form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:

For the transition period from______ to _______

01-06914

Commission File Number

Worldwide Biotech & Pharmaceutical Company

(Name of small business issuer in its charter)

Delaware

(State or other jurisdiction of Incorporation)

59-0950777

(IRS Employer Identification Number)

4 Fenghui South Road, 15th Floor, A10-11501

Jie Zuo Mansion, Xi'an, Shaanxi 710075

P.R. China

(Address of principal executive offices)

86-29-88193339

(Issuer's telephone number)

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

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 o No o

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

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) (check one): Yes o No x

As of August 12, 2010, there were 53,915,653 shares of the common stock issued and outstanding.

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

FORM 10-Q

June 30, 2010

TABLE OF CONTENTS

			Page

PART I - FINANCIAL INFORMATION

	ITEM 1 - FINANCIAL STATEMENTS		3

	ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		21

	ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		27

	ITEM 4 - CONTROLS AND PROCEDURES		27

PART II - OTHER INFORMATION

	ITEM 6 - EXHIBITS		28

		SIGNATURES	29

Table of Contents

PART I – FINANCIAL INFORMATION

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

June 30, 2010

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Contents	Page(s)

Consolidated Balance Sheets at June 30, 2010 (Unaudited) and December 31, 2009	4

Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2010 and 2009 (Unaudited)	5

Consolidated Statement of Comprehensive Loss for the Three Months and Six Months Ended June 30, 2010 and 2009 (Unaudited)	6

Consolidated Statement of Changes in Equity (Deficit) for the Six Months Ended June 30, 2010 (Unaudited)	7

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (Unaudited)	8

Notes to the Consolidated Financial Statements (Unaudited)	9 - 20

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY
CONSOLIDATED BALANCE SHEETS

	June 30, 2010			December 31, 2009
	(Unaudited)
ASSETS
Current Assets:
Cash	$	106,961		$	595,478
Accounts receivable, net (Note 4)		10,104			1,863
Inventories (Note 5)		177,047			139,507

Prepayments and other current assets		180,524			87,231

Total Current Assets		474,636			824,079

Property, plant and Equipment, net		4,147,796			4,316,918

Land use rights, net		764,488			768,590

Total Assets	$	5,386,920		$	5,909,587


LIABILITIES
Current liabilities:
Loan payable (Note 7)	$	707,814		$	703,089
Note payable- stockholder (Note 6)		155,011			161,300
Current maturities of note payable - bank (Note 8)		1,474,613			1,464,768
Accounts payable		353,234			354,617
Due to related parties (Note 6)		3,071,560			3,090,339
Other current liabilities		2,198,946			2,124,049

Total Current Liabilities		7,961,178			7,898,162

Total Liabilities		7,961,178			7,898,162

EQUITY(DEFICIT)
WWBP stockholders' equity (deficit):
Common stock $.001 par value; 90,000,000 shares authorized;
53,915,653 shares issued and outstanding,		53,916			53,916
Additional paid-in capital		12,717,003			12,669,140
Accumulated deficit		(15,145,591	)		(14,645,196	)
Accumulated other comprehensive income (loss):
Foreign currency translation gain		149,992			162,167
Total WWBP stockholders' equity (deficit)		(2,224,680	)		(1,759,973	)

Noncontrolling interest		(349,578	)		(228,602	)

Total Equity (Deficit)		(2,574,258	)		(1,988,575	)

Total Liabilities and Equity (Deficit)	$	5,386,920		$	5,909,587


See accompanying notes to the consolidated financial statements

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009

Net Revenues	$	6,588		$	19,555		$	10,583		$	37,820

Cost of Goods Sold		26,166			36,300			61,611			49,889

Gross Profit		(19,578	)		(16,745	)		(51,028	)		(12,069	)

Operating Expenses:
Selling expenses		15,015			2,043			56,041			3,561
Research and development		4,659			14,204			8,277			16,422
Professional fees		28,653			48,255			29,530			48,525
Stock-based compensation		-			-			-			-
General and administrative		69,438			99,275			143,681			172,559

Total Operating Expenses		117,765			163,777			237,529			241,067

Loss from Operations		(137,343	)		(180,522	)		(288,557	)		(253,136	)

Other Expenses(Income):
Interest income		(154	)		(141	)		(187	)		(446	)
Interest expense		112,441			99,153			224,505			194,461
Other (income) expense		(8,709	)		(37,610	)		(17,181	)		(36,252	)
Depreciation and production cost of idle capacity		79,086			60,838			121,348			121,758
Realized (gain) loss on sale of marketable securities		-			-			-			-

Total Other (Income) Expenses		182,664			122,240			328,485			279,521

Net Loss		(320,007	)		(302,762	)		(617,042	)		(532,657	)

Less: Net loss attributable to the noncontrolling interest		62,528			57,961			116,647			93,496

Net Loss Attributable to WWBP common stockholders	$	(257,479	)	$	(244,801	)	$	(500,395	)	$	(439,161	)

Net Loss Per Common Share
Net loss per common share - Basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)

Weighted average number of common shares outstanding
- Basic and diluted		53,915,653			53,915,653			53,915,653			53,915,653


See accompanying notes to the consolidated financial statements.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)

	For the Three Months Ended						For the Six Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009

Net loss	$	(320,007	)	$	(302,762	)	$	(617,042	)	$	(532,657	)

Other comprehensive income(loss), net of tax:
Foreign currency translation gain(loss)		(16,133	)		37,201			(16,504	)		633

Comprehensive loss		(336,140	)		(265,561	)		(633,546	)		(532,024	)
Comprehensive loss attributable to the noncontrolling interest		66,758			46,717			120,976			93,308

Comprehensive loss attributable to WWBP	$	(269,382	)	$	(218,844	)	$	(512,570	)	$	(438,716	)


See accompanying notes to the consolidated financial statements.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(UNAUDITED)

							WWBP Stockholders

																Accumulated
							Common Stock, $.001 Par Value				Additional					Other
				Comprehnsive			Number of				Paid-in		Accumulated			Comprehensive			Noncontrolling
	Total			Income			Shares		Amount		Capital		Deficit			Income			Interest

Balance, December 31, 2009	$	(1,988,575	)					53,915,653	$	53,916	$	12,669,140	$	(14,645,196	)	$	162,167		$	(228,602	)

Interest for due to related parties		47,863										47,863

Comprehensive loss:
Net loss		(617,042	)		(617,042	)								(500,395	)					(116,647	)
Other comprehensive loss, net of tax:
Foreign currency translation loss		(16,504	)		(16,504	)											(12,175	)		(4,329	)

Comprehensive loss		(633,546	)	$	(633,546	)

Balance, June 30, 2010	$	(2,574,258	)					53,915,653	$	53,916	$	12,717,003	$	(15,145,591	)	$	149,992		$	(349,578	)


See accompanying notes to the consolidated financial statements

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	For The Six Months Ended
	June 30, 2010			June 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(617,042	)	$	(532,657	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization		211,097			216,509
Stock-based compensation		-			-
Gain on sale of marketable securities		-			-
Imputed interest for due to related parties		47,863			59,109
Changes in assets and liabilities:
Accounts receivable		(8,241	)		(9,147	)
Inventories		(37,540	)		(43,045	)
Prepayments and other current assets		(93,293	)		(14,300	)
Accounts payable		(1,383	)		17,087
Other current liabilities		74,897			103,117

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(423,642	)		(203,327	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities		-			-
Purchase of property and equipment		(5,037	)		(13,515	)

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(5,037	)		(13,515	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable - stockholder		(7,325	)		(36,570	)
Repayment for due to related parties		(39,273	)		-
Proceeds from stockholders/officers		-			171,978

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(46,598	)		135,408

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(13,240	)		2,099

NET CHANGE IN CASH		(488,517	)		(79,335	)

CASH at beginning of period		595,478			190,039

CASH at end of period	$	106,961		$	110,704

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	-		$	-


See accompanying notes to the consolidated financial statements.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 1 - ORGANIZATION AND OPERATIONS

Worldwide Biotech & Pharmaceutical Company, (“Worldwide” or the “Company”) was incorporated in Delaware in 1961. In the fourth quarter of 2005, the Company commenced revenue producing operations.

On April 20, 2004, as amended on August 3, 2004 and effective December 16, 2004, under an Agreement and Plan of Reorganization, the Company issued 33,600,000 shares of its common stock for the acquisition of all of the outstanding capital stock of Yangling Daiying Biological Engineering Co., Ltd. (“Daiying”) with the former shareholders of the Company retaining 1,057,102 or approximately 5% of the outstanding stock. As a result of the ownership interests of the former shareholders of Daiying, for financial accounting purposes, the exchange of stock has been treated as a recapitalization of Worldwide with Daiying deemed the accounting acquirer and Worldwide deemed the accounting acquiree under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS No. 141”). Additionally, as part of the Merger, the Company, whose former name was Sun City Industries, Inc., amended its Articles of Incorporation, and changed its name to Worldwide Biotech & Pharmaceutical Company.

Daiying was incorporated on November 26, 2001 in Shaanxi Province, the People's Republic of China (the “PRC”). Its principal business activities are to develop and market viruses/viral vectors, external diagnostic reagents, prophylactic vaccines for humans, and oral solid dosage forms of traditional Chinese medicine products.

On March 7, 2005, Daiying formed Shaanxi Daiying Medicine Distribution Co., Ltd. (“Shaanxi”) with a stockholder of the Company, in which Daiying holds a 90% interest. The stockholder's contribution for its 10% interest was Renminbi (“RMB”) 500,000 (equivalent to $61,956 at December 31, 2005), which has been reduced by its proportional share of Shaanxi's loss from inception-to-date. Shaanxi's principal business activities are trading of medicine products.

On July 26, 2005, Glory Dragon Investments Ltd. (“Glory Dragon”), an international business company, was formed in the British Virgin Islands by the Company. Glory Dragon then established a wholly-owned foreign investment company in the People's Republic of China known as Shaanxi Allied Shine International Investment Management Consulting Ltd. (“Shaanxi Allied”) on December 27, 2005. Worldwide transferred all of its shares in Daiying to Shaanxi Allied on December 27, 2005.

On January 19, 2006, Worldwide by and through its wholly owned subsidiary, Daiying, entered into a Reorganization Agreement with Hunan Hua Yang Pharmaceutical Co. Ltd. (“Hua Yang”) and its shareholders. Pursuant to this agreement, the Company issued 482,800 shares of its common stock to the shareholders of Hua Yang to acquire 51%. Hua Yang, incorporated on June 22, 1999 in Hunan Province, China, engages in developing, manufacturing and marketing synthetic chemical medicine, antibiotics, immune vaccine and nutrient supplements.

Also on January 19, 2006, Daiying entered into a Reorganization Agreement with Hunan Ze An Pharmaceutical Co. Ltd. (“Ze An”) and its shareholders. Daiying paid RMB3,400,000 (equivalent to US$424,115 at March 31, 2006) and 217,600 shares of common stock of Worldwide for 65% of Ze An. Ze An was incorporated in February 2000 in Hunan Province, China, and engages in developing, manufacturing and marketing essential traditional Chinese medicine, organic herbal medicine, and neutraceutical products.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 1 - ORGANIZATION AND OPERATIONS (CONTINUED)

On December 18, 2006, Daiying, Mr. Aibin Chen and Mr. Zuobin Li, minority shareholders of Ze An and Hua Yang, entered into a Consolidation and Reorganization Agreement (“Consolidation”). Pursuant to the Consolidation, Ze An merged into Hua Yang with Hua Yang assuming all assets and liabilities of Ze An and Hua Yang continuing as the surviving entity. In addition, as part of the Consolidation, Daiying acquired an additional 15% equity interest in Ze An for a note payable to Mr. Zhongyu Lu, a former shareholder of Ze An, of RMB 1,351,200 (equivalent to $172,954 at December 31, 2006). The note included the principal of RMB1.2 million (equivalent to $153,600 at December 31, 2006) and accrued interest of RMB151,200 (equivalent to $19,354 at December 31, 2006) based on an interest rate of 6.3% per annum with both principal and interest due December 4, 2007; the note is currently passed due. The Company owns a 67.3486% equity interest of Hua Yang subsequent to the consolidation.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2009 and notes thereto contained in the Report on Form 10-K of the Company as filed with the United States Securities and Exchange Commission (the “SEC”) on March 31, 2010. Interim results are not necessarily indicative of the results for the full year.

The consolidated financial statements include all the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant inter-company balances and transactions have been eliminated. The results of operations for Hua Yang have been included in the Consolidated Statements of Operations and Comprehensive Loss since the date of acquisition.

Reclassification

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

Use of estimates

In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates. The Company regularly evaluates estimates and assumptions related to obsolete inventory, useful life and recoverability of long lived assets, and goodwill. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Subsequent Events

The Company has evaluated subsequent events through the date that the financial statements were issued, which was August 13, 2010, the date of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2010.

Cash equivalents

Cash and cash equivalents include cash on hand, demand deposits with banks and liquid investments with an original maturity of three months or less. Cash deposits with banks are held in financial institutions in China, which has no federally insured deposit protection. Accordingly, the Company has a concentration of credit risk related to these uninsured deposits.

Marketable securities

Marketable securities, available-for-sale, securities consisted of investments in the equity of publicly traded companies in China and are stated at market value based on the most recently traded price of these securities. Unrealized gains and losses, determined by the difference between historical purchase price and the market value at each balance sheet date, are recorded as a component of Accumulated other comprehensive income in stockholders’ equity. Realized gains and losses are determined by the difference between historical purchase price and gross proceeds received when the marketable securities are sold.

Trade accounts receivable

Trade accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses, if any.

Outstanding account balances are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure to its customers.

Inventories

Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average cost method. Costs include direct material, direct labor and applicable manufacturing overhead. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management writes down the inventories to market value if market value is below cost. Management also regularly evaluates the composition of the Company’s inventories to identify slow-moving and obsolete inventories to determine if a valuation allowance is required.

Property, plant and equipment

Property, plant and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property, plant and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives ranging from five (5) years to 20 years. Upon sale or retirement of property, plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. Leasehold improvements, if any, are amortized on a straight-line basis over the lease period or the estimated useful life, whichever is shorter. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. Construction in progress includes direct costs of construction of factory building. Interest incurred during the period of construction has not been capitalized as such amounts are considered to be immaterial at this time. Construction in progress is not depreciated until such time as the assets are completed and put into operational use.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Land use rights

Land use rights represent the cost to obtain the right to use land in the PRC. Land use rights are carried at cost and amortized on a straight-line basis over the lives of the right ranging from 40 to 50 years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Licenses

The Company has adopted the guidelines as set out in the standard, “Goodwill and Other Intangible Assets,” codified with ASC 350, for the licenses. Under the requirements as set out in SFAS No. 142, the Company amortizes the costs of acquired licenses over their remaining legal lives or the term of the contract, whichever is shorter. Licenses are stated at cost less accumulated amortization and accumulated impairment losses, if any. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Impairment of long-lived assets

The Company follows the standard, “Accounting for the Impairment or Disposal of Long-Lived Assets,” codified with ASC 360, for its long-lived assets. The Company's long-lived assets, which include property, plant and equipment, land use rights and licenses are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset's expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company determined that there were no impairments of long-lived assets for the six months ended June 30, 2010 and 2009.

Segment information

The standard, “Disclosures about Segments of an Enterprise and Related Information,” codified with ASC 280, requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in one business segment (research, development, production, marketing and sales of auto electronic products) and in one geographical segment (China), as all of the Company’s current operations are carried out in China.

Revenue recognition

The Company follows the guidance of the standard, “Revenue Recognition,” codified with ASC 605, for revenue recognition. The Company revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred and the title and risk of loss transfer to the buyer, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Persuasive evidence of an arrangement is demonstrated via invoice to the customer; product delivery is evidenced by the warehouse shipping log as well as a signed bill of lading from the trucking company and no product return is allowed except for defective or damaged products; the sales price to the customer is fixed upon acceptance of the purchase order; and there are no separate sales rebates, discounts, or volume incentives. The Company manufactures and distributes traditional Chinese medicine, including drink tablets, synthetic medicine, antibiotics, biotech medicine and biotech reagents; wholesale Class II medical devices, Class III medical devices, including but not limited to, medical sewing materials and bond, medical high molecular materials and products, and disposable sterile medical devices. The majority of the Company's revenue derives from sales contracts with distributors. The Company sells certain products to certain customers on a consignment basis. The Company records revenue for consignment transactions when the consignee sells the product to the end users.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock based compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment” (“SFAS No. 123R”) using the modified prospective method. On January 12, 2007, the Company issued 1,400,000 shares of its common stock to three employees pursuant to the 2005 Non-Qualified Stock Compensation Plan (see Note 15(i)). The Company valued the shares at $0.15 per share, the closing price of the Company's common stock on the date of issuance and charged $210,000 to stock based compensation. The Company did not issue any stock options or warrants to any employees, directors, officers or third parties since January 1, 2006.

Research and development

Research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment and material costs for research and development.

Government grants

Receipts of government grants to encourage research and development activities which are non-refundable are credited to deferred income upon receipt. The Company recognizes government grants income when the government completes inspection on regulated use of the subsidy. There was no government grants income recognized for the six months ended June 30, 2010 or 2009. As of June 30 2010, government grants of $368,653 were recorded as deferred income.

Shipping and handling costs

The Company accounts for shipping and handling fees in accordance with the Financial Accounting Standards Board Emerging Issues Task Force Issue No. 00-10 “Accounting for Shipping and Handling Fees and Costs” (“EITF Issue No. 00-10”). While amounts charged to customers for shipping product are included in revenues, the related costs are classified in cost of goods sold as incurred.

Income taxes

The Company follows the standard, “Accounting for Income Taxes,” codified with ASC 740, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations and Comprehensive Income in the period that includes the enactment date.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair value of financial instruments

The Company adopted the standard “Fair Value Measurements,” codified with ASC 820 and effective January 1, 2008. The provisions of ASC 820 are to be applied prospectively.

ASC 820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Under ASC 820, fair value measurements are not adjusted for transaction cost. ASC 820 provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2: Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.

Level 3: Unobservable inputs. Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.

An asset or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors. The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.

Foreign currency translation

Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with the standard, “Foreign Currency Translation”, codified with ASC 830.

The financial records of the Company are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency. Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the combined and consolidated financial statements. Foreign currency translation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the consolidated statement of stockholders' equity.

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 rate 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 United States dollars (“US$”) has been made at the following exchange rates for the respective years:

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

June 30, 2010

Balance sheet RMB 6.7814 to US$1.00

Statement of operations and comprehensive income (loss) RMB 6.8257 to US$1.00

December 31, 2009

Balance sheet RMB 6.8270 to US$1.00

Statement of operations and comprehensive income (loss) RMB 6.8311to US$1.00

June 30, 2009

Balance sheet RMB 6.8307 to US$1.00

Statement of operations and comprehensive income (loss) RMB 6.8331 to US$1.00

Commencing July 21, 2005, China adopted a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. The exchange rate of the US dollar against the RMB was adjusted from approximately RMB 8.2765 per US dollar to approximately RMB 8.11 per US dollar on July 21, 2005. Since then, the PBOC administers and regulates the exchange rate of the US dollar against the RMB taking into account demand and supply of RMB, as well as domestic and foreign economic and financial conditions.

Net gains and losses resulting from foreign exchange transactions, if any, are included in the Consolidated Statements of Operations and Comprehensive loss. The foreign currency translation gain(loss) for the six months ended June 30, 2010 and 2009 were and $(16,504) and $633 and effect of exchange rate changes on cash flows for the six months period then ended were $(13,240) and $2,099, respectively.

Related parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Comprehensive income (loss)

The Company has adopted the standard, “Reporting Comprehensive Income” codified with ASC 220. This statement establishes rules for the reporting of comprehensive income (loss) and its components. Comprehensive income (loss), for the Company, consists of net loss and foreign currency translation adjustments and is presented in the Consolidated Statements of Operations and Comprehensive Income (loss) and Stockholders' Equity.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Net loss per common share

Net loss per common share is computed pursuant to the standard, “Earnings Per Share,” codified with ASC 260. Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of June 30, 2010.

Commitments and contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Recent Accounting Pronouncements

In June 2009, the FASB issued a new standard regarding the accounting for transfers of financial assets amending the existing guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. For the Company, this standard is effective for new transfers of financial assets beginning January 1, 2010. Because the Company historically does not have significant transfers of financial assets, the adoption of this standard is not expected to have a material impact on the Company’s consolidated results of operations or financial condition.

In June 2009, the FASB issued a new standard that revises the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. For the Company, this standard was effective January 1, 2010. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force,” that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding the application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. For the Company, ASU No. 2009-13 is effective beginning January 1, 2011. The Company may elect to adopt the provisions prospectively to new or materially modified arrangements beginning on the effective date or retrospectively for all periods presented. The Company is currently evaluating the impact of this standard on its Company’s consolidated results of operations and financial condition.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In October 2009, the FASB issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force,” that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance: the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). For the Company, ASU No. 2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on the its consolidated results of operations and financial condition.

In January 2010, the FASB issued ASU No. 2010-6, “Improving Disclosures About Fair Value Measurements”, that amends existing disclosure requirements under ASC 820 by adding required disclosures about items transferring into and out of Levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to Level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. For the Company, this ASU is effective for the first quarter of 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which is effective beginning the first quarter of 2011. Since this standard impacts disclosure requirements only, its adoption will not have a material impact on the Company’s consolidated results of operations or financial condition.

In April 2010, the FASB issued ASU No. 2010-17, Milestone Method of Revenue Recognition—a consensus of the FASB Emerging Issues Task Force that recognizes the milestone method as an acceptable revenue recognition method for substantive milestones in research or development arrangements. This standard would require its provisions be met in order for an entity to recognize consideration that is contingent upon achievement of a substantive milestone as revenue in its entirety in the period in which the milestone is achieved. In addition, this ASU would require disclosure of certain information with respect to arrangements that contain milestones. For the Company, this guidance would be required prospectively beginning January 1, 2011. The Company is currently evaluating the impact of this consensus on its consolidated results of operations and financial condition.

NOTE 3 - GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $15,145,591 and a working capital deficiency of $7,486,542 at June 30, 2010, a net loss of $617,042 and net cash used in operations of $423,642 for the six months ended June 30, 2010, respectively.

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

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 4 - ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2010 and December 31, 2009 consisted of the following:

	June 30			December 31
	2010			2009

Accounts Receivable	$	545,259		$	533,446
Less: Allowance for doubtful accounts		(535,155	)		(531,583	)
	$	10,104		$	1,863

For the six months ended June 30, 2010 and 2009, the Company did not record any bad debt expense.

NOTE 5 - INVENTORIES

Inventories at June 30, 2010 and December 31, 2009 consisted of the following:

	June 30			December 31
	2010			2009

Raw Material	$	117,412		$	114,925
Work in process		296,525			259,198
Finished goods		483,352			480,816
		897,289			854,939
Less: Inventory obsolescence		(720,242	)		(715,432	)
	$	177,047		$	139,507

NOTE 6 - RELATED PARTY TRANSACTIONS

Due to and notes payable - related parties at June 30, 2010 and December 31, 2009 consisted of the following:

	June 30		December 31
	2010		2009
Due to related parties (a)
Guo, Wenxia CEO; Stockholder; Stockholder of Daiying	$	277,961	$	291,407
Xian Jin Hao Tech Stockholder; Stockholder of Daiying		1,331,089		1,308,568
Daiying Bio-Tech Research Institute The entity controlled by Guo,Wenxia		1,334,822		1,363,528
Li, Zhuobin Stockholder; Stockholder of Hua Yang		2,791		2,773
Chen, Aibin Stockholder; Stockholder of Hua Yang		124,897		124,063
	$	3,071,560	$	3,090,339
Note payable- stockholder (b)
Lu, Zhongyu Prior Stockholder of Ze An	$	155,011	$	161,300

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)

The chief executive officer and a stockholder advanced funds to the Company for its working capital. These advances are unsecured, due on demand and non-interest bearing.

Due to Xian Jin Hao Tech bears the interest at 12% per annum. For the six months ended June 30, 2010 and 2009, the interest expense was $97,943 and $56,046 respectively.

Note payable to a stockholder is unsecured, payable to a stockholder with interest at 6.3% per annum and due December 4, 2007. The note is currently past due. For the six months ended June 30, 2010 and 2009, the interest expense accrued for this note payable was $4,967 and $5,653, respectively.

On March 31, 2007, Xian Jin Hao Sci-Tech Investment Management Co., Ltd. (Xian Jin Hao), a stockholder of the Company converted RMB7.73 million (equivalent to $1 million at the date of conversion) to 10,000,000 shares of the Company’s common stock at $0.10 per share, the closing price of the Company’s common stock on the date of conversion

On September 30, 2007, the Company and Xian Jin Hao, a stockholder of the Company reached an agreement whereby the Company transferred certain property to Xian Jin Hao, with the original cost of RMB3,030,707 and Xian Jin Hao assumed the remaining mortgage of RMB1,087,250 and relieved debt of RMB1,943,457. Upon transfer of the property, the related cost of RMB3,030,707 (equivalent to $41,547 at December 31, 2007), accumulated depreciation of RMB447,032 ($61,283) remaining mortgage of RMB1,087,250 ($149,049) and the payable to Jin Hao of RMB1,943,457 ($266,424) were removed from the accounts with the excess value of the payable and assumed mortgage over the net book value of the transferred property being recorded as a contribution to capital.

Some due to related parties do not bear interest and have no definite terms of repayment. For the six months ended, June 30, 2010 and 2009, the Company imputed interest of $47,863 and $59,109, respectively, based on a 5.5% interest rate which approximates the bank lending rate.

Daiying Bio-Tech Research Institute rents the Company’s building for processing Emergency Haemostatic Patch. The lease agreement is valid from 2009 to 2016. The net value of leased building is $1,568,823 as of June 30, 2010. For the six months ended June 30, 2010 and 2009, other income-rental from this lease agreement was $17,581 and $0, respectively.

NOTE 7 – LOAN PAYABLE

Loan payable is collateralized by all of Hua Yang’s equipment, building and land use right, payable to a financial institution, with interest at 6.696% per annum payable monthly, with principal due May 27, 2007. The loan is currently past due. The Company paid interest through May 20, 2007 and interest accrued through June 30, 2010 was included in accrued interest. The net value of equipment, building and land use right collateralized for this loan is $2,768,612 as of June 30, 2010.

NOTE 8 – CURRENT MATURITIES OF NOTE PAYABLE- BANK

Note payable - bank is collateralized by all of Hua Yang’s equipment, building and land use right, and is payable to a financial institution, with interest at 6.696% per annum payable monthly, with RMB5 million (equivalent $667,307) due April 29, 2007 and RMB5 million ($667,308) due April 27, 2008. The note is currently past due for the first principal payment due on April 29, 2007. The Company paid interest through May 20, 2007 and interest accrued through June 30, 2010 was included in accrued interest

The accrued interest for above Loan Payable and Current Maturities of Note Payable was $529,006 and $452,234 as of June 30, 2010 and December 31, 2009, respectively. Interest expense accrued for above Loan Payable and Current Maturities of Note Payable was $73,732 and $73,653 for the six months ended June 30, 2010 and 2009, respectively.

Table of Contents

WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

June 30, 2010

(Unaudited)

NOTE 9 - CONCENTRATIONS AND CREDIT RISK

Credit risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. As of June 30, 2010, substantially all of the Company's cash and cash equivalents were held by major financial institutions located in the PRC, none of which are insured. However, the Company has not experienced losses on these accounts and management believes that the Company is not exposed to significant risks on such accounts.

NOTE 10 - FOREIGN OPERATIONS

(i) Operations

Substantially all of the Company's operations are carried out and all of its assets are located in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

(ii) Dividends and reserves

Under the Corporation Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years' losses, if any; (ii) allocations to the “Statutory Surplus Reserve” of at least 10% of net income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital; (iii) allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's “Statutory Common Welfare Fund”, which is established for the purpose of providing employee facilities and other collective benefits to employees in PRC; and (iv) allocations to any discretionary surplus reserve, if approved by stockholders.

As of June 30, 2010, the Company had no Statutory Surplus Reserve and the Statutory Common Welfare Fund established and segregated in retained earnings.

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

A.	PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The following analysis of the our results of operations and financial condition should be read in conjunction with the financial statements of Worldwide Biotech & Pharmaceutical Company for the year ended December 31, 2009 and notes thereto contained in the Report on Form 10-K of Worldwide Biotech & Pharmaceutical Company as filed with the Securities and Exchange Commission.

This document contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include (i) changes in external factors or in our internal budgeting process which might impact trends in our results of operations; (ii) unanticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in which we operate; and (iv) various competitive market factors that may prevent us from competing successfully in the marketplace.

B.	OVERVIEW OF BUSINESS

We were incorporated in Delaware in 1961. On Dec. 16, 2004, through a Reorganization Agreement, we reorganized with Yangling Daiying Biotech & Pharmaceutical Group Co., Ltd. (“Daiying”), located at Yangling High-tech Agricultural Demonstration Zone, P.R. China. We operate our business mainly through our wholly-owned subsidiary, Daiying and its subsidiaries in P.R. China. We focus on research and development, manufacture and distribution of in vitro diagnostics, human vaccine, biomedicines, traditional Chinese medicines, synthetic medicines and medical devices with frontier technologies and great potential.

Summary of Research and Development

As a biotech-focused company, we have made significant progress on our Hepatitis C virus (“HCV”) research pipelines. We successfully set up an in vitro intact HCV culturing system that can continuously replicate HCV in vitro and we are the first entity in the world to break this bottleneck in the HCV research field. Secondly, we developed a new generation of HCV diagnostic reagents that was fully approved for production and sales by the State Food and Drug Administration (“SFDA”) in China in 2006. We also established a high-throughput anti-HCV medicine screening system and started screening anti-HCV medicines. We expect to get one or two new anti-HCV leads in the next two years if we can raise enough capital funding for our research. We are actively developing an HCV human vaccine and in 2006, we successfully created two replication-deficient HCV strains that induced high immune responses in rabbit test subjects. We are now optimizing large-quantity purification methods for replication-deficient HCV and setting up ideal animal models for efficacy and safety studies of HCV human vaccine. Meanwhile, we will actively seek new collaboration opportunities and promising research projects. Our progress on research projects depends on our ability to raise enough funding in the future.

Corporate Events and Accomplishments

Our growth and development as a business enterprise has been marked by a number of significant corporate events. Daiying acquired Hunan Hua Yang Pharmaceutical Co., Ltd. (Hua Yang) and Hunan Ze An Pharmaceutical Co., Ltd. (Ze An) on January 19, 2006. On December 18, 2006, Daiying, Mr. Aibin Chen and Mr. Zuobin Li, minority shareholders of Ze An and Hua Yang, entered into a Consolidation and Reorganization Agreement (“Consolidation”). Pursuant to the Consolidation Ze An merged into Hua Yang with Hua Yang as a surviving entity. In addition, as part of the Consolidation, Daiying acquired a 15% equity interest in Ze An for a note payable to Mr. Zhongyu Lu, a former shareholder of Ze An, of RMB1,351,200 (equivalent to $172,954 at December 31, 2006). The note included the principal of RMB1.2 million (equivalent to $153,600 at December 31, 2006) and accrued interest of RMB151,200 (equivalent to $19,354 at December 31, 2006) based on an interest rate of 6.3% per annum with both principal and interest due December 4, 2007. The purpose of the Consolidation was to optimize capital resources and to minimize operating expenses.

Table of Contents

With the completion of these reorganization transactions, we now own two manufacturing facilities: our research and development and manufacturing headquarters, Daiying, is located at Yangling Hi-tech Demonstration Zone, Shaanxi Province, P.R. China. Daiying purchased the right to use 35,940 square meters of land and constructed a 5,359 square meter fully equipped manufacturing facility. Daiying owns six (6) traditional Chinese medicines and HCV in vitro diagnostics, which have National Drug Production Licenses from the China SFDA. Hua Yang purchased the right to use 51,640 square meters of land with a GMP-compliant manufacturing facility of 13,093 square meters. Hua Yang owns 29 medicines with National Drug Production Licenses and one (1) functional food with a National Food Production License from the SFDA.

In addition, we entered into a sole distribution agreement with Taramedic Corporation Sdn. BHD (“Taramedic”), a Malaysian company, to distribute its Tara KLamp® Disposable Circumcision Device (“Tara KLamp”). Taramedic owns patents for Tara KLamp in both Malaysia and China. Tara KLamp has been registered with the SFDA and sales began in 2006.

On March 28, 2007, Daiying, and Shaanxi Yangling Daiying Biotech Research Institute (“Institute”), entered into an Entrusting Agreement (the “Entrusting Agreement”) with respect to the commercialization of an Emergency Haemostatic Patch developed and patented in China by the Institute. Pursuant to the Entrusting Agreement, Daiying agreed to register the Emergency Haemostatic Patch (“Patch”) with the SFDA. All expenses associated with the registration process incurred by Daiying were paid by the Institute. We are currently producing and selling the SFDA-approved Emergency Haemostatic Patch product in China.

To continue our research and development on HCV products and facilitate the transition from focusing on research and development to engaging in both research and commercialization of new medical products, we may have to rely on our ability to raise additional capital during the next twelve months. In the case that we do not meet our fundraising goal in the year 2010, the above research projects will be delayed and production might not meet the market demand for our new product.

RESULTS OF OPERATIONS

The following analysis shows our selected unaudited consolidated statement of operations data for the three month and six month periods ended June 30, 2010 and June 30, 2009.

Three Months Ended June 30, 2010 Compared to the Three Months Ended June 30, 2009

Revenues

For the three months ended June 30, 2010, our revenues were $6,588 as compared to $19,555 for the three months ended June 30, 2009, a decrease of $12,967. This decrease in net revenues is the result of lower product sales by our subsidiaries due to greater competition in the pharmaceutical market.

Cost of Sales and Gross Profit

For the three months ended June 30, 2010, cost of sales amounted to $26,166 as compared to cost of sales of $36,300 for the three months ended June 30, 2009. We attribute the decrease in cost of sales to a reduction in the amount of goods sold and declining proceeds from sales. Gross profit for the three months ended June 30, 2010 was $(19,578), as compared to $(16,745) for the three months ended June 30, 2009.

Table of Contents

Operating Expenses

For the three months ended June 30, 2010, total operating expenses were $117,765 as compared to $163,777 for the three months ended June 30, 2009, a decrease of $46,012, or approximately 28.1%.

Contributing to the decrease was:

·	Research and development costs of $4,659 as compared to $14,204 for the three months ended June 30, 2010 and 2009, respectively, a decrease of $9,545. This result was due to less spending on research and development for the period.

·	Professional fees of $28,653 as compared to $48,255 for the three months ended June 30, 2010 and 2009, respectively, a decrease of $19,602. We attribute this decrease to lower legal and professional fees for the period.

·	General and administrative expenses were $69,438 for the three months ended June 30, 2010 as compared to $99,275 for the three months ended June 30, 2009, a decrease of $29,837, or approximately 30.1%. This reduction is the result of management’s efforts to cut expenditures in this area.

For the three months ended June 30, 2010, interest expense was $112,441 as compared to $99,153 for the three months ended June 30, 2009. For the three months ended June 30, 2010, total other expenses were $182,664 as compared to $122,240 for the three months ended June 30, 2009. The increase in other expenses for the three month period ended June 30, 2010 was mainly due to higher interest expense and lower other income as a result of no service provided to related parties.

As a result of these factors, we reported a net loss of $(320,007) or $0.00 per share for the three months ended June 30, 2010, as compared to a net loss of $(302,762) or $0.00 per share for the same period in 2009.

Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009

Revenues

For the six months ended June 30, 2010, our revenues were $10,583 as compared to $37,820 for the six months ended June 30, 2009, a decrease of $27,237. This decrease in revenues is due to lower product sales by our subsidiaries because of greater competition in the pharmaceutical market.

Cost of Sales and Gross Profit

For the six months ended June 30, 2010, cost of sales amounted to $61,611 as compared to cost of sales of $49,889 for the six months ended June 30, 2009. The increase in cost of sales for the six month period is primarily attributable to reduced production and an increase in the fixed cost per unit of product. Gross profit for the six months ended June 30, 2010 was $(51,028) as compared to $(12,069) for the six months ended June 30, 2009.

Operating Expenses

For the six months ended June 30, 2010, total operating expenses were $237,529 as compared to $241,067 for the six months ended June 30, 2009, a decrease of $3,538.

Table of Contents

Contributing to the decrease was:

·	Research and development costs of $8,277 as compared to $16,422 for the six months ended June 30, 2010 and 2009, respectively, a decrease of $8,145. This result was due to less spending on research and development in the first six months of 2010.

·	Professional fees of $29,530 for the six months ended June 30, 2010 as compared to $48,525 for the six months ended June 30, 2009, a decrease of $18,995. The decrease is the result of lower legal and professional fees for the six month period.

·	General and administrative expenses of $143,681 as compared to $172,559 for the six months ended June 30, 2010 and 2009, respectively, a decrease of $28,878, or approximately 16.7%. We attribute the reduction to management’s efforts to cut expenditures in this area.

For the six months ended June 30, 2010, interest expense was $224,505 as compared to $194,461 for the six months ended June 30, 2009. For the six months ended June 30, 2010, other expenses were $328,485 as compared to $279,521 for the six months ended June 30, 2009. The increase in other expenses for the period was mainly due to higher interest expense and lower other income as a result of no service provided to related parties.

As a result of these factors, we reported a net loss of $(617,042) or $(0.01) per share for the six months ended June 30, 2010, as compared to a net loss of $(532,657) or ($0.01) per share for the same period in 2009.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2010, we had cash and cash equivalents of $106,961.

Net cash used in operating activities for the six months ended June 30, 2010 was $423,642 as compared to net cash used in operating activities of $203,327 for the six months ended June 30, 2009. For the six months ended June 30, 2010, we used cash to fund our loss of $617,042, our inventories increased by $37,540, accounts payable decreased by $1,383, accounts receivable increased by $8,241, prepayments and other current assets increased by $93,293, accrued liabilities and other payables increased by $74,897, offset by non-cash items such as depreciation and amortization of $211,097. For the six months ended June 30, 2009, we used cash to fund our loss of $532,657, our inventories increased by $43,045, accounts payable increased by $17,087, accounts receivable increased by $9,147, prepayments and other current assets increased by $14,300, accrued liabilities and other payables increased by $103,117, offset by non-cash items such as depreciation and amortization of $216,509.

Net cash used in investing activities for the six months ended June 30, 2010 was $5,037 as compared to net cash used in investing activities for the six months ended June 30, 2009 of $13,515. For the six months ended June 30, 2010, we used cash of $5,037 for purchase of property and equipment. For the six months ended June 30, 2009, we used cash for purchase of property and equipment of $13,515.

Net cash used in financing activities for the six months ended June 30, 2010 was $46,598 as compared to net cash provided by financing activities for the six months ended June 30, 2009 of $135,408. For the six months ended June 30, 2010, we repaid $46,598 to stockholders/officers. For the six months ended June 30, 2009, we received net proceeds of $171,978 from stockholders/officers.

We have not generated sufficient cash flows from operations. If we do not generate enough revenues from the sales of our products to meet the cash needs, we will need other financing to continue to operate. As we work to increases sales of our products and services, we expect to increase cash flows from operations. However, we may choose at any time to raise capital through private debt or equity financing to strengthen our financial position and facilitate growth.

We currently have no material commitments for capital expenditures.

Table of Contents

Although China has been affected by the global recession, the government initiated a package of incentive programs to stimulate the economy and encourage business development, which has proven successful, especially in terms of GDP. According to China’s National Bureau of Statistics, China’s Gross Domestic Product (GDP) amounted to RMB4.98 trillion for the six months ended June 30, 2010, an increase of 10.3% as compared to the six months ended June 30, 2009. Additionally, a Chinese corporation can be owned by a United States corporation; however, the laws and regulations of China are subject to change and in the event a change occurs, it may affect our ability to operate in the People’s Republic of China.

Our future success depends on the continued services of our executive management currently in place. The loss of any of their services could be detrimental to us and could have an adverse affect on business development. Our future success also depends on our ability to identify, hire, train, or retain other qualified employees. Competition for these individuals is intense and increasing.

Efforts to Improve Our Financial Results

We have incurred losses since inception. Management is continuing to implement changes designed to improve our financial results and operating cash flows. The actions involve some cost-saving initiatives and growth strategies, including:

(a)	Improve capital conditions

Attract new investment and increase bank loans.

(b)	Strengthen internal controls

Strengthen internal controls in order to bring down production costs and various expenses.

(c)	Expand the market for our products

Increase marketing activities and introduce new products.

(d)	Continue our cooperation with Yangling Daiying Biotech Institute

Continue cooperation with Yangling Daiying Biotech Institute on the manufacturing and sale of its SFDA-approved product Emergency Haemostatic Patch, as well as to develop new products.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements at June 30, 2010.

Recently Issued Accounting Pronouncements

In June 2009, the FASB issued a new standard regarding the accounting for transfers of financial assets amending the existing guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. For us, this standard is effective for new transfers of financial assets beginning January 1, 2010. Because we historically do not have significant transfers of financial assets, the adoption of this standard is not expected to have a material impact on our consolidated results of operations or financial condition.

Table of Contents

In June 2009, the FASB issued a new standard that revises the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. For us, this standard was effective January 1, 2010. The adoption of this standard did not have a material impact on our consolidated results of operations or financial condition.

In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force,” that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding the application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. For us, ASU No. 2009-13 is effective beginning January 1, 2011. We may elect to adopt the provisions prospectively to new or materially modified arrangements beginning on the effective date or retrospectively for all periods presented. We are currently evaluating the impact of this standard on our consolidated results of operations and financial condition.

In October 2009, the FASB issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force,” that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance: the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). For us, ASU No. 2009-14 is effective beginning January 1, 2011. We are currently evaluating the impact of this standard on the its consolidated results of operations and financial condition.

In January 2010, the FASB issued ASU No. 2010-6, “Improving Disclosures About Fair Value Measurements”, that amends existing disclosure requirements under ASC 820 by adding required disclosures about items transferring into and out of Levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to Level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. For us, this ASU is effective for the first quarter of 2010, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which is effective beginning the first quarter of 2011. Since this standard impacts disclosure requirements only, its adoption will not have a material impact on our consolidated results of operations or financial condition.

Table of Contents

In April 2010, the FASB issued ASU No. 2010-17, Milestone Method of Revenue Recognition—a consensus of the FASB Emerging Issues Task Force that recognizes the milestone method as an acceptable revenue recognition method for substantive milestones in research or development arrangements. This standard would require its provisions be met in order for an entity to recognize consideration that is contingent upon achievement of a substantive milestone as revenue in its entirety in the period in which the milestone is achieved. In addition, this ASU would require disclosure of certain information with respect to arrangements that contain milestones. For us, this guidance would be required prospectively beginning January 1, 2011. We are currently evaluating the impact of this consensus on its consolidated results of operations and financial condition.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Credit risk

Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash and cash equivalents. As of June 30, 2010, substantially all of our cash and cash equivalents were held by major financial institutions located in the PRC, none of which are insured. However, we have not experienced losses on these accounts and management believes that we are not exposed to significant risks on such accounts.

Operations

Substantially all of our operations are carried out and all of our assets are located in the PRC. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. Our business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and our Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining disclosure controls and procedures for us. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

Table of Contents

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting, known to the chief executive officer or the chief financial officer that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 6. Exhibits

31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934

31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934

32.1	Certification of the Company's Chief Executive Officer Pursuant to 18 U.S.C. SS. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. SS. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WORLDWIDE BIOTECH & PHARMACEUTICAL COMPANY
	(Registrant)

August 13, 2010	By:	/s/ Wenxia Guo
		Wenxia Guo
		Chief Executive Officer and Director
		(Principal Executive Officer)


August 13, 2010	By:	/s/ Peng Wang
		Peng Wang
		Chief Financial Officer, Treasurer and Director
		(Principal Financial and Accounting Officer)


August 13, 2010	By:	/s/ Qiang Li
		Qiang Li
		Director