expenses. Our ~~gross~~operating ~~profit~~expenses increased by $41.67 million, or 43237.14%, to $~~15.~~2.4 million for the ~~six~~nine months ended ~~June~~September 30, 2011 from $100.67 million for the comparable period in 2010. ~~Our gross profit margin decreased to 17.4% for the six months ended June 30, 2011 from 17.9% for the comparable period in 2010.~~ The ~~decrease~~increase is primarily ~~attributable~~due to the ~~increase in~~additional ~~the costs~~operating ofexpenses ~~our~~attributed ~~TCM products and the sales price reduction as a result of competition. The decrease was also affected~~ by ~~the~~our ~~change~~newly inacquired ~~sales~~subsidiaries, ~~volume~~amounting to ~~different~~$354,000, ~~types of products~~ as well as the ~~revenue~~increased ~~shift from hospital customers to health clinic~~advertising, ~~chain~~freight ~~drug~~cost ~~stores,~~ and ~~retail~~employment ~~drug~~costs, ~~stores. The~~consistent ~~gross~~with ~~margin~~the ~~for~~increase ~~hospital~~in ~~customers~~our issales ~~usually~~volume ~~higher~~and ~~than~~expansion ~~other~~of ~~customers~~our business.

~~Operating~~General ~~Expenses~~and Administrative. Our ~~operating~~general and administrative expenses ~~increased~~decreased by $12.04 million, or ~~270~~36.67%, to $1.4.1 million for the ~~six~~nine months ended ~~June~~September 30, 2011 from $06.45 million for the comparable period in 2010. The ~~increase~~decrease is ~~primarily~~ due to ~~increased~~the ~~advertising,~~stock ~~freight~~compensation cost ~~and~~of ~~employment~~$4.5 ~~costs~~million booked for the nine months ended September 30, ~~consistent~~2010, ~~with~~offsetting against the increase of approximately $1.7 million in operating costs in the nine months ended September 30, 2011 as a result of the additional expenses attributed to our newly-acquired subsidiaries, as well as the greater sales volume and ~~expansion~~broader scale of ~~our~~operations, ~~business~~and the increase in professional service fees, such as legal, accounting and investor relations as a result of us becoming a public company.

~~General~~Income ~~and~~from ~~Administrative~~Operations. ~~Our~~As ~~general~~a ~~and~~result ~~administrative~~of ~~expenses~~the ~~decreased~~foregoing, byour ~~$0.5~~income ~~million,~~from oroperations ~~21%,~~increased to $118.72 million for the ~~six~~nine months ended ~~June~~September 30, 2011 from $29.23 million for the comparable period in 2010~~. The decrease is due to the stock compensation cost of $1.5 million booked in the second quarter of 2010~~, ~~offset~~an ~~against the~~ increase of ~~approximately~~ $18.09 million ~~in operating costs during normal course of business in the second quarter of 2011 as a result of higher sales volume and broader operation scales~~, ~~and~~or ~~the increase in professional service fees, such as legal, accounting and investor relations, as a result of us becoming a public company~~95.5%.

34Income Taxes. Our income tax expense increased to $4.5 million for the nine months ended September 30, 2011 from $3.6 million for the comparable period in 2010, consistent with the increased revenue as a result of our growth through acquisitions. The effective income tax rate decreased from 38.7% for the nine months ended September 30, 2010 to 25.7% for the comparable period in 2011. The decrease was mainly because the nondeductible expenses for income tax purposes were $5.6 million for the nine months ended September 30, 2010 as compared to $2.2 million for the comparable period in 2011. The decrease in nondeductible expenses for income taxes purpose will lead to a decrease in the effective income tax rate.

~~Income~~Net ~~from Operations~~Income. AsOur anet ~~result of the foregoing, our~~ income ~~from~~increased ~~operations~~by ~~increased~~$7.2 million, to $12.19 million, for the ~~six~~nine months ended ~~June~~September 30, 2011 from $85.17 million for the comparable period in 2010. Our net profit margin increased to 8.3% for the nine months ended September 30, an2011 from 6.3% for the comparable period in 2010. The slight increase in profit margin was primarily due to the one-time expense of the $4.15 million in stock-based compensation, orwhich 50was recorded as general and administrative expenses and had significant impact on the net income.0 The net income for the nine months ended September 30, 2011 was negatively impacted by the additional legal fees, accounting fees, and appraisal fees incurred in connection with our acquisitions of Zibo Global, Tai’an Global, Bozhou Xinghe, Pacific Asia and Quantum. Our profit margin for the nine months ended September 30, 2011was also negatively impacted by the lower profit margin of our newly-acquired subsidiaries, namely Zibo Global, Tai’an Global, Shandong Huawei, and GDGY, which had an average profit margin of 2.6% for the nine months ended September 30, 2011.

~~Income Taxes. Our income tax expense increased to $2.9 million for the six months ended June 30, 2011 from $2.4 million for the comparable period in 2010, consistent with the increased revenue.~~46

Net Income. Our net income increased by $3.5 million, to $9.2 million, for the six months ended June 30, 2011 from $5.7 million for the comparable period in 2010. Our net profit margin increased to 10.6% for the six months ended June 30, 2011 from 9.5% for the comparable period in 2010. The increase in profit margin was primarily due to our increased sales of certain prescription products and herbal products, which had higher profit margins, in the first six months of 2011.

Liquidity and Capital Resources

The following table sets forth a summary of our net cash flow information for the periods indicated:

For the six months ended June 30,
For the nine months ended September 30, (unaudited)
in US $ except percentage	2011			2010			Change			%
Net cash provided by operating activities	$	5,258,346		$	5,774,627		$	(516,281	)		(8.9	)
										%
Net cash used in investing activities		(870,109	)		(9,063	)		(861,046	)		95.0
Net cash provided by operating activities	$	6,032,523		$	3,200,226		$	2,832,297			88.5
Net cash provided by (used in) financing activities		299,730			(3,038,036	)		3,337,766			(109.9	)
Net cash used in investing activities		(946,346	)		(22,044	)		(924,302	)		4,193.0
Net increase in cash		4,687,967			2,727,528			1,960,439			71.9
Net cash provided by (used in) financing activities		9,036,686			(2,948,570	)		11,985,256			(406.5	)
Cash and cash equivalents at the end of the period	$	9,144,834		$	10,169,823		$	(1,024,989	)		(10.1	)
Net increase in cash		14,122,863			229,612			13,893,251			6,050.8
Cash and cash equivalents at the end of the period	$	18,570,246		$	7,830,291		$	10,739,955			137.2

Our net working capital was $2631.39 million as of ~~June~~September 30, 2011, an increase of $814.95 million, or 5183.13%, from $17.4 million as of December 31, 2010. Our cash and liquidity needs are funded primarily by cash generated from operations. We believe that the funds and cash generated from operations available to us are adequate to meet our operating needs for the remainder of 2011.

For the ~~six~~nine months ended ~~June~~September 30, 2011, cash and cash ~~equivalents~~equivalent increased by $414.73 million, as compared to December 31, 2010, primarily attributable to various factors, including:

Net cash provided by operating activities

For the ~~six~~nine months ended ~~June~~September 30, 2011, wecash generated ~~$5.3 million in net cash~~ from operating activities was $6.0 million, having no significant variance as compared to the $53.82 million generated for the comparable period in 2010. The net income for the ~~six~~nine months ended ~~June~~September 30, 2011 was $912.29 million, an increase of $37.52 million from $5.7 million for the comparable period in 2010. In addition to net income, the cash generated from operating activities was the net effect of the ~~decrease~~increase in accounts receivables of approximately $46.2 million, the ~~decrease~~increase in inventories of $17.64 million, the increase of restricted cash and other current assets of $5.1 million, the increase in accounts payable and accruals of $05.21 million, and the increase in amounts due to related parties of $5.3 million.

Net cash used in investing activities

WeCash used ~~$0.9 million~~ in investing activities was $1.0 million for the ~~six~~nine months ended ~~June~~September 30, 2011, as compared to $~~9,000~~ 0.02 million cash used for the ~~comparable~~same period in 2010, primarily as a result of increased expenditures relating to ~~purchases~~acquisitions of new ~~subsidiaries~~businesses and equipment.

Net cash (provided by) (used in) financing activities

Net cash provided by financing activities was $09.30 million for the ~~six~~nine months ended ~~June~~September 30, 2011, as compared to $32.09 million used for the comparable period in 2010. The cash ~~used~~provided in financing activities for the ~~six~~nine months ended ~~June~~September 30, 2011 was ~~the~~due ~~net~~to ~~effect~~our ~~of the~~ repayment of aloans ~~bank loan to Shandong Qilu Bank~~ of ~~approximately~~ $12.56 million~~, the~~ ~~credit from the bank acceptance of approximately $1.5 million~~ and ~~the~~proceeds ~~contribution~~received from ~~non-controlling~~our ~~interest~~convertible ofbonds ~~approximately~~financing of $010.30 million. ~~The cash used in financing activities for the six months ended June 30, 2010 was primarily due to the payment of dividends to former stockholders of our operating subsidiaries.~~

Capital Resources

The outstanding balances of the short-term loans we obtained from Shandong Qilu Bank and Construction Bank of China in 2010 were fully paid in January 2011 and May 2011.

As of ~~June~~September 30, 2011, we had ~~one~~six outstanding short-term loan and two outstanding long term loans obtained for our general working capital purposes as follows:

~~Loan~~Short-term obtained on December 31, 2010 with Shandong Qilu Bank. The outstanding amount is RMB 3 million, or $464,145, as of June 30, 2011, which is due on December 30, 2011. The loan bears an annual interest of 6.972%, payable on a monthly basis. The loan is secured by a pledge on our inventory valued at RMB 6 million or $928,290, the terms of which are similar to that of the loan. Shandong Qilu Bank has authorized Shandong Woerde Guarantee Company to monitor the pledged inventories.loans

Loan obtained on December 30, 2010 with Shandong Qilu Bank. The outstanding amount is $469,102, as of September 30, 2011, which is due on December 30, 2011. The loan bears an annual interest of 6.972%, payable on a monthly basis. The loan is secured by a pledge on our inventory worth RMB 6 million or $938,204, the terms of which are similar to that of the loan. Shandong Qilu Bank has authorized Shandong Woerde Guarantee Company to monitor the pledged inventories;

Loan obtained on May 13, 2011 with Agricultural Development Bank of China. The outstanding amount is $938,204, which is due on May 11, 2012. The loan bears an annual interest of 6.31%, payable on a monthly basis. The loan is secured by a guarantee given by two of our shareholders and a mortgage on one of our properties, valued at $3,587,253;

Two loans incurred on July 4, 2011 with Minsheng Bank as part of the acquisition of Bozhou Xinghe. The outstanding amounts are $977,295, and $273,643, respectively, which are due on May 12, 2012. The loans bear an annual interest of 8.2%, payable on a monthly basis. The loans are secured by a pledge given by one of the former shareholders of our subsidiary, Bozhou Xinghe, to maintain a bank deposit balance of not more than $250,188 with Minsheng Bank

Loan incurred on June 4, 2011 with Agricultural Development Bank of China as part of the acquisition of Bozhou Xinghe. The outstanding amount is $781,836, which is due on May 22, 2012. The loan bears an annual interest of 6.31%, payable on a monthly basis. The loan is secured by a guarantee given by two of the former shareholders of our subsidiary, Bozhou Xinghe;

Loan incurred on July 4, 2011 with Agricultural Development Bank of China as part of the acquisition of Bozhou Xinghe. The outstanding amount is $625,469, which is due on June 8, 2012. The loan bears an annual interest of 6.31%, payable on a monthly basis. The loan is secured by a guarantee given by two of the former shareholders of our subsidiary, Bozhou Xinghe;

Loan incurred on July 4, 2010 with Agricultural Development Bank of China as part of the acquisition of Bozhou Xinghe. The outstanding amount is $938,204, which is due on August 13, 2012. The loan bears an annual interest of 5.4%, payable on a monthly basis. The loan is secured by a guarantee given by one of the former shareholders of our subsidiary, Bozhou Xinghe. As of September 30, 2011, the Company had repaid an amount of $625,470 on this loan.

Long-term loan

Loan obtained on May 26, 2010 with Agricultural Development Bank of China. The outstanding amount is $1,563,673, of which 60% is due on July 30, 2013 and the remaining 40% is due on July 30, 2014. The loan bears an annual interest rate of 5.76%, payable on a monthly basis. The loan is secured by a guarantee given by one of our shareholders.

Intercompany Loan

On September 30, 2011, we have made an unsecured interest free loan to our subsidiary, Wisdom Fortune, in the principal amount of $9,749,998, the sum of which will be reduced as such proceeds are used for our Group’s business. There is no specific due date for this loan and Wisdom Fortune will repay the principal amount of the loan when it has the financial means to make any such repayment, and provided the repayment will not have a negative impact on its business. On October 20, 2011, in connection with our issuance of redeemable convertible bonds to Blazer Delight Limited, an investment company, we have assigned our rights and interest in this loan to Blazer Delight Limited pursuant to an assignment agreement.

Working Capital Requirements

Historically, cash generated from operations have been sufficient to meet our general cash needs. We believe that we will be able to continue to generate revenue from our operations, which will provide the necessary cash flow to meet anticipated working capital requirements. However, our actual short- and long-term working capital requirements will depend upon numerous factors, including operating results, competition, the opportunity to acquire or start up new businesses and the availability of credit facilities, none of which can be predicted with certainty. Due to our rapid growth and expansion, our need for additional capital may ~~arise~~increase and our management will seek to raise capital for the maintenance and expansion of our operations through the issuance of debt or equity, if necessary.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

We recognize revenues in compliance with Staff Accounting Bulletin 104. Sales revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable and (iv) the ability to collect is reasonably assured. These criteria are generally satisfied at the time of shipment when risk of loss and title passes to the customer. Our four segments have the same revenue recognition policy. Revenues are recorded net of value-added taxes.

Accounts Receivable

We ~~record~~records accounts receivable, net of an allowance for doubtful accounts, if any. We maintain allowances for doubtful accounts for estimated losses. We review the accounts receivable on a quarterly basis and make general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, we consider many factors, including the age of the balance, customer's historical payment history, our current creditworthiness and current economic trends. The amount of the provision, if any, is recognized in the unaudited condensed consolidated statement of income within "General and administrative." Accounts are written off after exhaustive efforts at collection. As of ~~June~~September 30, 2011 and December 31, 2010, all of the trade receivable balances were aged less than one year, except for $375,000 in accounts receivable assumed as part of our acquisition of Quantum in August 2011. Management valued the possibility in collecting such accounts receivable and concluded that those receivables are collectible since we still maintain good business relationships with the relevant customers after the acquisition. Therefore, management concluded that no allowance for uncollectible amounts was required.

Purchase Accounting and Business Combinations

~~The~~We ~~Company~~account ~~accounts~~ for ~~its~~our business combinations using the purchase method of accounting which requires that intangible assets be recognized apart from goodwill if they are contractual in nature or separately identifiable. Acquisitions are measured on the fair value of consideration exchanged and, if the consideration given is not cash, measurement is based on the fair value of the consideration given or the fair value of the assets acquired, whichever is more reliably measurable. The excess of cost of an acquired entity over the fair value of identifiable acquired assets and liabilities assumed is allocated to goodwill.

The valuation and allocation process relies on significant assumptions made by management. In certain situations, the allocations of excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when ~~the~~we ~~Company~~receive ~~receives~~ updated information, including appraisals and other analyses, which are completed within one year of the acquisition. Revisions to the fair values, which may be significant, are recorded when pending information is finalized, within one year from the acquisition date.

Income Taxes

We are subject to income taxes, primarily in the PRC. We believe we have adequately provided for all taxes due but amounts asserted by tax authorities could be greater or less than the amounts we have accrued. We have concluded all PRC corporate income tax matters for the ~~six~~nine months ended ~~June~~September 30, ~~2011and~~2011 and do not anticipate adjustments as a result of any tax audits within the next 12 months.

Segments

Segments are defined as components of our business for which separate financial information is available that is evaluated by our chief operating decision-maker (our CEO) in deciding how to allocate resources and assess performance. We presently have ~~four~~three operating segments, consisting of (i) pharmaceutical products distribution, (ii) TCM, processing and distribution, and (iii) herbal cultivation and sales ~~and (iv) flower tea bags~~. Currently, we do not have intersegment sales. On April 25, 2011, we decided to suspend our flower tea bags and sales operations. ~~Our~~This ~~decision~~ was ~~based~~because on the intentions of the local government of Bozhou, in conjunction with another pharmaceutical company, to expand the industry development park in Bozhou that would utilize the site where Xuelingxian is currently located. The factory buildings and relevant land on which Xuelingxian is situated ~~will~~was to be expropriated ~~and~~which ~~Xuelingxian~~resulted ~~will~~in bethe ~~required~~lease toof ~~relocate~~our tofactory abuildings ~~new~~not ~~commercial~~being ~~address~~renewed. WeIn ~~are~~September ~~currently~~2011, ~~evaluating~~we ~~potential~~decided ~~new~~that ~~locations~~in ~~and undergoing market research on~~ the ~~flower~~event ~~tea bags market. Since~~ we ~~recently~~resume ~~completed~~our ~~the acquisition of Bozhou Xinghe in July 2011, management is considering relocating the~~ flower tea ~~bags~~bag business, toour ~~Bozhou~~operations ~~Xinghe~~in ifrespect ~~the~~of ~~new~~this ~~facility~~segment iswill ~~suitable~~be ~~for~~integrated ~~processing~~into ~~flower~~our ~~tea~~TCM ~~bags.~~processing ~~Management is evaluating the situation~~ and ~~will~~distribution ~~either~~segment ~~re-commence~~since orboth ~~permanently~~segments ~~cease~~are ~~the~~similar ~~flower~~in ~~tea~~operations ~~bags business after research~~ and ~~valuation is completed, which we contemplate will be the end of 2011~~management.

Off-Balance Sheet Arrangements

We dodid not have any outstanding off-balance sheet ~~arrangements~~guarantees, ~~that~~interest ~~have~~rate orswap ~~are~~transactions, ~~reasonably~~foreign ~~likely~~currency toand ~~have~~commodity aforward ~~current~~contracts or ~~future~~other ~~effect~~off-balance onsheet ~~our~~arrangements. ~~financial~~We ~~condition,~~do ~~changes~~not engage in ~~financial~~trading ~~condition,~~activities ~~revenues~~involving ornon-exchange ~~expenses,~~traded ~~results~~contracts. ofIn ~~operations~~our ongoing business, ~~liquidity~~we do not enter into transactions involving, or ~~capital~~otherwise ~~expenditures~~form relationships with, unconsolidated entities or ~~capital~~financial ~~resources~~partnerships that are ~~material~~established tofor anthe ~~investor~~purpose inof ~~our~~facilitating ~~securities~~off-balance sheet arrangements or other contractually narrow or limited purposes.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

During and subsequent to the reporting period covered by this report, and under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures that were in effect at the end of the period covered by this report. Disclosure controls and procedures is defined under Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as those controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by anus ~~issuer~~ in the reports that itwe ~~files~~file or ~~submits~~submit under the Exchange Act is accumulated and communicated to ~~the~~our ~~issuer's~~ management, including ~~its~~our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation and as discussed below, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures that were in effect on June 30, 2011 were effective.

Based on their evaluation and as discussed below, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures that were in effect on September 30, 2011 were not effective, as, due to limitations in the capacity of our accounting resources to identify and react in a timely manner to non-routine and complex transactions, an accounting classification error resulting from contingent consideration associated with ordinary shares issued in connection with the Quantum and Pacific Asia acquisitions was not properly detected, resulting in an understatement of liabilities and failure to record the associated charge to earnings. Therefore, we were not able to effectively identify all necessary and appropriate disclosures and to effectively capture all financial data for the purposes of preparing our financial statements in accordance with U.S. GAAP.

Management’s Remediation Initiatives

In addition to the material weakness cited above, in our Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”) filed with the SEC on April 13, 2011, the following material weakness in our internal control over financial reporting was identified as of December 31, 2010:

“The Company did not have appropriate policies and procedures in place to identify and give disclosures relating to the basis for applying the reverse acquisition accounting to the Company’s acquisitions of three PRC operating subsidiaries pursuant to an Earn-In Agreement, as thereafter amended, and to properly accrue for dividends declared by the PRC operating company prior to the Earn-In Agreement and properly recognize certain transactions. Therefore, the Company was not able to effectively identify all necessary and appropriate disclosures and to effectively capture all financial data for the purposes of preparing its financial statements in accordance with U.S. GAAP.”

The material weakness identified in the 2010 Form 10-K as of December 31, 2010 was the result of a transaction in conjunction with the Reverse Merger, which had not occurred prior thereto, nor have any such activities been identified on an ongoing day-to-day basis thereafter. Subsequent to the year ended December 31, 2010, following the identification of the material weakness, our management has established financial reporting policies and procedures to facilitate the effective identification and capture of complex and significant transactions (similar to the isolated transaction described above, in which lack of proper financial reporting policies and procedures had resulted in a material weakness at December 31, 2010). Based on our current financial reporting policies and procedures, we do not anticipate that such a similar material weakness will occur on a going-forward basis.

InSubsequent ~~response~~ to the ~~above-identified~~year ~~material~~ended ~~weakness~~December ~~and~~31, to2010, ~~strengthen~~following ~~our~~the ~~internal~~identification ~~control~~of ~~over~~the material weakness, our management established financial reporting, wepolicies ~~have~~and ~~taken~~procedures to facilitate the ~~following~~effective ~~remediation~~identification ~~initiatives:~~and capture of complex and significant transactions.

● formed an Audit Committee in February 2011, chaired by an accounting expert with adequate knowledge and experience in U.S. GAAP and SEC reporting requirements, to advise the management on matters relating to the Company’s internal control over financial reporting.52

●In ~~engaged~~response anto ~~internal~~the ~~control~~above-identified ~~expert~~material inweaknesses ~~February~~and ~~2011~~to ~~with~~strengthen ~~eight~~our ~~years of audit experience (including five years of “Big Four” accounting firm experience focused primarily on~~ internal control ~~audit~~over ~~issues)~~financial ~~to assist management in evaluating complex accounting issues on an as-needed basis~~reporting, ~~and~~we tohave ~~ensure~~taken ~~proper~~the ~~disclosure~~following ~~and~~remediation ~~reporting is made in a timely manner.~~initiatives:

In· ~~addition,~~formed ~~going~~an ~~forward,~~Audit Committee in ~~order~~February to2011, ~~address~~chaired ~~any~~by ~~potential~~an ~~material~~accounting ~~weaknesses~~expert inwith ~~our~~adequate ~~internal~~knowledge ~~controls~~and ~~over~~experience ~~financial~~in U.S. GAAP and SEC reporting requirements, weto ~~plan~~advise tothe ~~make~~management on matters relating to the ~~following~~Company’s ~~necessary~~internal ~~change~~control ~~and~~over ~~improvement:~~financial reporting.

~~● provide~~· ~~training~~engaged toan ~~our~~internal ~~finance~~control ~~team~~expert ~~and~~in ~~other~~February ~~relevant~~2011 ~~personnel~~with eight years of ~~the~~audit ~~Company~~experience (including five years of “Big Four” accounting firm experience focused primarily on ~~the~~internal ~~U.S.~~control ~~GAAP~~audit issues) to assist management in evaluating complex accounting ~~guidance~~issues ~~applicable~~on an as-needed basis, and to ~~the~~ensure ~~Company’s~~proper ~~financial~~disclosure ~~statements~~and reporting is made in a timely manner.

As· ofhired ~~June~~additional ~~30,~~audit ~~2011,~~and ~~the~~finance ~~Company~~personnel ~~continued~~with toexperience ~~reassess~~in ~~its~~and ~~internal~~knowledge ~~controls~~of SEC reporting obligations and ~~procedures~~accounting onrequirements anassociated ~~ongoing~~with ~~basis~~U.S. public companies.

provided training to our management, heads of each department, our finance team and other relevant personnel of the Company in July 2011 on the U.S. GAAP accounting guidance applicable to the Company’s financial statements and internal controls over financial reporting and disclosure controls and procedures adopted by our Company.

In addition, going forward, in order to address any potential material weaknesses in our internal controls over financial reporting, we plan to take the following further measures:

·	engage a third party internal control consultant to conduct a review of our procedures in place and suggest improvements in our internal controls over financial reporting and disclosure controls and procedures.

·	engage a financial expert consultant with “Big Four” accounting firm experience to assist management in reviewing and evaluating our financial and accounting treatment of complex and non-routine transactions (including material acquisitions) on an as-needed basis.

·	arrange for our key financial personnel, including our Chief Financial Officer and head of our finance department, to attend on-site training programs on SEC reporting and disclosure requirements, U.S. GAAP standards and internal control over financial reporting for U.S. public companies.

As of September 30, 2011, the Company continued to reassess its internal controls and procedures on an ongoing basis.

Changes in Internal Control over Financial Reporting

~~There~~We will continue to monitor the effectiveness of the foregoing remediation measures and make any changes that our management deems appropriate. Other than as disclosed above, there was no change in our internal control over financial reporting during the period ended ~~June~~September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There is no material legal proceeding pending against us.

Item 1A. Risk Factors

There have not been any material changes to the Company’s risk factors from our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on April 13, 2011., except as follows:

We may experience difficulty in managing our acquisitions and future growth.

We have grown significantly in recent years with our net revenues increasing from $86.8 million in 2009 to $140.3 million in 2010, representing a compound annual growth rate, or CAGR, of 61.6% during that period. We anticipate that we will continue to grow through organic growth and selective acquisitions. Managing our acquisitions and growth has resulted in, and will continue to result in, substantial demands on our management, operational and other resources. To manage the potential growth of our operations, we will be required to, among other things:

control operating expenses and achieve a high level of efficiency;

enhance our information technology systems, including installing compatible warehouse management and team management systems;

strengthen our operational financial and management systems, procedures and controls;

maintain and expand our relationships with suppliers, hospitals, distributors, retail pharmacies and other third parties;

control procurement costs and optimize product and service offerings and prices;

increase marketing, sales and sales support activities; and

expand, train and manage our growing personnel resources.

Our current and planned operations, personnel, systems, internal procedures and controls may not be adequate to support our future growth. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.

Recently, the addition of GDGY has given us access to the pharmaceutical retail market. We have also gained a critical production capability through our acquisition of Bozhou Xinghe. In the future, although we may also acquire businesses in certain areas, our experience and expertise in such areas may not be as strong as our experience and expertise in distributing pharmaceutical and healthcare products, or we may not possess a track record in such areas. For example, prior to our acquisition of GDGY, we did not previously operate in the pharmaceutical retail market.

Furthermore, we did not previously have business operations in the province of Guangdong. We are unfamiliar with local business practices in this region and we may face difficulties navigating local regulatory schemes, maintaining a local management team, facing challenges from local competitors and finding sufficiently qualified technical personnel in the area. We may face logistical issues with respect to the expansion of our operations in Guangdong and related to any necessary government approvals and permits. We also may have difficulty attracting and retaining qualified staff in this region. We may also face other unexpected difficulties in conducting our business that we do not face in areas where we had conducted businesses before we acquired GDGY.

Our limited operating history in the sales of Chinese herbal medicine may not serve as an adequate basis to judge our future prospects and results of operations.

Our TCM processing and sales business has expanded to include the sales of Chinese herbal medicine with our acquisition of our subsidiary, Bozhou Xinghe on July 4, 2011. Bozhou Xinghe was established in April 2009 but did not commenced operations after it obtained a Good Manufacturing Practice, or GMP, certificate in July 2011. Its limited operating history in processing and sales of Chinese herbal medicine may not provide a meaningful basis for evaluating its business. Although we acquired Bozhou Xinghe for its potential in creating a new profitable source of revenue for us, we cannot assure you that we will be successful in developing this new business segment, failing which we may incur net losses in the future. We will continue to encounter risks and difficulties that companies at a similar stage of development frequently experience, including the potential failure to:

obtain sufficient working capital to support its expansion;

maintain or protect our intellectual property;

maintain its proprietary technology;

expand its product offerings and maintain the quality of its products;

manage its expanding operations and continue to fill customers’ orders on time;

maintain adequate control of its expenses allowing it to realize anticipated revenue growth;

implement its product development, marketing and sales strategies and adapt and modify them as needed;

integrate any future acquisitions; and

anticipate and adapt to changing conditions in the Chinese herbal medicines industry resulting from changes in government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.

If we are unable to address any or all of the foregoing risks, our business, prospects and results of operations may be materially and adversely affected.

We do not directly own any equity interest in GDGY, and we depend upon the contractual arrangements between our subsidiary, Hairui Xiexin and GDGY, to control and derive economical benefits therefrom, which may not be as effective as direct ownership.

We do not directly own any equity interest in our indirect subsidiary, GDGY. On July 11, 2011, our wholly owned subsidiary, Hairui Xiexin entered into a series of contractual arrangements with GDGY and the shareholders of GDGY, pursuant to which Hairui Xiexin will act as the management company and operation trustee for GDGY, while GDGY conducts the principal operations of the business. The contractual agreements effectively transferred the economic benefits of GDGY’s business to Hairui Xiexin, and Hairui Xiexin assumed effectively control and management of GDGY. These contractual arrangements may not be as effective in providing us with control over GDGY as direct ownership.

The contractual arrangements are governed by PRC laws and provides for the resolution of disputes through arbitration proceedings pursuant to PRC laws. Accordingly, the contractual arrangements will be interpreted in accordance with PRC laws. If GDGY or its shareholders fail to perform the obligations under the contractual arrangements, we may have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, and there is a risk that we may be unable to obtain these remedies. The legal environment in China is not as developed as in other jurisdictions. As a result, uncertainties in the PRC legal system could limit our ability to enforce the contractual arrangements.

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

~~None~~There have not been any unregistered sales of equity securities since our Current Reports on Form 8-K filed with the SEC on September 23, 2011 and October 26, 2011, respectively. The disclosure set forth under Item 3.02 in both Current Reports on Form 8-K is incorporated by reference into this Item 2.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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

Exhibit Number		Description
10.1		Credit Granting Maximum Amount Guarantee Contract of Legal Person, dated April 27, 2011, by and between Shandong Global Pharm and Jinan East Lishan Road Branch of Qilu Bank Co., Ltd.
10.2		Credit Granting Contract of Legal Person, dated April 27, 2011, by and between Shandong Global Pharm and Jinan East Lishan Road Branch of Qilu Bank Co., Ltd.
10.3		Mortgage Contract of Maximum Amount for Goods Control and Financing, dated April 27, 2011, by and between Shandong Global Pharm and Jinan East Lishan Road Branch of Qilu Bank Co., Ltd.

Exhibit Number		Description
10.1		Loan Agreement of Current Assets, dated May 13, 2011, by and between Bozhou Xinghe and Bozhou Branch of Agricultural Development Bank of China
10.2		Loan Agreement of Current Assets, dated May 23, 2011, by and between Bozhou Xinghe and Bozhou Branch of Agricultural Development Bank of China
10.3		Loan Agreement of Current Assets, dated June 9, 2011, by and between Bozhou Xinghe and Bozhou Branch of Agricultural Development Bank of China
10.4		Loan Agreement of Fixed Assets, dated May 26, 2010, by and between Bozhou Xinghe and Bozhou Branch of Agricultural Development Bank of China
10.5		Loan Agreement of Fixed Assets, dated June 2, 2010, by and between Bozhou Xinghe and Bozhou Branch of Agricultural Development Bank of China
10.6		Loan Agreement, dated May 13, 2011, by and between Bozhou Xinghe and Hefei Branch of China Minsheng Banking Corp., Ltd.
10.7		Loan Agreement, dated May 2011, by and between Bozhou Xinghe and Hefei Branch of China Minsheng Banking Corp., Ltd.
10.8		Lease Contract, dated July 1, 2011, by and between Shandong Huawei and Weifang Lishengyuan Pharmaceutical Franchises Co., Ltd.
10.9		Lease Contract, dated July 3, 2011, by and between Zibo Global Pharm and Shandong Yulin Warehousing Co., Ltd.
10.10		Lease Contract, dated December 1, 2010, by and between Shandong Huawei and Civil Air Defense Office of Weifang City
10.11		Lease Contract, dated July 1, 2011, by and between Shandong Huawei, Weifang Lishengyuan Pharmaceutical Franchises Co., Ltd. and Civil Air Defense Office of Weifang City
10.11A		Supplementary Agreement, dated September 30, 2011, by and between Shandong Huawei and Weifang Lishengyuan Pharmaceutical Franchises Co., Ltd.
10.12		Lease Contract, dated July 15, 2011, by and between Guangdong Guo Yao and Guangzhou Juli Stationery Co., Ltd.
10.13		Purchase Agreement, dated January 1, 2011, by and between Shandong Huawei and Beijing Tong Ren Tang Technologies (Operational Branch) Co. Ltd.
10.14		Purchase Agreement, dated January 1, 2011, by and between Shandong Huawei and Beijing Tong Ren Tang Technologies (Branch of New Products) Co. Ltd.
10.15		Purchase Agreement, dated January 2011, by and between Shandong Huawei and Shandong Jointown Pharmaceutical Co., Ltd.
10.16		Purchase Agreement, dated January 1, 2011, by and between Shandong Huawei and Branch of Beijing Tong Ren Tang Co., Ltd.
31.1		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended*
31.2		Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended *
31.3		Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
31.4		Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

10.4		Warehouse and Storage Supervision and Management Agreement, dated April 27, 2011, by and between Shandong Global Pharm and Jinan East Lishan Road Branch of Qilu Bank Co., Ltd. and Shandong Yayin Assets Management Co., Ltd.
10.5		Lease Contract, dated March 1, 2009, by and between Taian Senlin Pharmaceutical Co., Ltd. and Dabaiyu Resident Committee
10.6		Lease Contract, dated January 1, 2011, by and between Zibo Hongmao Pharmaceutical Co., Ltd. and Zibo Drug Purchasing & Supply Station of Shandong Province
10.7		Lease Contract, dated May 20, 2011, by and between Anhui Sino-Green and Li Wanzhi
10.8		Lease Contract, dated April 10, 2011, by and between Shandong Sino-Green and People’s Government of Mashan Town
10.9		Land Transfer Agreement, dated April 29, 2011, by and between Shandong Sino-Green and Chanqging District, Mashan Town
10.10		Land Transfer Contract, dated June 10, 2011, by and between Anhui Sino-Green and Shibali Town Government of Qiaocheng District, Bozhou City
10.11		M&A Agreement dated May 25, 2011, by and between Shandong Global Pharm and Taian Senlin Pharmaceutical Co., Ltd.
10.11A		Supplementary Agreement, dated May 25, 2011, by and between Shandong Global Pharm and Taian Senlin Pharmaceutical Co., Ltd.
10.12		M&A Agreement dated May 25, 2011, by and between Shandong Global Pharm and Zibo Hongmao Pharmaceutical Sales Co., Ltd.
10.12A		Supplementary Agreement, dated May 25, 2011, by and between Shandong Global Pharm and Zibo Hongmao Pharmaceutical Sales Co., Ltd.
10.13		M&A Agreement, dated July 4, 2011, by and between Shandong Global Pharm and Bozhou Xinghe Pharmaceutical Co., Ltd.
10.13A		Supplementary Agreement, dated July 5, 2011, by and between Shandong Global Pharm and Bozhou Xinghe Pharmaceutical Co., Ltd.
10.14		Equity Transfer Agreement, dated May 25, 2011, by and between Shandong Global Pharm and Kong Lingjin (for Taian Senlin)
10.15		Equity Transfer Agreement, dated May 25, 2011, by and between Shandong Global Pharm and Lv Xinjuan (for Taian Senlin)
10.16		Equity Transfer Agreement, dated May 31, 2011, by and between Shandong Global Pharm and Chen Hongsheng (for Zibo Hongmao)
10.17		Equity Transfer Agreement, dated July 4, 2011, by and between Shandong Global Pharm and Han Lingzhi (for Bozhou Xinghe)
10.18		Equity Transfer Agreement, dated July 4, 2011, by and between Shandong Global Pharm and Gu Quanhui (for Bozhou Xinghe)
10.19		Lease Contract, dated January 1, 2010, by and between Zibo Hongmao Pharmaceutical Co., Ltd. and Zibo Drug Purchasing & Supply Station of Shandong Province
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

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*
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*

* The referenced exhibits marked by an “*” attached to this Form 10-Q 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.

SIGNATURES

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

	GLOBAL PHARM HOLDINGS GROUP, INC.
Date: August 12, 2011	/s/ Yunlu Yin
Date: November 21, 2011	/s/ Yunlu Yin
	Yunlu Yin
	Chief Executive Officer and President
	(Principal Executive Officer)
Date: August 12, 2011	/s/ An Fu
Date: November 21, 2011	/s/ An Fu
	An Fu
	Chief Financial Officer
	(Principal Financial Officer)

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