**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**





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





For
      the
      fiscal year ended June
      30, 2007





**OR**





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





For
      the
      transition period from _______ to _______





Commission
      file number : 0-51312




**SHENGTAI
      PHARMACEUTICAL, INC.**


**(formerly
      known as West Coast Car Company)**


(Exact
      name of registrant as specified in its charter)


Delaware
              54-2155579State
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization
              dentification
                  No.)




Changda
                  Road East, Development District, Changle County,
                  Shandong, P.R.C.
              262400(Address
                  of principal executive offices)
              (Zip
                  Code)




Registrant’s
      telephone number, including area code 011-86-536-6295728




Securities
      registered pursuant to Section 12(b) of the Act:




Title
                  of each class
              Name
                  of each exchange on which registered_________________________________________
              ___________________________________________________________________________________
              __________________________________________


Securities
      registered pursuant to section 12(g) of the Act:





Common
      Stock


(Title
      of
      class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


o Yes x No





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


o Yes x No










**Note** -
      Checking the box above will not relieve any registrant required to file reports
      pursuant to Section 13 or 15(d) of the Exchange Act from their obligations
      under
      those Sections.





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


x Yes o No





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K.


x Yes o No




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




Large
      accelerated filer o   Accelerated
      filer o   Non-accelerated
      filer x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).


o Yes x No





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      last sold, or the average bid and asked price of such common equity, as of
      the
      last business day of the registrant’s most recently completed second fiscal
      quarter.





**Note.** —If
      a
      determination as to whether a particular person or entity is an affiliate cannot
      be made without involving unreasonable effort and expense, the aggregate market
      value of the common stock held by non-affiliates may be calculated on the basis
      of assumptions reasonable under the circumstances, provided that the assumptions
      are set forth in this Form.





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates* is (5,596,175 shares of common stock) computed by reference
      to
      the price of $2.65 per share of common stock at which the common equity was
      last
      sold on September 21, 2007as reported on www.yahoo.com is:
      $14,829,863.75





*Excludes
      the common stock held by executive officers, directors and stockholders whose
      individual ownership exceeds 5% of the common stock outstanding on June 30,
      2007.




APPLICABLE
      ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS:





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court.  o Yes o No





(APPLICABLE
      ONLY TO CORPORATE REGISTRANTS)





Indicate
      the number of shares outstanding of each of the registrant’s classes of common
      stock, as of the latest practicable date.





There
      are
      18,875,000 shares of Common Stock, par value $0.001, issued and outstanding
      as
      of September 21, 2007.




2





DOCUMENTS
      INCORPORATED BY REFERENCE




List
      hereunder the following documents if incorporated by reference and the Part
      of
      the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
      incorporated: (1) Any annual report to security holders; (2) Any proxy or
      information statement; and (3) Any prospectus filed pursuant to Rule 424(b)
      or
      (c) under the Securities Act of 1933. The listed documents should be clearly
      described for identification purposes (e.g., annual report to security holders
      for fiscal year ended December 24, 1980).





None.


3





**PART
      I**




**Item
      1.**  **Business.**





This
      Annual Report on Form 10-K (including the section regarding Management’s
      Discussion and Analysis of Financial Condition and Results of Operations)
      contains forward-looking statements regarding our business, financial condition,
      results of operations and prospects. Words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or
      variations of such words are intended to identify forward-looking statements,
      but are not deemed to represent an all-inclusive means of identifying
      forward-looking statements as denoted in this Annual Report on Form 10-K.
      Additionally, statements concerning future matters are forward-looking
      statements.




Although
      forward-looking statements in this Annual Report on Form 10-K reflect our
      good faith judgment, such statements can only be based on facts and factors
      currently known by us. Consequently, forward-looking statements are inherently
      subject to risks and uncertainties and actual results and outcomes may differ
      materially from the results and outcomes discussed in or anticipated by the
      forward-looking statements. Factors that could cause or contribute to such
      differences in results and outcomes include, without limitation, those
      specifically addressed in Item 1A—“Risks Factors” below, as well as those
      discussed elsewhere in this Annual Report on Form 10-K. Readers are urged
      not to place undue reliance on these forward-looking statements, which speak
      only as of the date of this Annual Report on Form 10-K. We file reports
      with the SEC. We make available on our website under “Investor Relations/SEC
      Filings,” free of charge, our annual reports on Form 10-K, quarterly
      reports on Form 10-Q, current reports on Form 8-K and amendments to
      those reports as soon as reasonably practicable after we electronically file
      such materials with or furnish them to the SEC. Our website address is *www.chinaglucose.com* .
      You can
      also read and copy any materials we file with the SEC at the SEC’s Public
      Reference Room at 100 F Street, NE, Washington, DC 20549. You can
      obtain additional information about the operation of the Public Reference
      Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains
      an Internet site ( *www.sec.gov* )
      that
      contains reports, proxy and information statements, and other information
      regarding issuers that file electronically with the SEC, including
      us.




We
      undertake no obligation to revise or update any forward-looking statements
      in
      order to reflect any event or circumstance that may arise after the date of
      this
      Annual Report on Form 10-K. Readers are urged to carefully review and
      consider the various disclosures made throughout the entirety of this Annual
      Report, which attempt to advise interested parties of the risks and factors
      that
      may affect our business, financial condition, results of operations and
      prospects.




All
      references to us, we, the Company and Shengtai refer to Shengtai Pharmaceutical,
      Inc. (formerly known as West Coast Car Company, and its subsidiaries) and the
      PRC to the People’s Republic of China.




**Overview**




We
      are
      through our indirect wholly-owned subsidiary, Weifang Shengtai, a PRC-based
      company, a manufacturer and supplier of glucose products in the PRC. Our
      products include pharmaceutical grade glucose used for medical purposes, and
      glucose and starch products for the food and beverage industry and for
      industrial production.





Approximately
      ninety percent (90.25%) of our sales revenues for the fiscal year ended June
      30,
      2007 were attributable to sales made in the PRC.




Dextrose
      (a form of glucose) is one of the most important carbohydrates and the chief
      source of energy in the human body. As such dextrose monohydrate is used in
      a
      wide array of pharmaceutical products such as transfusions and intravenous
      drips
      for restorative and nutritional purposes.  (Source:
      A survey by the China Starch Industry Association. (Source: An extract from
      “China’s Starch, Modified Starch and Crystallized Glucose Production Summary,
      2006 edition”, published in July 2007 by the China Starch Industry
      Association).




4





Approximately
      sixty two percent (62%) of our sales revenues for the fiscal year ended June
      30,
      2007 were attributable to sales of pharmaceutical grade glucose.




In
      addition to our pharmaceutical glucose series of products, we also produce
      the
      other medicinal product lines described below and glucose and starch products
      such as industrial glucose, syrup, starch, avermectins, dextrin, maltose and
      maltitol, which are used for food, beverage and industrial
      production **.**





We
      believe that the global market for pharmaceutical grade glucose (dextrose)
      is
      approximately 3 billion bottles per year and growing (Source: China Medical
      Glass Bottle website, www.bbmt.com ,
      report
      titled “The International Big Infusion Drugs Plastic Packing Market is Huge”
dated September 29, 2006).





In
      the PRC alone, from 2002 to 2004, the annual demand for glucose has
      increased from 250,000 tons to 800,000 tons per year, and the annual demand
      for
      glucose is expected to increase to 1.7 million tons per year by
      2009 (Source: An extract from “Analysis on Present Situation and Prospect
      of Chinese Starch Sugar Industry” published by *Starch
      and Sugar* ,
      Volume
      I of 2007).





**Our
      Products**





We
      manufacture two categories of products (i) pharmaceutical and medicinal grade
      products and (ii) raw material for the food and beverage and processing
      industries





***Pharmaceutical
      and medicinal grade products:***




These
      products accounted for 68% of our sales for the fiscal year ended June 30,
      2007.
      Set forth below is a list of our major pharmaceutical and medical grade
      products:




*Dextrose
      Monohydrate (DMH)*





Dextrose
      Monohydrate Transfusion (25kg/bag)


Dextrose
      Monohydrate Oral in large bags (720kg/bag)


Dextrose
      Monohydrate Oral in small bags (25kg/bag)


Dextrose
      Anhydrous (25kg/bag)


Dextrose
      Monohydrate Oral for export (25kg/bag)


Dextrose
      Monohydrate transfusion for export (25kg/bag)


Dextrose
      Anhydrous for export (25kg/bag)


*Cornstarch,
      Dextrin, Polypropylene Resin II, Polypropylene Resin III, and Polypropylene
      Resin IV*





*Glucose
      and starch products for the pharmaceutical and hospital markets* :





Multivitamin
      glucose (500g/bag)


Glucose
      base solution


Pharmaceutical
      grade starch (25kg/bag)





***Raw
      Materials for the Food Beverage and Processing
      Industries***





We
      produce raw materials for the food and beverage and processing
      industries:





Industrial
      glucose (for domestic and export)


Syrup
      for
      export


Starch
      for export


Avermectins


Dextrin
      (for domestic and export)


Avermectins
      Ointment


Avermectins
      refinement


Maltose


Maltitol




5





During
      the reporting period, we expanded our manufacturing and supply of Avermectins,
      which is a veterinary medicine derived from glucose. The market prospect for
      it
      has been encouraging.





***New
      Products***





At
      the
      end of June 2007, we set up a new product line to manufacture sodium gluconate.
      This non-corrosive, non-toxic and highly pure gluconate is gaining popularity
      as
      a chelating agent in the PRC and is widely used in pharmaceutical, construction
      and chemistry industries.





The
      initial sales of sodium gluconate have been encouraging. As a compound of
      glucose and sodium hydroxide, sodium gluconate is a high quality crystalline
      sodium salt of gluconic acid. It appears as white crystals that exhibit
      excellent solubility. We dissolved sodium hydroxide in glucose solution, along
      with certain catalysts. The solution is then heated. Separating the catalysts
      by
      steaming the solution, and then after a series of processes such as
      inspissations, crystallization, centrifugation and dehydration, we eventually
      get the end product - sodium gluconate.





Since
      we
      have only begun the production of sodium gluconate, we have insufficient
      profitability records for the reporting period, but we anticipate its gross
      profit margin to be between 25% and 30%, depending on our scale of production
      scale and our production efficiency.





Currently
      we are targeting the construction companies as our end customers since real
      estate construction is a booming sector in the PRC economy.




**Sales
      of Products by Type and Geographic Locations**





Approximately
      90% of our sales revenues for the fiscal year ended June 30, 2007 were
      attributable to domestic sales made in the PRC.




Set
      forth
      below is a breakdown of the principal products sold by us in different
      geographic locations over the previous three fiscal years and the revenues
      attributed to such sales.


Sales
                  by Product
              
              FY
                  6/30/2005(Revenue)($)
              
              %
                  of Total
              
              FY
                  6/30/2006Revenues($)
              
              %
                  of Total
              
              FY
                  6/30/2007Revenues($)
              
              %
                  of TotalDextrose
                  Monohydrate (DMH)Domestic
              
              
              9,655,570
              
              
              39.1
              
              
              9,474,787
              
              
              26.7
              
              
              14,110,347
              
              
              27.0International
              
              
              207,293
              
              
              0.8
              
              
              1,363,569
              
              
              3.9
              
              
              1,516,334
              
              
              2.9Dextrose
                  AnhydrateDomestic
              
              
              1,606,832
              
              
              6.5
              
              
              762,238
              
              
              2.2
              
              
              1,409,117
              
              
              2.7International
              
              
              256,261
              
              
              1.0
              
              
              534,253
              
              
              1.4
              
              
              1,009,844
              
              
              1.9Pharmaceutical
                  Grade Oral GlucoseDomestic
              
              
              9,892,962
              
              
              44.1
              
              
              16,578,570
              
              
              46.8
              
              
              12,044,464
              
              
              23.0International
              
              
              1,000,550
              
              
              4.1
              
              
              2,824,816
              
              
              8.0
              
              
              2,553,863
              
              
              4.9Industrial
                  Grade Oral GlucoseDomestic
              
              
              1,452,959
              
              
              5.9
              
              
              2,003,386
              
              
              5.7
              
              
              2,632,628
              
              
              5
                  .0Corn
                  StarchDomestic
              
              
              265,223
              
              
              1.1
              
              
              946,436
              
              
              2.7
              
              
              8,645,865
              
              
              16.5International
              
              
              2,359
              
              
              0.0
              
              
              1,933
              
              
              0.0
              
              
              8,436
              
              
              0.0





6





**Sales
      and Marketing**





Sales
      are
      carried out directly by our sales department and we are not dependent on
      distributors or middlemen. As of June 30, 2007, 27 of a total 31 provinces
      (or
      province equivalent administrative district) in the mainland PRC have been
      covered by our domestic sales network. We have established representative
      offices in 7 provinces to fortify our domestic sales network. We believe that
      these offices help us to better interact with our customers, reinforce our
      sales
      force and improve our corporate image. In the meantime, we export our products
      to customers in over sixty countries, and we plan to increase our global sales
      in the coming years.




**Delivery
      Methods**





We
      utilize the following delivery methods: ground transportation, shipment by
      sea
      and by rail. Products sold internationally are shipped by sea. Approximately
      80%
      of our products are delivered by ground transportation. We generally bear the
      costs and risks of transportation unless a customer specifies a particular
      mode
      of delivery.




**The
      Glucose Production Process**





Our
      glucose is made from enzyme-converted cornstarch. The glucose that we produce
      has the following characteristics: low heat, endotoxin in bacteria lower than
      0.125Eu/ml, high purity, and a production standard of lower than
      0.06Eu/ml.





The
      steps
      required to produce glucose from cornstarch are:


·
              The
                  cornstarch is converted into an
                  emulsion;
  ·
              Alpha-Amylase
                  Glucoamylase is added;
  ·
              The
                  emulsion from the chemical reaction form the combination of the
                  two above
                  is cleaned and dried after filtering, discoloring, ion exchange,
                  inspissation, crystallization and separation; and
  ·
              The
                  cleaned and dried end-product of the above process is
                  glucose


Under
      normal operating conditions, the finished product rate is 100%, with no rejects
      and wasted products. In case of a power outage or equipment malfunction,
      sub-standard output is detected by our quality control procedures, and is placed
      back into the production process for re-processing.





**Major
      Suppliers**





The
      three
      principal ingredients for glucose production are cornstarch, enzyme preparations
      and active carbon. The major suppliers for these raw materials are as
      follows:





***Cornstarch***




Shouguang
      Shengtai Starch Company Ltd (“Shougang Shengtai”) was our main supplier of
      cornstarch. Previously, Mr. Qingtai Liu, our Chief Executive Officer and
      President **,** owned
      40% of the stock of Shouguang Shengtai and managed Shougang Shengtai under
      a management contract. Shouguang Shengtai supplied cornstarch to us based on
      sales contracts, but there were no long-term supply agreements between Shouguang
      Shengtai and us. This production facility had been used for the past five years
      to ensure stable supplies of quality starch to us. We purchased approximately
      45%, 77% and 81% of our total cornstarch with the amount of $7,652,465,
      $15,963,415 and $13,794,612 for the years ended June 30, 2007, 2006 and
      2005, respectively from Shouguang Shengtai. The sharp decline of purchase from
      Shougang Shengtai in fiscal 2007 is because we have completed building a new
      cornstarch production complex with annual production capacity of 300,000 tons
      which supplies us with the cornstarch we need. We expect such third party
      purchase to be minimal in the years ahead. See “New Cornstarch Manufacturing
      Facility .”
      Shougang Shengtai has ceased its operations as of early calendar
      2007.





7




***Enzyme
      Preparations***




We
      purchased a total of 369 tons of enzyme preparations from our sole supplier
      for
      the past three years, Novozymes (China) Biotechnology Co. Ltd. Although we
      have
      not purchased enzyme preparations from any other source, there are a number
      of other suppliers from whom we can make purchases, if necessary.




***Active
      Carbon***




We
      believe that Fujian Sha County Qingshan Chemical Carbon Corporation is one
      of
      the major active carbon producers in the PRC. We purchased a total of 4,100
      tons
      of active carbon from them over the past three years. There are a number of
      other suppliers of active carbon from whom we can make purchases, if
      necessary.





We
      are
      not dependent on any one supplier of raw materials and machinery nor have
      we ever experienced a shortage of supply of raw materials or
      machinery.




**New
      Cornstarch Manufacturing Facility**





We
      completed most of the construction of a new cornstarch production complex with
      annual production capacity of 300,000 tons. The new complex is close to our
      existing glucose production plant. It started producing cornstarch in January
      2007. When it reaches its full production capacity, we believe its production
      capability will be in excess of 2.5 times the 120,000 ton per year production
      capacity of Shougang Shengtai. The new cornstarch production facility was
      commissioned at the end of 2006 and started production in January 2007.
      Currently, the production capacity of the new cornstarch production plant is
      240,000 tons per year. The new cornstarch facility will allow us to supplement
      and eventually replace our purchases from Shougang Shengtai, which had
      inadequate production to meet our needs. In addition, Shougang Shengtai utilized
      older equipment which led to unpredictable quality in the cornstarch it
      produced. It is approximately 60 kilometers from our facility and resulted
      in
      additional shipping costs, which then led to higher manufacturing
      costs.





Because
      Mr. Qingtai Liu **** was managing Shougang
      Shengtai, our management was able to make a smooth transition to manufacturing
      our own cornstarch during the reporting period.





During
      calendar 2007, approximately 50% of the new cornstarch production plant’s
      output (i.e. 150,000 tons per year) will be used as raw materials
      for glucose production, and the other 50% will be sold to customers in the
      food and beverage, pharmaceutical and industrial industries.




8




Our new
      cornstarch production complex consists of the following parts:





·
            Corn
                storage




·
            Cornstarch
                production line




·
            Warehouse
                for finished product (cornstarch)




·
            Logistical
                and delivery coordination center




·
            Environmentally
                friendly waste water treatment
                facilities





Our
      new
      cornstarch production has the following benefits:





·
            Low-cost
                and stable supply of high-quality raw materials for glucose
                production




·
            The
                stable supply of cornstarch will enable our existing glucose production
                plant to operate at full capacity




·
            Reduced
                transportation costs of raw
                materials




·
            Quality
                assurance of cornstarch since we are producing our own
                cornstarch




**Glucose
      Manufacturing Facility Upgrade**





We
      plan
      to upgrade our existing glucose production facility by replacing our old
      machinery to produce more complex glucose products such as anhydrous glucose
      transfusion, monohydrate glucose transfusion and oral glucose. We also plan
      to
      add an additional production line such as the production line for sodium
      gluconate.




After
      this upgrade, we expect that at least 70% (up from 50%) of the cornstarch
      produced by the new cornstarch production plant will be used by us as raw
      materials for glucose production. This upgrade will also allow for increased
      production of glucose.





**Construction
      of New Glucose Manufacturing Facility**





We
      have
      begun construction on a new glucose manufacturing facility to boost our
      production capacity. The facility is deigned to have a production capacity
      of
      150,000 tons. Our preliminary budget for the new glucose complex is
      approximately $12 million, without taking account of any appreciation of the
      Renminbi and increased construction costs due to the recent inflationary economy
      in the PRC. A portion of the costs will be financed through bank loans and
      the
      remainder from the monies we had raised in our May 2007 private placement.
      We
      anticipate that construction will be completed by the end of calendar 2007
      or
      the first half of calendar 2008.





**Quality
      Control**





Our
      PRC
      production facilities are fully certified by applicable PRC regulations for
      cGMP, ISO9002 and HACCP international quality standards. The rate of quality
      output (output conforming to pharmaceutical-grade glucose product
      specifications) is maintained at 100% because non-conforming products can be
      reprocessed.




9





A
      three-tier quality control system (production team level, workshop level, and
      management accountability for quality) ensures that all products are produced
      in
      a pollution-free, contamination-free and efficient production environment
      following strict quality-oriented procedures:





·
            A
                team of workers on-duty is responsible for the smooth operation of
                the
                production process by adhering to proper procedures. The intermediate
                output from each production step is sampled and checked to ensure
                that the
                final output is of specified quality standards.




·
            Equipment
                is checked regularly and maintained to ensure proper operation. The
                quality of the water used in the production process is regularly
                checked
                as well. The level of airborne particles and microbes in the production
                sites is regularly checked to eliminate contamination.




·
            The
                quality of all output is reviewed by the General Manager of the Quality
                Control Department, and ultimately approved by the CEO. A full set
                of
                written quality control records is
                maintained.





The
      qualities of our manufactured glucose can be summarized as follows:





Properties :
      white
      crystal, granular powder, odorless, sweet taste, easy soluble in water, slightly
      soluble in alcohol


Specific
      rotatory power :
      +52.0
      degrees— +53.5degrees


Dry
      loss :
      ≤9.5%


Chloride: <0.02%


Sulfate: <0.02%


Alcohol-insoluble
      matter: ≤5mg


Ferrous
      salt: <0.002%


Ignition
      residue: 0.08%


Heavy
      metal: ≤20ppm


Arsenide: <2ppm


Sulfite
      and soluble starch: appear
      yellow when added to an iodine test solution.




The
      qualities of our Dextrose Monohydrate Transfusion (Liquid glucose) may be
      summarized as follows:





Perceptual
      index:


Appearance: colorless without the impurity that can be seen by naked eye


Odor: no
      unusual odor


Taste: Clear
      sweet





Physical
      and chemical index


Solid
      substance: more
      than 84%


DE: 38-42


PH: 4.6
      -6.0


Maltose
      content: 8% -
      20%


Transmittance
      (426nm): more
      than 94


Coke
      Temperature: more
      than or equal to 125


Ash: no more
      than 0.3%




10




Hygienic
      index:


As: not more
      than 0.5mg/Kg


Pb: not more
      than 0.5mg/Kg


Bacterium
      total: not more
      than 1,000/g


E.
      coli: not more
      than 30/100g


Pathogen: No




**Market
      Analysis**





*Industry
      Overview and Trends*





The pharmaceutical
      transfusion was first put to use in 1832. Since then clinical transfusion
      has grown from its rather limited choice of original physiological brine to
      more
      than 200 different kinds of transfusion media.





The
      diverse range of transfusion media could be grouped into five
      categories:





·
            Body
                fluid balance (Isohydria)




·
            Nutritional
                transfusion




·
            Dialyzate




·
            Plasma
                expander




·
            Therapeutic
                transfusion (including herbal
                transfusion)





Dextrose
      Monohydrate is widely used in the medical and clinical environment for
      restorative and nutritional purposes. For example, a solution of pure glucose
      (Dextrose or D-glucose) has been recommended for use by subcutaneous injection
      as a restorative measure after major operations or as a nutritive measure in
      debilitating diseases.





Dextrose
      Monohydrate is widely used in hospitals and clinical institutions in the PRC
      and
      is covered by the PRC Government-subsidized Medical Insurance
      Scheme.




Glucose
      exists in many forms in nature, including in plants, fruits, honey and animal
      products. In humans, every 100ml of blood typically contains 80-120 mg glucose.
      Glucose is the ingredient for many saccharide compounds such as saccharose,
      maltose, starch, glycogen and vitamins. The properties of glucose are summarized
      as: white crystal with sweet taste, easily soluble in water, difficult to
      dissolve in alcohol, insoluble in organic solvents such as ether, chloroform
      and
      neutral reaction to litmus.




Liquid
      glucose is a transparent and viscous liquid, and is produced by the action
      of
      enzymes on refined cornstarch. Glucose is formed by the hydrolysis of many
      carbohydrates, including sucrose, maltose, cellulose, starch and glycogen.
      Fermentation of glucose by yeast produces ethyl alcohol and carbon dioxide.
      Glucose is made industrially by the hydrolysis of starch under the influence
      of
      diluted aid, or more commonly, under that of enzymes.





Glucose
      is used for many different purposes, as a raw material for many food and
      beverage products and as a substitute for sucrose. With the technological
      advances in food and beverage production, and as also in response to the demand
      from consumers for healthier food and drinks, producers are using more and
      more
      glucose as a raw material. Glucose is also used in veterinary medicine as a
      carrier of animal medicines.




11





Glucose
      is used by the pharmaceutical and chemical industries in a variety of ways.
      By
      using different reaction mechanisms, different types of chemical compounds
      are
      produced, using the self-oxidation and combination mechanism to produce calcium
      gluconate, zinc gluconate, and glucorone; using the hydro-reduction mechanism
      to
      produce sorbic alcohol and manno-alcohol, or to produce Vitamin B2, glutamine,
      ribose, and other vitamins.





***World
      Pharmaceutical Market***





The
      global market for pharmaceutical products is growing at a significant rate
      and is projected to continue to do so in the immediate future. 
Pharmaceutical Market Trends, 2006-2010 by BioPortfolio forecast an increase
      in
      the global pharmaceutical market to $842 billion in 2010.





The
      Pharmaceutical Business Review reported, “ *Positive
      economic growth, stabilizing political structures, growing patient populations,
      and increasing direct foreign investment in the emerging markets of Brazil,
      Russia, India and China (BRIC) are creating significant opportunities for
      pharmaceutical companies to expand into these markets and maximize future
      revenue potential. Pharmaceutical sales across the BRIC economies grew by 22.3%
      in 2005, compared to single digit growth in the major markets of the US, Europe
      and Japan.* ”





According
      to IMS, a leading forecast provider of market intelligence to the pharmaceutical
      and healthcare industries, 2005 total global pharmaceutical sales grew 7% at
      constant exchange rates, to $602 billion. In the ten major markets, audited
      growth was 5.7% in 2005. IMS audits covers 95% of the market, while the
      remaining 5% are estimates.





***The
      PRC Pharmaceutical Market***





With
      annual growth rates in the PRC pharmaceutical industry exceeding 15% per year,
      the PRC has become a critically important market (see “China’s Pharmaceutical
      Market is World’s Ninth Largest”, October 22, 2005, available on www.100md.com).
      Our expectation of similar growth rate also comes from a demographic analysis.
      The PRC has the most aged citizens in the world. In 2004, it had 143 million
      people aged 60 and above. This number will be 200 million in 2014 and 300
      million in 2026. (See article titled “China’s ageing problem and seven
      features”, dated February 24, 2006, available on www.china.org.cn). We believe
      that an aging population will necessarily call for the demand of more
      pharmaceutical and medicinal products to meet its needs. Demand for better
      drugs
      and medical equipment is driving this market. We believe it will continue to
      grow as the country modernizes and provides healthcare to a population of 1.3
      billion people. Currently, the population of the PRC is served by approximately
      310,000 medical and clinical institutions.





The
      PRC
      is one of the top 10 emerging pharmaceutical markets of the world, and is the
      second largest market in Asia after Japan as reported in an article dated May
      6,
      2005 titled “Experts Forecast China will become the World’s Fifth Biggest
      Medicine Market in 2010” on the Chinese Small-Medium Enterprises website
      ( http://www.ynetc.gov.cn/Article_Show.asp?ArticleID=387 ).
      By
      2010, it is believed the PRC will become the world’s fifth largest
      pharmaceutical market after the USA, Japan, Germany, and France according to
      a
      report dated November 13, 2002 titled “Asia Pacific Medical Industrial Council
      Forecasts China will become the World’s Fifth Largest Pharmaceutical Market by
      2010” on People’s Website (www.people.com.cn). It is projected that the PRC
      pharmaceutical market would be valued at $75 billion by 2010, accounting for
      10%
      of global demand, and $120 billion by 2020 (Source:
      www.http://managert.bokee.com/4173614.html).




The
      value
      of PRC pharmaceutical goods produced in 1970 was only $21.7 billion. (as
      reported on the Szechuan News Website, www.newssc.org, in an article titled
      “Discussion on the Development and State of China’s Pharmaceutical Industry”).
      Currently the PRC pharmaceutical market produces goods with a value of over
      $54.6 billion, according to an article in the July/August 2006 edition of the
      magazine Pharmaceutical Manufacturing. The PRC produces a little less than
      25%
      of what is produced by the U.S. pharmaceutical market, which is valued at
      $240 billion. Projections show that the total value of global pharmaceuticals
      will expand to $750 billion in 2010 (Source: Western Medical People website
      (www.yd210.com)).




12





IMS
      reported that the total pharmaceutical market will expand at a compound
      annual growth rate of 5-8% over the next five years. North America and Europe
      are each projected to grow at a 5-8% pace; Asia Pacific/Africa, 9-12%; Latin
      America, 7-10%; and Japan, 3-6%. Emerging markets including the PRC, Korea,
      Mexico, Russia and Turkey, will all experience double-digit growth, outpacing
      global performance and signaling important shifts in the marketplace.





We
      believe that the global demand for pharmaceuticals is likely to continue to
      increase; with developing countries now being economically more prosperous
      and
      capable of spending more money on improving health care.




***Major
      Import and Export Markets for Pharmaceutical Products***





The
      major
      producers of chemical pharmaceutical raw materials are Western Europe, North
      America, Japan, China and India. Western Europe is a net exporter exporting
      50%
      of its total production. North America is a major importer, with its own
      products only able to satisfy 20% of its total demand. Japan is believed to
      be evolving to become a net importer. The PRC and India have emerged into
      two major exporters for pharmaceutical raw materials, exporting 30-40% of its
      total output. (Source: Article titled “2002-2003 Analysis of the World’s
      Pharmaceutical Market” as reported on the Shanghai Information Services Platform
      website, http://www.istis.sh.cn/)





The
      total
      annual chemical drug-base production of the PRC is approximately 500,000 tons,
      consisting of raw materials for the production of anti-biotic, vitamins,
      pain-killers and hormonal and other drugs, and is second only to United States.
      The PRC and India are emerging as the major exporters in these product and
      raw
      material categories.





***The
      Pharmaceutical Raw Material Manufacturing Industry in the PRC***





The
      PRC,
      as a country, has put a lot of emphasis on the production of pharmaceutical
      raw
      materials in the past 40-50 years. Additionally, in the past ten
      years, a number of large international pharmaceutical companies have moved
      their
      productions to the PRC, such as Cargill, CPI and Roquette. Both factors have
      contributed to the growth of this specific segment in the PRC.





This
      industry segment can be categorized into three groups: first, the state-owned
      or
      government-subsidized pharmaceutical companies taking up 30% of market share;
      second, the foreign-owned or Sino-foreign Joint ventures taking up 60% of market
      share, and with the bulk of smaller firms competing for the remaining 10%.
      We
      fall into the second category.





***Market
      Analysis and Projections for Clinical Transfusion Products in the
      PRC***





Transfusion
      solutions are one of most commonly used clinical prescriptions in hospitals
      and
      health care institutions. Dextrose Monohydrate is one of the five most important
      types of medical prescriptions in the PRC and is one of the most widely used
      pharmaceutical products.





The
      total
      production volume of transfusion solutions grew from 1.38 billion bottles in
      1995 to 2.91 billion bottles in 2001, i.e. annual growth of around 16.1%
      (source: http://www.chinapharm.com.en/html/scfx/20034815219.html). The types
      of
      transfusion solutions grew from 40 to more than 80 types of medical transfusion
      formulations.




13





There
      are
      more than 200 types of transfusion solutions developed and used in overseas
      countries, and the annual per capital consumption is more than 3 bottles. The
      PRC has only approximately 50 types of transfusion products, and the per
      capital consumption is around 2.15 bottles. Most of the consumption is for
      Dextrose Monohydrate.





(Source:
      Report titled “Major Transportation of Liquid Pharmaceutical Products: Entering
      the Speedway” dated April 21, 2003 published on Chinapharm website,
      www.chinapharm.com.cn)




We
      believe that we are one of the top producers of Dextrose Monohydrate transfusion
      solutions as well as Dextrose Anhydrous solutions. These products are the raw
      material or base solutions for pharmaceutical manufacturers to add specific
      medical formulations to produce medicated transfusion. Our industrial customers
      are producers of medical transfusion solutions.




The
      growth in demand for Dextrose Monohydrate transfusion solutions is co-related
      to
      the growth of the pharmaceutical production and consumption trends and patterns.
      Medical transfusion is a common and well-accepted treatment routine all over
      the
      PRC for many ailments, ranging from the common cold, influenza, and intestinal
      disorders to clinical restorative or recuperative prescriptions after surgical
      operations. There are altogether 310,000 medical service providers such as
      hospitals, clinics, and health-care institutions serving the 1.3 billion people
      in the PRC.





Some
      authorities predict that the PRC’s pharmaceutical industry will grow at a rate
      of between 15 and 16 % for the whole year of 2007, a little higher than the
      number for 2006. (Source: http://www.bioon.com/industry/market, report title:
      Forecast of Pharmaceutical Industry in 2007).





Based
      on
      our analysis of the consumption of glucose products carried out by the China
      Starch Industry Association and the disposable income per capita from China
      National Statistics Bureau, we believe that there is a strong correlation
      between the consumption of glucose products and the disposable income per
      capita.





We
      predict that higher living standards would lead to higher consumption of
      pharmaceutical dextrose. It is our understanding that the robust and continuing
      economic growth, the rising purchasing power of domestic market, as well as
      the
      public awareness of quality health care products, are all drivers to the demand
      for our products. The strong growth in the PRC pharmaceutical industry will
      also
      help increase the selling prices of our major products, and enhance our revenues
      and increase our gross profit margin.





**Target
      Market**





Our
      principal customers are:





·
            Hospitals




·
            Health
                Care Institutions




·
            Medical
                supply companies




·
            Physician
                offices




·
            Pharmaceutical
                companies




·
            Medical
                supply exporters




14




·
            Food
                and beverage companies




We
      market
      our products to these types of businesses within the PRC and plan to expand
      our
      export business as we increase our production capabilities, particularly in
      wholesale sales to foreign distributors.





We
      utilize the following factors/incentives to encourage the purchase of our
      products:





·
            High
                quality, pharmaceutical grade
                products




·
            Certified
                product reliability




·
            On-time
                deliveries




·
            New
                and improved medicinal products and
                packaging




·
            Excellent
                service and support




·
            Excellent
                referrals





**Domestic
      and International Market**




The
      market in the PRC for our products is very large and growing rapidly. There
      are more than 310,000 medical service providers such as hospitals and health
      care institutions all over the PRC.





We
      believe that the export market is a lucrative market that we plan to further
      develop and expand. Due to the strong domestic demand for our products and
      our
      prior production constraints, historically we could only serve a fraction
      of the export market.




Our
      export revenues for the Dextrose Monohydrate series of products (which also
      includes anhydrous glucose and oral glucose) derived from our top four export
      markets are summarized as follows:




*South
      Korea*




Import
      approval permit issued in 2003


Products
      exported: Dextrose Monohydrate Oral and Dextrose Anhydrous





FY2005
            
            FY2006
            
            FY2007$
            342,955
            
            $
            370,467
            
            $
            548,172





*Russia*




Import
      approval permit issued in 2004


Products
      exported: Dextrose Monohydrate Oral, Dextrose Monohydrate
      transfusion





FY2005
            
            FY2006
            
            FY2007$
            100,000
            
            $
            258,115
            
            $
            1,006,133




*Australia*




Import
      approval permit issued in 2003


Product
      exported: Dextrose Monohydrate Oral




FY2005
            
            FY2006
            
            FY2007$
            42,780
            
            $
            278,202
            
            $
            813,746





15





*Singapore
      (plus re-export to Thailand)*




Import
      approval permit issued in2003


Products
      exported: Dextrose Monohydrate Injection




FY2005
            
            FY2006
            
            FY2007$
            89,725
            
            $
            28,285
            
            $
            29,345




**Competition**





Some
      of
      our competitors of its main products are listed below. They are coded as
      follows:





(trans
      =
      competitor in Dextrose Monohydrate transfusion solution)


(oral
      =
      competitor in oral Dextrose Monohydrate)


(andh
      =
      competitor in Dextrose Anhydrous)





·
            Dong
                Ping Rui Xing Petrochemical Company Ltd
                (trans)




·
            North
                China Pharmaceutical Production Company Ltd
                (trans)




·
            Ci
                Feng Pharmaceutical Production Company Ltd
                (trans)




·
            Yi
                Kan Pharmaceutical Production Company Ltd
                (trans)




·
            Hebei
                Shengxue Company Ltd (andh)




·
            Northern
                China Kan Yin Pharmaceutical Product Company Ltd
                (trans)




·
            Shandong
                Xi Wang Company Ltd (oral)




·
            QingHuangDao
                Lihua Glucose Company Ltd (oral)




·
            Hebei
                Hua Ying Glucose Company Ltd (oral)




·
            Cargill
                USA (trans), (oral)




·
            CPI
                USA (oral) (andh)




·
            Roquette
                (trans), (andh)




16




·
            Cerestar
                (trans), (andh)




·
            Hebei
                Zhou Ping Rui Xue Glucose Company Ltd
                (andh)




·
            Hebei
                Linhua Glucose and Medicinal Production Company Ltd
                (andh)





Among
      our
      domestic competitors, we believe that we are the largest manufacturer of
      pharmaceutical grade glucose. However, our foreign competitors may be
      better-capitalized and more technologically advanced.





**Competitive
      Advantages**





With
      the
      PRC being a major corn-producing region of Asia, and Shandong being the major
      corn-producing province of the PRC, our operating subsidiary Weifang Shengtai,
      located in Shandong, has the advantage of a steady supply of raw materials,
      which are located nearby with low transportation costs.





Among our
      assets is a total of 253,746 square meters of land, of which approximately
      only
      60% is being utilized, leaving room for expansion.




We
      have
      only started to export to markets such as South Korea, Russia, Australia and
      Singapore and sixty other countries. Taking into consideration the geographical
      proximity and cross-cultural similarities with the Northern and South-Eastern
      Asian markets, we believe that we can be competitive in terms of product price,
      delivery lead-time and customer service responsiveness.





With
      our
      new cornstarch facility, a planned upgrade of our glucose manufacturing facility
      and construction of another new glucose manufacturing facility, we believe
      that we will be able to stabilize our raw material costs and
      production, enable our glucose production facility to function at maximum
      capacity and produce more products for both the domestic and export
      markets.





We
      believe that we are the one of the leading producers of Dextrose Monohydrate
      transfusion solution in the PRC, with an estimated 30% of the overall PRC market
      share (Source: “Compilation of the Means of Production for Starch, Modified
      Starch, Crystal Glucose and Liquid Starch Sugars in 2005” published by the China
      Starch Industry Association in July 2006). The other suppliers of Dextrose
      Monohydrate transfusion solutions have pharmaceutical production lines with
      a diversified range of medicinal products. We believe that we are the only
      manufacturer that has our primary focus on producing high-quality Dextrose
      Monohydrate transfusion solutions in the PRC.





The
      other competitors are manufacturing companies with a diversified range of
      industrial glucose and cornstarch products. We believe that most of our
      competitors put more emphasis on volume production of medium to low value-added
      products, while we focuses more on quality production of high value-added
      products.




**Backlog**





Our
      orders are processed on a made to order basis and we do not have any backlog
      of
      orders.





**Growth
      Initiative**





We
      have
      developed and are implementing the following initiatives to achieve its growth
      goals:





·
            Vertical
                integration of our manufacturing capabilities by building and operating
                a
                cornstarch plant.




17




We
      believe the new cornstarch processing plant will lower production costs and
      improve profit margin because higher-quality and lower cost raw materials will
      be produced in-house and there will be no transportation costs because the
      cornstarch processing plant is next to the glucose production line. This will
      somewhat shield us from external cornstarch price fluctuation, thus protecting
      or improving its profit margins.





·
            Increase
                its glucose production capabilities to be able to meet market
                demand





Overseas
      demand had not been fully satisfied in the past because our products have been
      sold out due to strong domestic demand in the PRC. We believe that our new
      300,000 ton cornstarch processing plant will supply enough raw materials to
      increase production volumes and sales to an expanding domestic client base
      and
      fulfill more overseas orders which offer higher profit margins. In line with
      this, we have commenced construction of our new glucose manufacturing facility,
      which is anticipated to be completed next year.





·
            Develop
                new products




Beyond
      the pharmaceutical-grade products, some of the industrial-grade products can
      be
      further refined and transformed into higher-margin products, such
      as modified starch and glucose-transformed nutraceutical raw materials. We
      have in our pipeline biotechnology product formulas that could be deployed
      to
      serve emerging market segments in the next few years. An example of this is
      in
      the production of sodium gluconate, which has been sold recently on a trial
      basis to encouraging feedback.





·
            Expand
                our marketing and sales efforts to identify and secure additional
                domestic
                customers and increase our export
                sales





We
      plan
      to (i) optimize our web site to describe and promote its business, (ii) take
      out
      advertisements in trade publications, (iii) buy advertisements for various
      search words and phrases (e.g. “glucose”) on Google and Yahoo and major PRC
      search engines, (iv) conduct seminars at various trade show events to promote
      our products, and (v) optimize our web site so that people doing ‘natural’
searches will see the web site link on the first page of the search by refining
      its Search Engine Optimization





**Major
      Customers**





Our
      customers are principally located in the PRC but we hope to expand our
      international customer base. Our principal customers are hospitals and
      pharmaceutical companies. Below is a list of our largest PRC
      customers:





·
            Zhejiang
                Hsin Pharmaceutical Co Ltd




·
            Shouguang
                Tianli Biological Technology Co Ltd




·
            Guangdong
                Weishiya Health Food Co Ltd




·
            Lianyungang
                Roquette Co Ltd




·
            Sichuan
                Kelun Pharmaceutical Co Ltd




18




·
            Beijing
                Double-Crane Pharmaceutical Co Ltd




·
            Huayuan
                Changfu Pharmaceutical Group




·
            Anhui
                Fengyuan Pharmaceutical Group




·
            Huayu
                Wuxi Pharmaceutical Co Ltd




·
            Chengdu
                Qingshan Pharmaceutical Co Ltd




·
            Guangdong
                Duole Dairy Co Ltd




·
            Hong
                Kong Xiehe Group




·
            Redox
                Australia




·
            PBI
                Thailand




·
            SGN
                Korea





No
      one
      customer accounted for more than 10% of our sales revenues for any of the fiscal
      years ended June 30, 2007, 2006 or 2005.





**Intellectual
      Property**





We
      formally acquired the registered “Heng De Bao” trade mark from Changle Medical
      Starch Factory on or about July 28, 2000. The trade mark was assigned by the
      Chinese Trademark Bureau and registered under classes 31 (pharmaceutical starch
      and white dextrin) and 5 (pharmaceutical glucose). The class 31 registration
      was
      renewed till June 10, 2009 while the class 5 registration was renewed and valid
      till May 9, 2011. International Class Code 5 covers pharmaceuticals, veterinary
      and sanitary preparations; dietetic substances adapted for medical use; food
      for
      babies; plasters, materials for dressings; material for stopping teeth, dental
      wax; disinfectants; preparations for destroying vermin; fungicides, herbicides.
        International Class Code 31 covers agricultural, horticultural, and
      forestry products and grains not included in other classes; live animals, fresh
      fruits and vegetables; seeds, natural plans, and flowers; foodstuffs for animal,
      malt.




**Insurance**




We
      purchased automobile insurance with third party liability coverage for our
      vehicles and life insurance for our key personnel.  We do not have other
      insurance such as property insurance, business liability or disruption insurance
      coverage for our operations in the PRC. While a lawsuit against a company such
      as Weifang Shengtai in the PRC would be rare, we cannot make any assurance
      that we will not have exposure for liability in the event of a lawsuit.





**Government
      Regulations**





Because
      we manufacture medicinal and pharmaceutical products, we are subject to the
      laws
      governing the Good Practice in the Manufacturing and Quality Control of Drugs
      (as amended in 1998) as promulgated by the PRC State Food and **** Drug
      Administration on March 18, 1999.




19





We
      are
      also subject to business license and approval regulations that are required
      for
      all corporations in the PRC.





We
      have
      obtained Certificates of Good Manufacturing Practices for Pharmaceutical
      Products (“GMP Certificates”) issued by the PRC State Food and **** Drug
      Administration. The GMP Certificates certify that we have complied with the
      requirements of Chinese Current Good Manufacturing Practices for Pharmaceutical
      Products in the manufacture of bulk Dextrose Monohydrate, glucose and anhydrous
      glucose and the GMP Certificates are valid through May 18, 2009, March 23,
      2008
      and April 18, 2009 respectively.





Additionally,
      we have obtained Drug Registration Certificates for glucose and glucosum pro
      orale from the State Food and Drug Administration in accordance with the PRC
      Medical Products Governance Law and its implementing regulations.





**Environmental
      Compliance**





We
      are
      subject to PRC environmental laws, rules and regulations that are standard
      to
      manufacturing facilities.




Our
      production line has passed inspection by the Environmental Protection Bureau
      of
      PRC and was issued a Certificate of Qualification.




**Employees**




As
      of
      June 30, 2007, we employed approximately 760 full-time employees. Of these,
      7
      are group administrators, 20 are managers, approximately 45 are in marketing,
      approximately 50 perform administrative functions, and approximately 638 are
      in
      production, storage and distribution.





**Item
      1A. Risk Factors.**





***An
      investment in our common stock involves a high degree of risk. You should
      carefully consider the risks described below and the other information contained
      in this prospectus before deciding to invest in our common
      stock.***





**Risks
      related to doing business in the People’s Republic of
      China**





Our
      business operations are conducted primarily in the PRC. Because PRC laws,
      regulations and policies are continually changing, our PRC operations will
      face
      several risks summarized below.





***Our
      ability to operate in the PRC may be harmed by changes in its laws and
      regulations***





Our
      offices and manufacturing plants are located in the PRC and the production,
      sale
      and distribution of our products are subject to PRC rules and regulations.
      In
      particular, the manufacture and supply of pharmaceutical grade and medicinal
      products are subject to the PRC rules and regulations, such as the Good Practice
      in the Manufacturing and Quality Control of Drugs (as amended in 1998) as
      promulgated by the PRC State Food and Drug Administration on March 18, 1999
      and
      the PRC Medical Products Governance Law. In addition, because we operate a
      cornstarch production facility which produces waste water and we are subject
      to
      the environmental rules and regulations such as the Integrated Wastewater
      Discharge Standard (GB8978-1996).




20





The
      PRC
      only recently has afforded provincial and local economic autonomy and permitted
      private economic activities. The PRC government has exercised and continues
      to
      exercise substantial control over virtually every sector of the PRC economy
      through regulation and state ownership.





Our
      ability to operate in the PRC may be harmed by changes in its laws and
      regulations, including those relating to manufacturing, taxation, import and
      export tariffs, environmental regulations, land use rights, property and other
      matters.





Our
      production and manufacturing facility is subject to PRC regulation and
      environmental laws. The PRC government has been active in regulating the
      pharmaceutical and medicinal goods industry. Our business and products are
      subject to government regulations mandating the use of good manufacturing
      practices. Changes in these laws or regulations in the PRC, or other countries
      we sell into, that govern or apply to our operations could have a materially
      adverse effect on our business. For example, the law could change so as to
      prohibit the use of certain chemical agents in our products. If such chemical
      agents are found in our products, then such a change would reduce our
      productivity of that product.





We
      are a
      state-licensed corporation. **** If
      we
      were to lose our state-licensed status, we would no longer be able to
      manufacture our products in the PRC. ****





***There
      is no assurance that PRC economic reforms will not adversely affect our
      operations in the future***





As
      a
      developing nation, the PRC's economy is more volatile than that of developed
      Western industrial economies. It differs significantly from that of the U.S.
      or
      a Western European country in such respects as structure, level of development,
      capital reinvestment, resource allocation and self-sufficiency. Only in recent
      years has the PRC economy moved from what had been a command economy through
      the
      1970s to one that during the 1990s encouraged substantial private economic
      activity. Although the PRC government still owns the majority of productive
      assets in the PRC, in the past several years the government has implemented
      economic reform measures that emphasize decentralization and encourage private
      economic activity.




In
      1993,
      the Constitution of the PRC was amended to reinforce such economic reforms.
      The
      trends of the 1990s indicate that future policies of the Chinese government
      will
      emphasize greater utilization of market forces. The PRC government has confirmed
      that economic development will follow the model of a market economy. For
      example, in 1999 the Government announced plans to amend the Chinese
      Constitution to recognize private property, although private business will
      officially remain subordinated to the state-owned companies, which are the
      mainstay of the Chinese economy. However, there can be no assurance that, under
      some circumstances, the government's pursuit of economic reforms will not be
      restrained or curtailed. Actions by the central government of the PRC could
      have
      a significant adverse effect on economic conditions in the country as a whole
      and on the economic prospects for our Chinese operations. Economic reforms
      could
      either benefit or damage our operations and profitability. Some of the things
      that could have this effect are: (i) level of government involvement in the
      economy; (ii) control of foreign exchange; (iii) methods of allocating
      resources; (iv) international trade restrictions; and (v) international
      conflict.





Under
      the
      present direction, we believe that the PRC will continue to strengthen its
      economic and trading relationships with foreign countries and business
      development in the PRC will follow market forces. While we believe that this
      trend will continue, there can be no assurance that this will be the case.
      A
      change in policies by the PRC government could adversely affect our interests
      by, among other factors: changes in laws, regulations or the interpretation
      thereof, confiscatory taxation, restrictions on currency conversion, imports
      or
      sources of supplies, or the expropriation or nationalization of private
      enterprises and could require us to divest ourselves of any interest we then
      hold in Chinese properties or businesses.




21





Although
      the PRC government has been pursuing economic reform policies for more than
      two
      decades, there is no assurance that the government will continue to pursue
      these
      policies or that these policies may not be significantly changed, especially
      in
      the event of a change in leadership, social or political disruption, or other
      circumstances affecting the PRC's political, economic and social
      life.





Because
      these economic reform measures may be inconsistent, ineffectual or temporary,
      there are no assurances that:




·
            we
                will be able to capitalize on economic reforms;





·
            the
                Chinese government will continue its pursuit of economic reform
                policies;




·
            the
                economic policies, even if pursued, will be successful;





·
            economic
                policies will not be significantly altered from time to time; and




·
            business
                operations in the PRC will not become subject to the risk of
                nationalization.




***Anti-inflation
      measures may be ineffective or harm our ability to do business in the
      PRC***




Since
      1979, the PRC government has reformed its economic system. Because many reforms
      are unprecedented or experimental, they are expected to be refined and improved.
      Other political, economic and social factors, such as political changes, changes
      in the rates of economic growth, unemployment or inflation, or in the
      disparities in per capita wealth between regions within the PRC, could lead
      to
      further readjustment of the reform measures. This refining and readjustment
      process may instead negatively affect our operations and there is guarantee
      that
      it will be effective.





Over
      the
      last few years, the PRC's economy has registered a high growth rate. During
      the
      past ten years, the rate of inflation in the PRC has been as high as 20.7%
      and
      as low as -2.2%. Recently, there have been indications that rates of inflation
      have increased. In response, the PRC government recently has taken measures
      to
      curb this excessively expansive economy. These corrective measures were designed
      to restrict the availability of credit or regulate growth and contain inflation.
      These measures have included devaluations of the PRC currency, the Renminbi
      (RMB), restrictions on the availability of domestic credit, reducing the
      purchasing capability of certain of its customers, and limited re-centralization
      of the approval process for purchases of some foreign products. These austerity
      measures alone may not succeed in slowing down the economy's excessive expansion
      or control inflation, and may result in severe dislocations in the PRC economy.
      The PRC government may adopt additional measures to further combat inflation,
      including the establishment of freezes or restraints on certain projects or
      markets. Such measures could harm the market for our products and inhibit our
      ability to conduct business in the PRC.





***The
      PRC’s legal and judicial system may not adequately protect our business and
      operations and the rights of foreign investors***





The
      PRC
      legal and judicial system may negatively impact foreign investors. In 1982,
      the
      National People's Congress amended the Constitution of China to authorize
      foreign investment and guarantee the "lawful rights and interests" of foreign
      investors in the PRC. However, the PRC's system of laws is not yet
      comprehensive. The legal and judicial systems in the PRC are still rudimentary,
      and enforcement of existing laws is inconsistent. Many judges in the PRC lack
      the depth of legal training and experience that would be expected of a judge
      in
      a more developed country. Because the PRC judiciary is relatively inexperienced
      in enforcing the laws that do exist, anticipation of judicial decision-making
      is
      more uncertain than would be expected in a more developed country. It may be
      impossible to obtain swift and equitable enforcement of laws that do exist,
      or
      to obtain enforcement of the judgment of one court by a court of another
      jurisdiction. The PRC's legal system is based on the civil law regime, that
      is,
      it is based on written statutes; a decision by one judge does not set a legal
      precedent that is required to be followed by judges in other cases. In addition,
      the interpretation of Chinese laws may be varied to reflect domestic political
      changes.




22





The
      promulgation of new laws, changes to existing laws and the pre-emption of local
      regulations by national laws may adversely affect foreign investors. However,
      the trend of legislation over the last 20 years has significantly enhanced
      the
      protection of foreign investment and allowed for more control by foreign parties
      of their investments in PRC enterprises. There can be no assurance that a change
      in leadership, social or political disruption, or unforeseen circumstances
      affecting the PRC's political, economic or social life, will not affect the
      PRC
      government's ability to continue to support and pursue these reforms. Such
      a
      shift could have a material adverse effect on our business and
      prospects.




The
      practical effect of the PRC legal system on our business operations in the
      PRC
      can be viewed from two separate but intertwined considerations. First, as a
      matter of substantive law, the Foreign Invested Enterprise laws provide
      significant protection from government interference. In addition, these laws
      guarantee the full enjoyment of the benefits of corporate Articles and contracts
      to Foreign Invested Enterprise participants. These laws, however, do impose
      standards concerning corporate formation and governance, which are qualitatively
      different from the general corporation laws of the United States. Similarly,
      the
      PRC accounting laws mandate accounting practices, which are not consistent
      with
      U.S. generally accepted accounting principles. PRC’s accounting laws require
      that an annual "statutory audit" be performed in accordance with PRC accounting
      standards and that the books of account of Foreign Invested Enterprises are
      maintained in accordance with Chinese accounting laws. Article 14 of the
      People's Republic of China Wholly Foreign-Owned Enterprise Law requires a wholly
      foreign-owned enterprise to submit certain periodic fiscal reports and
      statements to designated financial and tax authorities, at the risk of business
      license revocation. Weifang Shengtai is a wholly foreign owned enterprise.
      Second, while the enforcement of substantive rights may appear less clear than
      United States procedures, the Foreign Invested Enterprises and Wholly
      Foreign-Owned Enterprises are Chinese registered companies, which enjoy the
      same
      status as other Chinese registered companies in business-to-business dispute
      resolution.





Since
      the
      Articles of Association of Weifang Shengtai do not provide for the resolution
      of
      disputes business, the parties are free to proceed to either the Chinese courts
      or if they are in agreement, to arbitration.





Any
      award
      rendered by an arbitration tribunal is enforceable in accordance with the United
      Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards
      (1958). Therefore, as a practical matter, although no assurances can be given,
      the Chinese legal infrastructure, while different in operation from its United
      States counterpart, should not present any significant impediment to the
      operation of Foreign Invested Enterprises.





In
      addition, some of our present and future executive officers and our directors,
      most notably, Mr. Qingtai Liu, Mr. Yongqiang Wang, Mr. Yizhao Zhang and Mr.
      Chris Wang, may be residents of the PRC and not of the United States, and
      substantially all the assets of these persons are located outside the U.S.
      As a
      result, it could be difficult for investors to effect service of process in
      the
      United States, or to enforce a judgment obtained in the United States against
      us
      or any of these persons.





The
      PRC
      laws and regulations governing our current business operations are sometimes
      vague and uncertain. There are substantial uncertainties regarding the
      interpretation and application of PRC laws and regulations, including but not
      limited to the laws and regulations governing our business, or the enforcement
      and performance of our arrangements with customers in the event of the
      imposition of statutory liens, death, bankruptcy and criminal proceedings.
      We
      and any future subsidiaries are considered foreign persons or foreign funded
      enterprises under PRC laws, and as a result, we are required to comply with
      PRC
      laws and regulations. These laws and regulations are sometimes vague and may
      be
      subject to future changes, and their official interpretation and enforcement
      may
      involve substantial uncertainty. The effectiveness of newly enacted laws,
      regulations or amendments may be delayed, resulting in detrimental reliance
      by
      foreign investors. New laws and regulations that affect existing and proposed
      future businesses may also be applied retroactively. We cannot predict what
      effect the interpretation of existing or new PRC laws or regulations may have
      on
      our business.




23




***Governmental
      control of currency conversion may affect the value of your
      investment*** **.**





The
      majority of our revenues will be settled in Renminbi and U.S. dollars, and
      any
      future restrictions on currency exchanges may limit our ability to use revenue
      generated in Renminbi to fund any future business activities outside the PRC
      or
      to make dividend or other payments in U.S. dollars. Although the PRC government
      introduced regulations in 1996 to allow greater convertibility of the Renminbi
      for current account transactions, significant restrictions still remain,
      including primarily the restriction that foreign-invested enterprises like
      us
      may only buy, sell or remit foreign currencies after providing valid commercial
      documents, at those banks in the PRC authorized to conduct foreign exchange
      business.





In
      addition, conversion of Renminbi for capital account items, including direct
      investment and loans, is subject to governmental approval in the PRC, and
      companies are required to open and maintain separate foreign exchange accounts
      for capital account items. We cannot be certain that the PRC regulatory
      authorities will not impose more stringent restrictions on the convertibility
      of
      the Renminbi.





***The
      value of our securities and your ability to receive dividends may be affected
      by
      the foreign exchange rate between U.S. dollars and Renminbi and the PRC
      government’s control over the Renminbi.***





The
      value
      of our common stock will be affected by the foreign exchange rate between U.S.
      dollars and Renminbi, and between those currencies and other currencies in
      which
      our sales may be denominated. For example, to the extent that we need to convert
      U.S. dollars into Renminbi for our operational needs and should the Renminbi
      appreciate against the U.S. dollar at that time, our financial position, our
      business, and the price of our common stock may be harmed. Conversely, if we
      decide to convert our Renminbi into U.S. dollars for the purpose of declaring
      dividends on our common stock or for other business purposes and the U.S. dollar
      appreciates against the Renminbi, the U.S. dollar equivalent of our earnings
      from our subsidiary in the PRC would be reduced.





The
      PRC
      government imposes controls on the convertibility of Renminbi into foreign
      currencies and, in certain cases, the remittance of currency out of the PRC.
      We
      receive substantially all of our revenues in Renminbi which is currently not
      a
      freely convertible currency. Shortages in the availability of foreign currency
      may restrict our ability to remit sufficient foreign currency to pay dividends,
      or otherwise satisfy foreign currency dominated obligations. Under existing
      PRC
      foreign exchange regulations, payments of current account items, including
      profit distributions, interest payments and expenditures from the transaction,
      can be made in foreign currencies without prior approval from the PRC State
      Administration of Foreign Exchange by complying with certain procedural
      requirements. However, approval from appropriate governmental authorities is
      required where Renminbi is to be converted into foreign currency and remitted
      out of the PRC to pay capital expenses, such as the repayment of bank loans
      denominated in foreign currencies **.**





The
      PRC
      government may also at its discretion restrict access in the future to foreign
      currencies for current account transactions. If the foreign exchange control
      system prevents us from obtaining sufficient foreign currency to satisfy our
      currency demands, we may not be able to pay certain expenses as they come
      due.




***The
      fluctuation of the Renminbi may materially and adversely affect your
      investment.***





The
      value
      of the Renminbi against the U.S. Dollar and other currencies may fluctuate
      and
      is affected by, among other things, changes in the PRC's political and economic
      conditions. As we rely almost entirely on revenues earned in the PRC since
      most
      of our sales occur in the PRC, any significant revaluation of the Renminbi
      may
      materially and adversely affect our cash flows, revenues and financial
      condition. For example, to the extent that we need to convert U.S. Dollars
      we
      receive from an offering of our securities into Renminbi for our operations,
      appreciation of the Renminbi against the U.S. Dollar could have a material
      adverse effect on our business, financial condition and results of operations.
      Conversely, if we decide to convert our Renminbi into U.S. Dollars for the
      purpose of making payments for dividends on our common shares or for other
      business purposes and the U.S. Dollar appreciates against the Renminbi, the
      U.S.
      Dollar equivalent of the Renminbi we convert would be reduced. In addition,
      the
      depreciation of significant U.S. Dollar denominated assets could result in
      a
      charge to our income statement and a reduction in the value of these
      assets.




24





On
      July
      21, 2005, the PRC government changed its decade-old policy of pegging the value
      of the Renminbi to the U.S. Dollar. Under the new policy, the Renminbi is
      permitted to fluctuate within a narrow and managed band against a basket of
      certain foreign currencies. This change in policy has resulted in an
      approximately 2.0% appreciation of the Renminbi against the U.S. Dollar. While
      the international reaction to the Renminbi revaluation has generally been
      positive, there remains significant international pressure on the PRC government
      to adopt an even more flexible currency policy, which could result in a further
      and more significant appreciation of the Renminbi against the U.S.
      Dollar.





***Recent
      SAFE Regulations may restrict our ability to remit profits out of the PRC as
      dividends***





Recent
      PRC State Administration of Foreign Exchange ("SAFE") Regulations regarding
      offshore financing activities by PRC residents have undergone a number of
      changes which may increase the administrative burden we face. The failure by
      our
      stockholders who are PRC residents to make any required applications and filings
      pursuant to such regulations may prevent us from being able to distribute
      profits and could expose us and our PRC resident stockholders to liability
      under
      PRC law.





SAFE
      issued a public notice ("October Notice") effective from November 1, 2005,
      which
      requires registration with SAFE by the PRC resident stockholders of any foreign
      holding company of a PRC entity. We are a foreign holding company of a PRC
      entity **.** Without
      registration, the PRC entity cannot remit any of its profits out of the PRC
      as
      dividends or otherwise; however, it is uncertain how the October Notice will
      be
      interpreted or implemented regarding specific documentation requirements for
      a
      foreign holding company formed prior to the effective date of the October
      Notice, such as in our case **.** In
      addition, the October Notice requires that any monies remitted to PRC residents
      outside of the PRC be returned within 180 days; however, there is no indication
      of what the penalty will be for failure to comply or if stockholder
      non-compliance will be considered to be a violation of the October Notice by
      us
      or otherwise affect us.





In
      the
      event that the proper procedures are not followed under the SAFE October Notice,
      we could lose the ability to remit monies outside of the PRC and would therefore
      be unable to pay dividends or make other distributions. Our PRC resident
      stockholders could be subject to fines, other sanctions and even criminal
      liabilities under the PRC Foreign Exchange Administrative Regulations
      promulgated January 29, 1996, as amended.




**Risks
      related to our business**





***We
      give no assurances that any plans for future expansion will be implemented
      or
      that they will be successful.***





While
      we
      have expansion plans, which include making full use of the newly built
      cornstarch manufacturing plant (partially completed and operational since
      January 2007), upgrading our existing glucose manufacturing facility, building
      a
      new glucose manufacturing facility and expanding our sales overseas, there
      is no
      guarantee that such plans will be implemented or that they will be successful.
      These plans are subject to, among other things, their feasibility to meet the
      challenges we face, our ability to arrange for sufficient funding and the
      ability to hire qualified and capable employees to carry out these expansion
      plans.




25





***We
      have a limited operating history and limited historical financial information
      upon which you may evaluate our performance*** *.*





Our
      operating subsidiary, Weifang Shengtai, was incorporated in 1999 and our
      operations have been largely confined to the PRC. In addition, while we have
      had
      some experience in managing a cornstarch manufacturing facility, we may not
      be
      adequately prepared to manage and operate a larger and more modern facility.





We
      are in
      our early stages of development and face risks associated with a new company
      in
      a growth industry. We may not successfully address these risks and uncertainties
      or successfully implement our operating strategies. If we fail to do so, it
      could materially harm our business to the point of having to cease operations
      and could impair the value of our common stock to the point investors may lose
      their entire investment. Even if we accomplish these objectives, we may not
      generate positive cash flows or the profits we anticipate in the
      future.





Although
      our revenues have grown rapidly since our inception from the growing demand
      for
      our glucose products, we cannot assure you that we will maintain our
      profitability or that we will not incur net losses in the future. We expect
      that
      our operating expenses will increase as we expand. Any significant failure
      to
      realize anticipated revenue growth could result in significant operating losses.
      We will continue to encounter risks and difficulties frequently experienced
      by
      companies at a similar stage of development, including our potential failure
      to:





·
            expand
                our product offerings and maintain the high quality of our
                products;





·
            manage
                our expanding operations, including the integration of any future
                acquisitions;




·
            obtain
                sufficient working capital to support our expansion and to fill customers'
                orders in time;





·
            maintain
                adequate control of our expenses;




·
            implement
                our product development, marketing, sales, and acquisition strategies
                and
                adapt and modify them as needed;
                and





·
            anticipate
                and adapt to changing conditions in the dextrose monohydrate and
                glucose
                products markets in which we operate as well as the impact of any
                changes
                in government regulation, mergers and acquisitions involving our
                competitors, technological developments and other significant competitive
                and market dynamics.




***If
      we are not successful in addressing any or all of these risks, our business
      may
      be materially and adversely affected.***





Because
      we are a relatively new company, we may not be experienced enough to address
      all
      the risks in our business or in our expansion including successfully operating
      our new cornstarch manufacturing plant and construction of our new glucose
      manufacturing facility. If we are unable to anticipate and react to such risks,
      our business may be materially and adversely affected.





***We
      will face a lot of competition, some of which may be from companies which may
      be
      better capitalized and more experienced than us.***





We
      face
      competition from other domestic and global manufacturers and suppliers of
      pharmaceutical grade dextrose monohydrate and glucose. Although we view
      ourselves in a favorable position vis-à-vis our competition, some of the other
      companies that sell into our markets may be more successful than us and/or
      have
      more experience and money that we do. This additional experience and money may
      enable our competitors to produce more cost-effective products and market their
      products with more success than we are able to, which would decrease our sales.
      We expect that we will be required to continue to invest in product development
      and productivity improvements to compete effectively in our markets. However,
      we
      cannot give assure you that we can successfully remain competitive. If our
      competitors developed a more efficient product or undertook more aggressive
      and
      costly marketing campaigns than us this could have a material adverse effect
      on
      our business, results of operations or financial condition.




26




***A
      slowdown in the PRC economy may adversely affect our
      operations.***




As
      all of
      our operations are conducted in the PRC and most of all of our revenues are
      generated from sales in the PRC, a slowdown or other adverse developments in
      the
      PRC economy could materially and adversely affect our customers, demand for
      our
      products and our business. Although the PRC economy has grown significantly
      in
      recent years, we cannot assure you that such growth will continue. While we
      believe the demand for our products is not dependent on the health of the
      economy, we do not know how sensitive we are to a slowdown in economic growth
      or
      other adverse changes in the PRC economy. A slowdown in overall economic growth,
      an economic downturn or recession or other adverse economic developments in
      the
      PRC may materially reduce the demand for our products and materially and
      adversely affect our business.





Our
      major
      competitors may be better able than us to successfully endure downturns in
      our
      sector. In periods of reduced demand for our products, we can either choose
      to
      maintain market share by reducing our selling prices to meet competition or
      maintain selling prices, which would likely sacrifice market share. Sales and
      overall profitability would be reduced under either scenario. In addition,
      we
      cannot assure you that additional competitors will not enter our existing
      markets, or that we will be able to compete successfully against existing or
      new
      competition.





***Inflation
      in the PRC could negatively affect our profitability and
      growth.***





While
      the
      PRC economy has experienced rapid growth, such growth has been uneven among
      various sectors of the economy and in different geographical areas of the
      country. Rapid economic growth can lead to growth in the money supply and rising
      inflation. If prices for our products rise at a rate that is insufficient to
      compensate for the rise in the costs of supplies, it may have an adverse effect
      on profitability. In order to control inflation in the past, the PRC government
      has imposed controls on bank credits, limits on loans for fixed assets and
      restrictions on state bank lending. Such an austere policy can lead to a slowing
      of economic growth. In October 2004, the People's Bank of China, the PRC's
      central bank, raised interest rates for the first time in nearly a decade and
      indicated in a statement that the measure was prompted by inflationary concerns
      in the PRC economy. Repeated rises in interest rates by the central bank would
      likely slow economic activity in the PRC which could, in turn, materially
      increase our costs and also reduce demand for our products.




***A
      widespread health problem in the PRC could negatively affect our
      operations***




A
      renewed
      outbreak of SARS or another widespread public health problem in the PRC, such
      as
      bird flu, where a major portion of our revenue is derived, could have an adverse
      effect on our operations. Our operations may be impacted by a number of
      health-related factors, including quarantines or closures of some offices that
      would adversely disrupt our operations. Any of the foregoing events or other
      unforeseen consequences of public health problems could adversely affect our
      operations.




***Enforcement
      against us or our directors and officers may be
      difficult***




Because
      our principal assets are located outside of the U.S. and almost all our
      directors and officers reside outside of the U.S., it may be difficult for
      you to enforce your rights based on U.S. Federal securities laws against us
      and
      our officers and some directors or to enforce a U.S. court judgment against
      us
      or them in the PRC.




27





In
      addition, our operating subsidiary is located in the PRC and substantially
      all
      of its assets are located outside of the U.S. It may therefore be difficult
      for
      investors in the U.S. to enforce their legal rights based on the civil liability
      provisions of the U.S. Federal securities laws against us in the courts of
      either the U.S. or the PRC and, even if civil judgments are obtained in U.S.
      courts, to enforce such judgments in PRC courts. Further, it is unclear if
      extradition treaties now in effect between the U.S. and the PRC would permit
      effective enforcement against us or our officers and directors of criminal
      penalties under the U.S. Federal securities laws or otherwise.





***We
      may have difficulty establishing adequate management, legal and financial
      controls in the PRC.***





The
      PRC
      historically has not adopted a western style of management and financial
      reporting concepts and practices, as well as in modern banking, computer and
      other control systems. We may have difficulty in hiring and retaining a
      sufficient number of qualified employees to work in the PRC. As a result of
      these factors, we may experience difficulty in establishing management, legal
      and financial controls, collecting financial data and preparing financial
      statements, books of account and corporate records and instituting business
      practices that meet Western standards.




***Inadequate
      funding for our capital expenditure may affect our growth and
      profitability***




Our
      sales
      revenues have increased from $19,999,826, for the fiscal year ended June 30,
      2004 to $ 51,706,215 for the fiscal year ended June 30, 2007 **.** Our
      continued growth is dependent upon our ability to raise capital from outside
      sources. Our ability to obtain financing will depend upon a number of factors,
      including:





·
            our
                financial condition and results of operations;




·
            the
                condition of the PRC economy and the healthcare sector in the PRC;




·
            conditions
                in relevant financial markets; and




·
            relevant
                PRC laws regulating the same.





If
      we are
      unable to obtain financing, as needed, on a timely basis and on acceptable
      terms
      to our investors or lenders, our financial position, competitive position,
      growth and profitability may be adversely affected.





***We
      may not be able to effectively control and manage our
      growth.***





If
      our
      business and markets grow and develop, it will be necessary for us to finance
      and manage expansion in an orderly fashion. We may not have the requisite
      experience to manage and operate a larger, more modern cornstarch manufacturing
      plant and a bigger glucose production line. In addition, we may face challenges
      in managing expanding product offerings and in integrating acquired businesses
      with our own. These events would increase demands on our existing management,
      workforce and facilities. Failure to satisfy these increased demands could
      interrupt or adversely affect our operations and cause production backlogs,
      longer product development time frames and administrative
      inefficiencies.




28





***Significant
      fluctuations in raw material prices may have a material adverse effect on
      us***




We
      do not
      have any long-term supply contracts with our raw materials suppliers. Any
      significant fluctuation in price of our raw materials could have a material
      adverse effect on the manufacturing cost of our products. We are subject to
      market conditions and although raw materials are generally available and we
      have
      not experienced any raw material shortage in the past, we cannot assure you
      that
      the necessary materials will continue to be available to us at prices currently
      in effect or acceptable to us.




We
      may
      have limited options in the short-term for alternative supply if our suppliers
      fail for any reason, including their business failure or financial difficulties,
      to continue the supply of raw materials. Moreover, identifying and accessing
      alternative sources may increase our costs.





Although
      we are in the corn-producing region in the Shandong province, there is no
      guarantee that we will not face a shortage of corn because of some natural
      calamity or other reason.





We
      had
      also mitigated the risks of a shortage in cornstarch by managing a
      cornstarch-producing company, Shouguang Shengtai Starch Company, and implemented
      a vertical integration manufacturing program, which includes building our own
      cornstarch processing plant, which plant is now operational. This will not
      only
      lower production costs and improve profit margins, it will also allow Weifang
      Shengtai to produce higher quality, lower-cost cornstarch. We cannot guarantee
      these measures will be effective in eradicating all risks attendant to the
      supply of raw materials. In the event our cost of materials is increased, we
      may
      have to raise prices of our products, making us less competitive
      price-wise.




We
      may
      not be able to adjust our product prices, especially in the short-term, to
      recover the costs of any increases in raw materials. Our future profitability
      may be adversely affected to the extent we are unable to pass on higher raw
      material costs to our customers.





***We
      may be exposed to intellectual property infringement and other claims by third
      parties, which, if successful, could cause us to pay significant damage awards
      and incur other costs.***





Our
      success also depends in large part on our ability to use and develop our
      technology and know-how without infringing the intellectual property rights
      of
      third parties. We believe that the technology we use is not protected by any
      patent or intellectual property rights. As litigation becomes more common in
      the
      PRC in resolving commercial disputes, we face a higher risk of being the subject
      of intellectual property infringement claims. The validity and scope of claims
      relating to the manufacturing of pharmaceutical grade products and cornstarch
      involve complex technical, legal and factual questions and analysis and,
      therefore, may be highly uncertain. The defense and prosecution of intellectual
      property suits, patent opposition proceedings and related legal and
      administrative proceedings can be both costly and time consuming and may
      significantly divert the efforts and resources of our technical and management
      personnel. An adverse determination in any such litigation or proceedings to
      which we may become a party could subject us to significant liability, including
      damage awards, to third parties, require us to seek licenses from third parties,
      to pay ongoing royalties, or to redesign our products or subject us to
      injunctions preventing the manufacture and sale of our products. Protracted
      litigation could also result in our customers or potential customers deferring
      or limiting their purchase or use of our products until resolution of such
      litigation. Further, we do not have adequate product liability insurance
      coverage against defective products as our products are manufactured according
      to fairly basic formulas. Any disputes so far have been resolved through
      friendly negotiations. There is no guarantee that we will not be involved in
      any
      legal proceedings should such negotiations fail one day.





***Potential
      environmental liability could have a material adverse effect on our operations
      and financial condition.***





To
      the
      knowledge of management, neither the production nor the sale of our products
      constitute activities, or generate materials in a material manner, that requires
      our operation to comply with the PRC environmental laws. Although it has not
      been alleged by PRC government officials that we have violated any current
      environmental regulations, we cannot assure you that the PRC government will
      not
      amend the current PRC environmental protection laws and regulations. Our
      business and operating results may be materially and adversely affected if
      we
      were to be held liable for violating existing environmental regulations or
      if we
      were to increase expenditures to comply with environmental regulations affecting
      our operations.




29





***We
      rely on Mr. Qingtai Liu, our Chief Executive Officer and President, for the
      management of our business, and the loss of his services may significantly
      harm
      our business and prospects.***





We
      depend, to a large extent, on the abilities and participation of our current
      management team, but have a particular reliance upon Mr. Qingtai Liu, our Chief
      Executive Officer and President for the direction of our business. The loss
      of
      the services of Mr. Liu, for any reason, may have a material adverse effect
      on
      our business and prospects. We cannot assure you that the services of Mr. Liu
      will continue to be available to us, or that we will be able to find a suitable
      replacement for Mr. Liu. We have not entered into an employment contract with
      Mr. Liu. We do not have key man insurance on Mr. Qingtai Liu. If Mr. Liu dies
      and we are unable to replace Mr. Liu for a prolonged period of time, we may
      be
      unable to carry out our long term business plan and our future prospect for
      growth, and our business, may be harmed.




***We
      may not be able to hire and retain qualified personnel to support our growth
      and
      if we are unable to retain or hire such personnel in the future, our ability
      to
      improve our products and implement our business objectives could be adversely
      affected.***





Our
      future success depends heavily upon the continuing services of the members
      of
      our senior management team, in particular our Chief Executive Officer and
      President, Mr. Qingtai Liu. If one or more of our senior executives or other
      key
      personnel is/are unable or unwilling to continue in his/her/their present
      positions, we may not be able to replace them easily or at all, and our business
      may be disrupted and our financial condition and results of operations may
      be
      materially and adversely affected. Competition for senior management and
      personnel is intense, the pool of qualified candidates is very limited, and
      we
      may not be able to retain the services of our senior executives or senior
      personnel, or attract and retain high-quality senior executives or senior
      personnel in the future. This failure could materially and adversely affect
      our
      future growth and financial condition.





***We
      may not have adequate internal accounting controls. While we have certain
      internal procedures in our budgeting, forecasting and in the management and
      allocation of funds, our internal controls may not be
      adequate.***





We
      are
      constantly striving to improve our internal accounting controls. With the
      appointment of our new Chief Financial Officer, Mr. Yizhao Zhang, we hope to
      develop an adequate internal accounting control to budget, forecast, manage
      and
      allocate our funds and account for them. There is no guarantee that such
      improvements will be adequate or successful or that such improvements will
      be
      carried out on a timely basis. If we do not have adequate internal accounting
      controls, we may not be able to appropriately budget, forecast and manage our
      funds, we may also be unable to prepare accurate accounts on a timely basis
      to
      meet our continuing financial reporting obligations and we may not be able
      to
      satisfy our obligations under US securities laws.





***Standards
      for compliance with Section 404 of the Sarbanes-Oxley Act Of 2002 are uncertain,
      and if we fail to comply in a timely manner, our business could be harmed and
      our stock price could decline.***




Rules
      adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
      require annual assessment of our internal control over financial reporting,
      and
      attestation of this assessment by our company's independent registered public
      accountants. The SEC extended the compliance dates for non-accelerated filers,
      as defined by the SEC. Accordingly, we believe that the annual assessment of
      our
      internal controls requirement will first apply to our annual report for the
      2007
      fiscal year and the attestation requirement of management's assessment by our
      independent registered public accountants will first apply to our annual report
      for the 2008 fiscal year. The standards that must be met for management to
      assess the internal control over financial reporting as effective are new and
      complex, and require significant documentation, testing and possible remediation
      to meet the detailed standards. We may encounter problems or delays in
      completing activities necessary to make an assessment of our internal control
      over financial reporting. In addition, the attestation process by our
      independent registered public accountants is new and we may encounter problems
      or delays in completing the implementation of any requested improvements and
      receiving an attestation of our assessment by our independent registered public
      accountants. If we cannot assess our internal control over financial reporting
      as effective, or our independent registered public accountants are unable to
      provide an unqualified attestation report on such assessment, investor
      confidence and share value may be negatively impacted.




30




***We
      have inadequate insurance coverage***




We
      do not
      presently maintain product liability insurance, and our property and equipment
      insurance does not cover the full value of our property and equipment, which
      leaves us with exposure in the event of loss or damage to our properties or
      claims filed against us.





We
      currently do not carry any product liability or other similar insurance. We
      cannot assure you that we would not face liability in the event of the failure
      of any of our products. This is particularly true given our plan to
      significantly expand our sales into international markets, like the United
      States, where product liability claims are more prevalent.





Except
      for property and automobile insurance, we do not have other insurance such
      as
      business liability or disruption insurance coverage for our operations in the
      PRC.





We
      do not
      maintain a reserve fund for warranty or defective products claims. Our costs
      could substantially increase if we experience a significant number of warranty
      claims. We have not established any reserve funds for potential warranty claims
      since historically we have experienced few warranty claims for our products
      so
      that the costs associated with our warranty claims have been low. If we
      experience an increase in warranty claims or if our repair and replacement
      costs
      associated with warranty claims increase significantly, it would have a material
      adverse effect on our financial condition and results of
      operations.





**Risks
      related to an investment in our common stock**





***Our
      Chief Executive Officer and President controls us through his position and
      stock
      ownership and his interests may differ from other
      stockholders***





Our
      Chief
      Executive Officer and President, Mr. Qingtai Liu, beneficially owns
      approximately 41.15% of our common stock. As a result, although Mr. Liu is
      not
      the holder of a majority of the outstanding shares, Mr. Liu may be able to
      influence the outcome of stockholder votes on various matters, including the
      election of directors and extraordinary corporate transactions, including
      business combinations. Mr. Liu's interests may differ from other stockholders.




***We
      do not intend to pay cash dividends in the foreseeable
      future***





We
      currently intend to retain all future earnings for use in the operation and
      expansion of our business. We do not intend to pay any cash dividends in the
      foreseeable future but will review this policy as circumstances dictate. Should
      we decide in the future to do so, as a holding company, our ability to pay
      dividends and meet other obligations depends upon the receipt of dividends
      or
      other payments from our operating subsidiary based in the PRC, Weifang Shengtai.
      Our operating subsidiary, from time to time, may be subject to restrictions
      on
      its ability to make distributions to us, including as a result of restrictions
      on the conversion of local currency into U.S. dollars or other hard currency
      and
      other regulatory restrictions. See “Risks related to doing business in the
      People’s Republic of China”.




31





***There
      is currently a very limited trading market for our common
      stock***





Our
      common stock has been quoted on the over-the-counter Bulletin Board since
      January 2007. Because we were formerly a shell company, our bid and ask
      quotations have not regularly appeared on the OTC Bulletin Board for any
      consistent period of time. There is a limited trading market for our common
      stock and our common stock may never be included for trading on any stock
      exchange or through any other quotation system, including, without limitation,
      the NASDAQ Stock Market. You may not be able to sell your shares due to the
      absence of an established trading market.





***Our
      common stock is subject to the Penny Stock
      Regulations***




Our
      common stock is, and will continue to be subject to the SEC's "penny stock"
      rules to the extent that the price remains less than $5.00. Those rules, which
      require delivery of a schedule explaining the penny stock market and the
      associated risks before any sale, may further limit your ability to sell your
      shares. ****





The
      SEC
      has adopted regulations which generally define "penny stock" to be an equity
      security that has a market price of less than $5.00 per share. Our common stock,
      when and if a trading market develops, may fall within the definition of penny
      stock and subject to rules that impose additional sales practice requirements
      on
      broker-dealers who sell such securities to persons other than established
      customers and accredited investors (generally those with assets in excess of
      $1,000,000, or annual incomes exceeding $200,000 or $300,000, together with
      their spouse).





For
      transactions covered by these rules, the broker-dealer must make a special
      suitability determination for the purchase of such securities and have received
      the purchaser's prior written consent to the transaction. Additionally, for
      any
      transaction, other than exempt transactions, involving a penny stock, the rules
      require the delivery, prior to the transaction, of a risk disclosure document
      mandated by the Commission relating to the penny stock market. The broker-dealer
      also must disclose the commissions payable to both the broker-dealer and the
      registered representative, current quotations for the securities and, if the
      broker-dealer is the sole market-maker, the broker-dealer must disclose this
      fact and the broker-dealer's presumed control over the market. Finally, monthly
      statements must be sent disclosing recent price information for the penny stock
      held in the account and information on the limited market in penny stocks.
      Consequently, the "penny stock" rules may restrict the ability of broker-dealers
      to sell our common stock and may affect the ability of investors to sell their
      common stock in the secondary market.





***Our
      common stock is illiquid and subject to price volatility unrelated to our
      operations***





The
      market price of our common stock could fluctuate substantially due to a variety
      of factors, including market perception of our ability to achieve our planned
      growth, quarterly operating results of other companies in the same industry,
      trading volume in our common stock, changes in general conditions in the economy
      and the financial markets or other developments affecting our competitors or
      us.
      In addition, the stock market is subject to extreme price and volume
      fluctuations. This volatility has had a significant effect on the market price
      of securities issued by many companies for reasons unrelated to their operating
      performance and could have the same effect on our common stock.





A
      large
      number of shares of common stock will be issuable for future sale which will
      dilute the ownership percentage of our current holders of common stock. We
      have
      successful registered for public resale 8,750,000 shares (as well as 4,375,000
      shares issuable on exercise of the attached warrants) belonging to our investors
      and the availability for public resale of those shares may depress our stock
      price.





Also
      as a
      result, there will be a significant number of new shares of common stock on
      the
      market in addition to the current public float. Sales of substantial amounts
      of
      common stock, or the perception that such sales could occur, and the existence
      of warrants to purchase shares of common stock at prices that may be below
      the
      then current market price of the common stock, could adversely affect the market
      price of our common stock and could impair our ability to raise capital through
      the sale of our equity securities.





32


**Item
      1B. Unresolved Staff Comments.**





Not
      applicable.





**Item
      2. Properties** .





Our
      facility in the PRC is located at  Hi-Tech Industrial Park of Changle
      County, Shandong Province, PRC 262400. ****





All
      land
      in the PRC is owned by the government and cannot be sold to any individual
      or
      entity. Instead, the government grants or allocates landholders a “land use
      right.” From March 2000 to December 2003 Weifang Shengtai purchased various land
      use rights in succession for a total price of $1,295,959. Weifang
      Shengtai has obtained another land use right in June 2007 for a price of
      $949,900.As a result Weifang Shengtai has the right to use various
      parcels of land that range from 20 to 50 years in length, all of which are
      currently being used by Weifang Shengtai for its business.





Weifang
      Shengtai occupies an area of approximately 253,746 square meters in Changle
      Economic and Technology Development Zone. Set forth below is the detailed
      information regarding the land:





Location
            
            Area
              (square
                meters)
            
            Construction
                on the
              Land
            
            ExpirationChangle
                Economic and Technology Development Zone
            
            85,880.43
            
            New
                glucose production complex
            
            April
                20,2057Changle
                Economic and Technology Development Zone
            
            16,168
            
            None
            
            January
                14, 2030Changle
                Economic and Technology Development Zone
            
            73,313.38
            
            Glucose
                production facility
            
            April
                28, 2052Changle
                Economic and Technology Development Zone
            
            19,692.4
            
            Office
                and staff buildings
            
            September
                21, 2052Changle
                Economic and Technology Development Zone
            
            58,692
            
            Cornstarch
                processing plant (11,800 sq meters)
            
            April
                2, 2054




**Item
      3. Legal Proceedings.**





We
      know
      of no material, active, pending or threatened proceeding against us
      or our subsidiaries, nor are we, or any subsidiary, involved as a
      plaintiff or defendant in any material proceeding or pending
      litigation. ****





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





None.





**PART
      II**





**Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.**





33




***Market
      Information***





We
      began
      trading on the Over the Counter Bulletin Board on January 12, 2007 and our
      symbol is "SGTI.OB." Prior to that, there had never been any established public
      market for shares of our common stock.  The following table sets forth for
      the period indicated the prices of the common stock in the over-the-counter
      market, as reported and summarized by the OTC Bulletin Board. Such prices are
      based on inter-dealer bid and asked prices, without markup, markdown,
      commissions, or adjustments and may not represent actual transactions. As of
      September 21, 2007, the last reported bid price of our common stock was $2.65
      per share and the last reported ask price was $2.70 per share.





CALENDAR
                QUARTER ENDED
            
            HIGH
                BID(S)
            
            LOW
                BID(S)March
                31, 2007
            
            
            -
            
            
            -June
                30, 2007
            
            $
            6.00
            
            $
            1.01




***Holders***





As
      of
      September 21, 2007, there were 18,875,000 shares of our common stock issued
      and
      outstanding and there were 61 holders of record of our common stock.





***Dividends***





Since
      our
      incorporation, no dividends have been paid on our common stock. We intend to
      retain any earnings for use in our business activities, so it is not expected
      that any dividends on our common stock will be declared and paid in the
      foreseeable future.





As
      a
      holding company our ability to pay dividends is dependent on the receipt of
      dividends from SHI and our PRC based operating company Weifang Shengtai. The
      PRC
      government imposes controls on the convertibility of Renminbi into foreign
      currencies and, in certain cases, the remittance of currency out of the PRC.
      We
      receive substantially all of our revenues in Renminbi which is currently not
      a
      freely convertible currency. Shortages in the availability of foreign currency
      may restrict our ability to remit sufficient foreign currency to pay dividends,
      or otherwise satisfy foreign currency dominated obligations.




***Warrants***





As
      of
      September 21, 2007 we had 4,693,750 outstanding warrants to purchase 4,693,750
      shares of common stock and no outstanding options. Set forth below is a
      description of our outstanding warrants.





On
      May
      15, 2007, we entered into a share purchase agreement and completed a private
      placement of our shares and warrants. Under the share purchase agreement we
      sold
      to the Selling Stockholders for $2.00 per share (or a total of $17,500,000)
      an
      aggregate of 8,750,000 shares of commons tock and 4,375,000 warrants to purchase
      4,375,000 shares of common stock. The exercise price of the warrants is $2.60
      per share, as adjusted, and the warrants expire on May 15, 2012 **.**




On
      May
      15, 2007, we issued to Chinamerica Fund, L.P. 75,000 warrants and Jeff Jenson
      25,000 warrants to compensate the former as lead investor and the latter in
      assisting in providing the shell. These warrants have an exercise price of
      $0.01
      per share and a term of five years.





As
      part
      of their consideration for acting as placement agent for the May 15, 2007
      private placement Brill Securities, Inc **.** received
      five year warrants to purchase 218,750 shares of common stock at an exercise
      price of 2.60 per share, as adjusted. These have the same terms as the warrants
      issued to the Selling Stockholders in the May 15, 2007 private
      placement.





34




***Shares
      Eligible for Future Sale***





Future
      sales of substantial amounts of our common stock in the trading market could
      adversely affect market prices.




As
      of
      September 21, 2007, we had 18,875,000 shares of our common stock issued and
      outstanding. If all of our 4,693,750 outstanding warrants are exercised we
      will
      have 23,568,750 shares of common stock issued and outstanding. Of these shares,
      the 8,750,000 shares of common stock and the 4,693,750 shares issuable on
      conversion of the warrants registered in this prospectus will be freely tradable
      without restriction or further registration under the Securities Act. All other
      outstanding shares not registered in this prospectus will be deemed "restricted
      securities" as defined under Rule 144. Restricted securities may be sold in
      the
      public market only if registered or if they qualify for an exemption from
      registration under Rule 144 promulgated under the Securities Act, which rules
      are summarized below. On May 15, 2008, one year after the closing of the share
      exchange transaction, 9,125,000 shares, which were issued in connection with
      the
      share exchange transaction, may be sold under and subject to Rule 144 described
      below.





***Rule
      144***





In
      general, under Rule 144 as currently in effect, a person, or persons whose
      shares are aggregated, who has beneficially owned shares of common stock for
      at
      least one year, including the holding period of any prior owner, except if
      the
      prior owner was one of our affiliates, would be entitled to sell within any
      three-month period a number of shares that does not exceed the greater of:




·
            1%
                of the number of shares of our common stock then outstanding; or




·
            the
                average weekly trading volume of our common stock during the four
                calendar
                weeks preceding the filing of a notice on Form 144 with respect to
                the
                sale.




Sales
      under Rule 144 are also subject to manner of sale provisions and notice
      requirements and to the availability of current public information about our
      company.




***Rule
      144(k)***





Under
      Rule 144(k), a person who is not deemed to have been one of our affiliates
      at
      any time during the 90 days preceding a sale, and who has beneficially owned
      the
      shares proposed to be sold  for at least two years, including the holding
      period of any prior owner except one of our affiliates, is entitled to sell
      the
      shares without complying with the manner of sale, public information, volume
      limitation or notice provisions of Rule 144.




***Lock-Up
      Agreement*** **





Mr.
      Qingtai Liu entered into a “lock-up” agreement pursuant to which he, and
      his wife and daughter have agreed not to sell or transfer any shares of the
      Company’ common stock for the period continuing through the effective date of
      the initial registration statement filed  by us and ending twelve (12)
      months thereafter. Mr. Liu is the beneficial owner of 7,766,325 shares of our
      common stock. As an “affiliate” Mr. Liu would not be permitted sell under Rule
      144(k).





***Stock
      Performance Graph***





We
      are
      unable to prepare a line graph comparing the yearly percentage change in our
      cumulative total shareholder return our common stock because we only began trading
      on the Over the Counter Bulletin Board on January 12, 2007. The preparation
      of a
      line graph for the months our common stock has been trading would not be
      meaningful.





35





**Item
      6. Selected Financial Data.**





The
      following selected financial data for the fiscal years ended 2007, 2006, 2005,
      2004 and 2003 are derived from our audited consolidated financial statements.
      The data should be read in conjunction with our consolidated financial
      statements and notes thereto and “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations” included elsewhere in this
      report.




**Year
                  Ended June 30,****Consolidated
                  Statements of Operations**
              
              **2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2003**(audited)
              
              (audited)
              
              (audited)
              
              (audited)
              
              (unaudited)Sales
                  revenue
              
              $
              51,706,215
              
              $
              36,029,179
              
              $
              24,860,399
              
              $
              19,999,826
              
              $
              10,493,234Cost
                  of good sold
              
              
              39,527,662
              
              
              27,568,092
              
              
              19,557,743
              
              
              16,487,240
              
              
              8,666,872Gross
                  profit
              
              $
              12,178,553
              
              $
              8,461,087
              
              $
              5,302,656
              
              $
              3,512,586
              
              
              1,826,362SeSelling,
                  general and administrative expenses
              
              
              4,674,679
              
              
              3,831,778
              
              
              3,242,330
              
              
              2,474,813
              
              
              1,868,727Operating
                  Income
              
              $
              7,503,874
              
              $
              4,629,309
              
              $
              2,060,326
              
              $
              1,037,773
              
              $
              (42,365
              )Other
                  net income
              
              
              524,088
              
              
              (418,398
              )
              
              (445,169
              )
              
              (550,196
              )
              
              193,279Income
                  before Income taxes
              
              $
              8,027,962
              
              $
              4,210,911
              
              $
              1,615,157
              
              $
              487,577
              
              
              150,914Provision
                  for Income Taxes
              
              
              878,836
              
              
              -
              
              
              -
              
              
              -
              
              
              (49,463
              )Net
                  income
              
              $
              7,149,126
              
              $
              4,210,911
              
              $
              1,615,157
              
              $
              487,577
              
              $
              101,451Fr
                  Foreign Currency Translation Adjustment
              
              
              641,596
              
              
              185,402
              
              
              -
              
              
              -
              
              
              -C
                  Comprehensive Income
              
              $
              7,790,722
              
              $
              4,396,313
              
              $
              1,1615,157
              
              $
              487,577
              
              $
              101,451Earning
                per share - basic
              
              $
              0.64
              
              $
              0.42
              
              $
              0.16
              
              $
              0.05
              
              $
              -B
                  Earning per share - diluted
              
              $
              0.62
              
              $
              0.42
              
              $
              0.16
              
              $
              0.05
              
              $
              -B
                  Basic weighted average common shares outstanding
              
              
              11,251,712
              
              
              10,125,000
              
              
              10,125,000
              
              
              10,125,000
              
              
              -DiDiluted
                  weighted average common shares outstanding
              
              
              11,477,545
              
              
              10,125,000
              
              
              10,125,000
              
              
              10,125,000
              
              
              -




36




**Year
                  Ended June 30,****Consolidated
                  Balance Sheets**
              
              **2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2003**(audited)
              
              (audited)
              
              (audited)
              
              (audited)
              
              (unaudited)Current
                  Assets
              
              $
              31,266,489
              
              $
              12,149,634
              
              $
              11,981,783
              
              $
              7,900,644
              
              $
              5,729,938Total
                  Assets
              
              
              73,760,133
              
              
              31,271,457
              
              
              23,672,498
              
              
              17,644,345
              
              
              12,261,479Current
                  Liabilities
              
              
              38,468,085
              
              
              23,612,427
              
              
              19,564,316
              
              
              14,447,904
              
              
              9,214,696Total
                  Liabilities
              
              
              42,129,557
              
              
              24,614,027
              
              
              20,411,316
              
              
              16,141,904
              
              
              11,634,696Total
                  Stockholders’ Equity
              
              
              32,630,576
              
              
              6,657,430
              
              
              3,261,182
              
              
              1,502,441
              
              
              626,783




**Item
      7. Management’s Discussion and Analysis of Financial Condition and Results of
      Operation.**




*This
      report contains forward-looking statements. These statements relate to future
      events or our future financial performance. In some cases, you can identify
      forward-looking statements by terminology such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or
“continue,” the negative of such terms or other comparable terminology. These
      statements are only predictions. Actual events or results may differ
      materially. Factors that may cause our results to differ include, but are not
      limited to: changes in the scope or timing of our projects; slowdown in the
      demand for pharmaceutical grade glucose and glucose and starch products
      genereally, which could reduce revenues and profit margins.*




*Although
      we believe that the expectations reflected in the forward-looking statements
      are
      reasonable, we cannot guarantee future results, levels of activity, performance
      or achievements. Moreover, neither we, nor any other person, assume
      responsibility for the accuracy and completeness of the forward-looking
      statements. We are under no obligation to update any of the forward-looking
      statements after the filing of this Annual Report on Form 10-K to
      conform such statements to actual results or to changes in our
      expectations.*




*The
      following discussion should be read in conjunction with our audited consolidated
      financial statements and the related notes and other financial information
      appearing elsewhere in this Form 10-K and other reports and filings made
      with the Securities and Exchange Commission. Readers are also urged to carefully
      review and consider the various disclosures made by us which attempt to advise
      interested parties of the factors which affect our business, including without
      limitation the disclosures made under the caption “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations,” and Item 1A—Risk
      Factors.*




37





**Overview**





We
      are,
      through our wholly-owned subsidiary, Shengtai Holding Inc. and its wholly-owned
      subsidiary in the PRC, Weifang Shengtai Pharmaceutical Co., Ltd, a leading
      manufacturer and supplier of pharmaceutical grade glucose in the PRC. We also
      manufacture glucose and starch products for food and beverage industry for
      domestic market.





During
      the reporting period, our market share in the PRC for pharmaceutical grade
      glucose products, especially dextrose monohydrate, has increased (Source: An
      extract from “China’s Starch, Modified Starch and Crystallized Glucose
      Production Summary, 2006 edition”, published by China Starch Industry
      Association in July 2007) . Dextrose monohydrate is one of the five most
      important types of medical prescriptions in the PRC and is one of the most
      widely used pharmaceutical products for restorative and nutritional purposes.
      It
      is used as a raw material in a wide array of pharmaceutical products such as
      transfusions and intravenous drips.





Our
      new
      cornstarch production facility with the capacity to produce 240,000 tons of
      cornstarch a year was partially completed and started production in January
      2007. This new complex is close to our existing glucose production plant and
      new
      glucose production complex that is currently under construction.





Our
      new
      cornstarch production facility allows us to produce our own cornstarch and
      replace our suppliers of cornstarch. We are able to ensure the adequacy and
      quality of the cornstarch we use and also meet our increasing demand for quality
      cornstarch. Since cornstarch is produced on our premises, we are able to
      obliterate shipping costs to transport the cornstarch to our glucose production
      facility and operating costs, thus resulting in lower manufacturing
      costs.





In
      addition to our pharmaceutical glucose series of products, we also produce
      other medicinal product lines of glucose and starch products such as industrial
      glucose, syrup, starch, Avermectins, dextrin, maltose and maltitol, which are
      used for food, beverage and industrial production. During the reporting period,
      we expanded our manufacturing of Avermectins, which is a veterinary medicine
      derived from glucose. The feedback from our sales trial has been
      encouraging.





At
      the
      end of June 2007, we set up a new product line to manufacture sodium gluconate.
      This non-corrosive, non-toxic and highly pure gluconate is gaining popularity
      as
      a chelating agent in the PRC and is widely used in pharmaceutical, construction
      and chemistry industries.





The
      initial sales of sodium gluconate have been encouraging. As a compound of
      glucose and sodium hydroxide, sodium gluconate is a high quality crystalline
      sodium salt of gluconic acid. It appears as white crystals that exhibit
      excellent solubility. We dissolved sodium hydroxide in glucose solution, along
      with certain catalysts. The solution is then heated. Separating the catalysts
      by
      steaming the solution, and then after a series of processes such as
      inspissations, crystallization, centrifugation and dehydration, we eventually
      get the end product - sodium gluconate.





Since
      we
      have only begun the production of sodium gluconate, we have insufficient
      profitability records for the reporting period, but we anticipate its gross
      profit margin to be between 25% and 30%, depending on our scale of production
      scale and our production efficiency.





Currently
      we are targeting the construction companies as our end customers since real
      estate construction is a booming sector in the PRC economy.





Management
      believes that through manufacturing innovative products to meet market demand
      ,
      we would be able to command higher profit margins and diversify our operating
      risks.





38




Some
      authorities predict that the PRC’s pharmaceutical industry will grow at a rate
      of between 15 and 16 % for the whole year of 2007, a little higher than the
      number for 2006. (Source: http://www.bioon.com/industry/market, report title:
      Forecast of Pharmaceutical Industry in 2007).





Based
      on
      our analysis of the consumption of glucose products carried out by the China
      Starch Industry Association and the disposable income per capita from China
      National Statistics Bureau, we believe that there is a strong correlation
      between the consumption of glucose products and the disposable income per
      capita.





We
      predict that higher living standards would lead to higher consumption of
      pharmaceutical dextrose. It is our understanding that the robust and continuing
      economic growth, the rising purchasing power of domestic market, as well as
      the
      public awareness of quality health care products, are all drivers to the demand
      for our products. The strong growth in the PRC pharmaceutical industry will
      also
      help increase the selling prices of our major products, and enhance our revenues
      and increase our gross profit margin.





Management
      has been placing emphasis on (i) product quality control (ii) enhancement of
      operating efficiency (iii) expansion of geographical coverage and
      diversification of customer base, and (iv) new product development. We believe
      that these points are essentially for maintaining our
      competitiveness.





Our
      production facilities have been fully certified GMP (Good Manufacturing Practice
      for Drugs), ISO9002 and HACCP. The rate of quality output (output conforming
      to
      pharmaceutical-grade glucose product specifications) is maintained at 100%.
      We
      have a three-tier quality control system and a well equipped quality inspection
      center to ensure timely detection and then reprocessing of non-conforming
      products.





Our
      production lines are vertically integrated. Our production facilities are all
      inter-connected by an enclosed pipeline system to enhance overall production
      efficiency, minimize wastage of water and raw materials, and to avoid production
      contamination.





We
      are
      currently developing new production technology to recycle our waste water and
      byproducts. At the same time, we are improving overall production efficiency
      by
      analyzing and ameliorating inefficient production processes. We believe that
      environment protection and production efficiency are important in our
      growth.





At
      the
      end of calendar year 2006, the Changle local government negotiated with us
      and
      required us to surrender the land use right of our old factory in the
      downtown Changle for their municipal construction. The land we occupied was
      27,396 square meters. We were offered a bigger parcel of land in Changle
      Economic and Technology Development Zone with 85,880 square meters as described
      below.





In
      April
      2007, we acquired the rights to use a piece of land measuring 85,880 square
      meters in the Changle Economic and Technology Development Zone. We plan to
      develop the land and build a new glucose production complex with an expected
      production capacity of 150,000 tons per year. We commenced construction in
      early
      July 2007 and anticipate that construction will be completed in the first half
      of calendar year 2008. The new facility will be used to produce cornstarch
      and
      pharmaceutical grade glucose.





During
      the reporting period under review, we managed to successfully expand our
      domestic sales network. As of June 30, 2007, 27 of a total 31 provinces (or
      province equivalent administrative district) in the PRC have been covered by
      our
      domestic sales network. We have established representative offices in 7
      provinces to fortify our domestic sales network. We believe that these offices
      help us to better interact with our customers, reinforce our sales force and
      improve our corporate image. In the meantime, we export our products to
      customers in over sixty countries, and we plan to increase our global sales
      in
      the coming years.





We
      constantly strive to broaden and diversify our customer base. A broader customer
      base can not only mitigate our reliance on certain big customers, but also
      bring
      us more opportunities. We believe a broader market for our products can increase
      demand for our products, reduce our vulnerability to market changes, and provide
      additional areas of growth in the future. For the fiscal year ended June 30,
      2007, only Shouguang Tianli Biological Technology Co Ltd, our biggest customer,
      accounted for 7.78% of the our revenue. Our top ten customers accounted for
      only
      29.3% for our total sales for the fiscal year ended June 30, 2007.





39




Our
      research and development team has been constantly striving to improve production
      techniques, and to develop new technologies and higher-value products such
      as
      Avermectins and sodium gluconate.





Management
      is not aware of any adverse trends that would materially affect our market
      and
      financial position. We will continue to identify and pursue innovative products
      and technology to our increase market share and optimize our cost structure.
      Barring unforeseen circumstances, we anticipate continued growth in our sales
      growth. Our ability to meet increased customer demand and stay profitable will
      however still depend on factors such as our production capacity and working
      capital.




**Result
      of Operations**





**Year
      Ended June 30, 2007 Compared with Year Ended June 30, 2006**





*The
      following table shows our operating results for the fiscal years ended June
      30,
      2006 and 2007* .




**Fiscal
                Year ended**
              **June
                30, 2006**
            
            **Fiscal
                Year ended**
              **June
                30, 2007**Sales
                Revenue
            
            
            36,029,179
            
            
            51,706,215Costs
                of Goods Sold
            
            
            27,568,092
            
            
            39,527,662Gross
                Profit
            
            
            8,461,087
            
            
            12,178,553Sales,
                General and Administrative Expenses
            
            
            3,831,778
            
            
            4,674,679Operating
                Income
            
            
            4,629,309
            
            
            7,503,874Other
                Net Income (Expense)
            
            
            (418,398
            )
            
            524,088Income
                before Income Taxes
            
            
            4,210,911
            
            
            8,027,962Provision
                for Income Taxes
            
            
            —
            
            
            878,836Net
                income
            
            
            4,210,911
            
            
            7,149,126





Sales
      revenue for the fiscal year ended June 30, 2007 was $51,706,215, an increase
      of
      $15,677,036, or 43.5% compared with the corresponding period in 2006. This
      increase was mostly the result of the increase in sales of our glucose products
      and higher product prices. In addition, our new cornstarch plant began
      production in 2007 resulting in maximizing the production of our glucose
      manufacturing facility and the sale of additional excess cornstarch to outside
      customers. Accordingly, the total sales of both glucose and cornstarch were
      both
      increased.





Costs
      of
      goods sold for the year ended June 30, 2007 was $39,527,662, an increase of
      $11,959,570, or 43.4% compared with the corresponding period in 2006. The
      increase in cost of goods sold is *in
      tandem* with the
      increase in sales of our products.





Gross
      profit for the year ended June 30, 2007 was $12,178,553, an increase of
      $3,717,466, or 43.9% compared with the corresponding period in 2006. The reason
      for the increase in gross profit was mostly due to the economies of scale
      resulting from the expansion of our production output and enhanced operating
      efficiency. Although product cost increased as a result of price increases
      of
      corn and other raw materials, the selling price was higher than the price
      increase of corn, thus making our gross profit higher.





However,
      there is not significant increase of gross profit margin from fiscal 2006 to
      2007. Gross profit margin for the year ended June 30, 2007 was 23.6%, while
      it
      was 23.5% for the same period in 2006. We produced some new products with high
      profit margins, but at the same time the sales of lower profit margin products
      to outside customers, such as cornstarch, averaged down our overall gross profit
      margin.





40




Selling,
      General and Administrative expenses for the year ended June 30, 2007 was
      $4,674,679, an increase of $842,901, or 22% compared with the corresponding
      period in 2006. The increase in our Selling, General and Administrative expenses
      was the result of the expansion of our production output, especially the
      expansion of domestic sales network. The higher worker insurance requirements
      and environment related expenditures are also the causes of higher general
      and
      administrative expenses. However, the percentage of increase in our expenses
      is
      much lower than the percentage increase in our gross profit because of greater
      efficiencies of scale from a larger production output and our strict cost
      control.





Net
      income for the year ended June 30, 2007 was $7,149,126, an increase of
      $2,938,215, or 69.8% compared with the corresponding period in 2006. The
      increase of net income was due to our increase in production output, sales
      volume and gross profit margin, as well as the gain derived from surrendering
      our land use rights in the piece of property in downtown Changle to the Changle
      local government.





**Fiscal
      Year Ended June 30, 2006 and Fiscal Year Ended June 30,
      2005**





*The
      following table shows our operating results for the fiscal years ended June
      30,
      2005 and 2006.*








Fiscal
                Year ended
              June
                30, 2005
            
            Fiscal
                Year ended
              June
                30, 2006Sales
                Revenue
            
            
            24,860,399
            
            
            36,029,179Costs
                of Goods Sold
            
            
            19,557,743
            
            
            27,568,092Gross
                Profit
            
            
            5,302,656
            
            
            8,461,087Sales,
                General and Administrative Expenses
            
            
            3,242,330
            
            
            3,831,778Operating
                Income
            
            
            2,060,326
            
            
            4,629,309Other
                Net Expense
            
            
            (445,169
            )
            
            (418,398
            )Income
                before Income Taxes
            
            
            1,615,157
            
            
            4,210,911Provision
                for Income Taxes
            
            
            —
            
            
            —Net
                income
            
            
            1,615,157
            
            
            4,210,911





Sales
      revenue for fiscal year ended June 30, 2006 was $36,029,179, an increase of
      $11,168,780 which represented a 44.9% increase compared with the same period
      in
      2005. The reason for the increase was a 27.4% increase in sales volume and
      an
      increase in the selling prices of our products. For example, the domestic
      selling price of our oral dextrose product increased by an average 14.7%, while
      its export selling price increased 13.66%.





The
      selling price of our products is determined by market demand. If the demand
      is
      higher than the supply, we will increase our prices. Accordingly, prices
      fluctuate throughout the year.





Costs
      of
      goods sold for the fiscal year ended June 30, 2006 was $27,568,092, an increase
      of $8,010,349 or 41.0% from $19,557,743 for the same period in 2005. The
      increase on the cost of goods was *in
      tandem* with the
      increase in sales volume.




Gross
      profit for the fiscal year ended June 30, 2006 was $8,461,087, an increase
      of
      $3,158,431 or 59.6% from $5,302,656 for the same period in 2005. The gross
      profit margin for fiscal 2006 was 23.5%, while it was 21.3% for fiscal 2005.
      The
      reason for the increase in gross profit margin was that the unit cost decreased
      due to the economies of scale resulting from the expansion of our production
      output. Although the product cost increased as a result of the price increase
      of
      corn, the selling price was higher than the price increase of corn, thus making
      our gross profit margin higher.





41




Our
      Selling, General and Administrative expenses for the fiscal year ended June
      30,
      2006 were $3,831,778, an increase of $589,448 or 18.2% from $3,242,330 for
      the
      same period in 2005. This was the result of the increase in our production
      output. However, the percentage increase of our Selling, General and
      Administrative expenses of 18.18% is lower than the percentage increase in
      our
      sales.




Other
      expenses for fiscal 2006 and 2005 were $214,641 and $1,683 respectively. The
      27.5% increase was directly related to the increase in our production
      output.





Net
      income for fiscal 2006 was $4,210,911, an increase of $2,595,754 compared with
      fiscal 2005. The reason for this increase was the increase in sales volume
      and
      gross profit.




**Liquidity
      and Capital Resources**





***Operating
      Activities***




**Fiscal
      Year Ended June 30, 2007 compared to Fiscal Year Ended June 30,
      2006**





Net
      cash
      provided by operating activities for fiscal 2007 was $5,052,502, compared to
      $6,528,302 provided by operating activities for fiscal 2006. The decrease in
      net
      cash provided by operations was mostly due to the facts that we extended credit
      sales to some long-term customers, and we stored more inventories because we
      needed additional raw materials (corn) for cornstarch production.




***Investing
      Activities***





**Fiscal
      Year Ended June 30, 2007 compared to Fiscal Year Ended June 30,
      2006**





Net
      cash
      used in investing activities for fiscal 2007 was $21,151,410, compared to
      $7,512,613 used in investing activities for fiscal 2006. Most of the cash has
      been spent on the construction of the new cornstarch manufacturing facility
      and
      the new glucose manufacturing complex, as well as some advances on the purchase
      of plant equipment. Before these facilities are completed and put into operation
      next year, we expect to incur additional capital expenditure in the coming
      months.





Our
      preliminary budget for the new glucose complex would be approximately $12
      million, without taking into account any appreciation of the RMB against the
      US
      dollar and increased construction costs due to the recent inflation from a
      robust economy.




***Financing
      Activities***




42




***Recent
      Events***





On
      May
      15, 2007, we completed, at a price of $2 per share, a private placement of
      8,750,000 shares and 4,375,000 attached five year warrants to purchase common
      stock at an exercise price of $2.60 per share, as adjusted. We received net
      proceeds of $15,256,428 from that offering.




**Fiscal
      Year Ended June 30, 2007 Compared to Fiscal year Ended June 30,
      2006**




Net
      cash
      provided by financing activities for fiscal 2007 was $22,177,695 compared to
      $633,177 for the same period in fiscal 2006. The increase was mostly due to
      the
      effect of the short term borrowings from local banks and the recent equity
      financing. The proceeds were mainly used for capital expenditure and as working
      capital.





Besides
      our capital expenditure in building the new glucose manufacturing complex,
      as
      well as the acquisition of new plant and equipment for the newly built plant,
      we
      plan to upgrade our existing glucose production facility by replacing our old
      machinery to produce more “complex” glucose products such as anhydrous glucose
      transfusion, monohydrate glucose transfusion and oral glucose.





After
      this upgrade, we expect that at least 70% (up from 50%) of the cornstarch
      produced by the new cornstarch production plant will be used by us as raw
      material for the production of our glucose products. This upgrade will not
      only
      allow for increased production of higher grade glucose, but also facilitate
      the
      extension of our dextrose series of products. We anticipate that this will
      result in higher profit margins and bigger revenues.





In
        July 2007,
        we began construction of employee dormitory. Construction is expected to
        be
        completed in June 2008. Total amount expected to be spent on the construction
        is
        approximately $800,000 to $900,000.


**Loans**





Before
      the recent financing, our PRC operating subsidiary, Weifang Shengtai financed
      its operations and capital expenditure requirements primarily through bank
      loans
      and operating income. Weifang Shengtai had a total of $18,870, 250, $8,576,200
      and $7,683,500 short term bank loans outstanding as of June 30, 2007, 2006
      and
      2005, respectively. The loans were secured by Weifang Shengtai’s properties. The
      terms of all these short term loans were for one year. Weifang Shengtai has
      never defaulted on any of these loans.





Weifang
      Shengtai also has long term loans from local banks. The outstanding long-term
      loans, or the non-current portion of payables, which can be classified as long
      term liabilities, were $3,661,472, $1,001,600 and $847,000 as of June 30, 2007,
      2006 and 2005, respectively.





The
      significant increase of bank loans during the reporting period, for both short
      term and long term loans, is mostly due to the massive capital needs in
      construction and increased working capital needed for increased production.





**Guarantees**





We
      have
      guaranteed certain borrowings of other unrelated third parties including short
      term bank loans, lines of credit and bank notes. The total guaranteed amounts
      were $8,560,650 and $14,270,880 as of June 30, 2007 and 2006.




**Future
      cash commitments**





We
      anticipate spending about $15 million in the upgrading of our existing glucose
      manufacturing facility and the construction of a new glucose production complex
      and a new employee dormitory, of which a portion of it will be financed
      through bank loans and a portion would be funded from the proceeds of our May
      2007 private placement. We also estimate the need for $6 million to $8 million
      to run these facilities. The exact amount will be determined based on both
      the
      market demand of our products and the time needed for these facilities to run
      at
      full capacity. We may carefully review our financial conditions and consider
      financing either with the cash internally generated, bank loans, or with
      additional equity.





43




**Critical
      Accounting Policies and Estimates**





We
      have
      disclosed in the notes to our financial statements those accounting policies
      that we consider to be significant in determining our results of operations
      and
      our financial position which are incorporating by reference herein. We believe
      that the following reflect the more critical accounting policies that currently
      affect our financial condition and results of operations.




***Revenue
      recognition***




We
        utilize the accrual method of accounting. Revenue is recognized when the
        products are delivered, title has passed, and collectibility is reasonably
        assured. Sales revenue represents the invoiced value of goods, net of
        value-added tax (VAT).


***Use
      of estimates***





In
      preparing the consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America, management makes
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the dates
      of
      the financial statements, as well as the reported amounts of revenues and
      expenses during the reporting year. Significant estimates, required by
      management, include the recoverability of long-lived assets and the valuation
      of
      inventories. Actual results could differ from those estimates.




***Accounts
      Receivables***





Accounts
      receivables are stated at net realizable value. Any allowance for doubtful
      accounts is established based on the management’s assessment of the
      recoverability of accounts and other receivables. Management reviews our
      accounts receivable on a regular basis to determine if the bad debt allowance
      is
      adequate. An estimate for doubtful accounts is made when collection of the
      full
      amount is no longer probable. Known bad debts are written off as incurred.




***Property
      and equipment***





Property
      and equipment are stated at cost less accumulated depreciation. Depreciation
      is
      computed using straight-line method with a 3% residual value over the estimated
      useful lives of the assets.





***Foreign
      currency translation***





Our
      functional currency is Renminbi (“RMB”). Foreign currency transactions are
      translated at the applicable rates of exchange in effect at the transaction
      dates. Monetary assets and liabilities denominated in foreign currencies at
      the
      balance sheet date are translated at the applicable rates of exchange in effect
      at that date. Revenues and expenses are translated at the average exchange
      rates
      in effect during the reporting period.





Translation
      adjustments arising from the use of different exchange rates from period to
      period are included as a component of stockholders’ equity as “Accumulated Other
      Comprehensive Income”. Gains and losses resulting from foreign currency
      translations are included in Accumulated Other Comprehensive
      Income.




**Item7A.
      Quantitative and Qualitative Disclosures About Market
      Risk.**




*Credit
      Risk* .
      We are
      exposed to credit risk from our cash at bank, fixed deposits and contract
      receivables. The credit risk on cash at bank and fixed deposits is limited
      because the counterparts are recognized financial institutions. Contract
      receivables are subject to credit evaluations. We periodically record a
      provision for doubtful collections based on an evaluation of the collectibility
      of contract receivables by assessing, among other factors, the customer’s
      willingness or ability to pay, repayment history, general economic conditions
      and our ongoing relationship with the customers.




44




*Country
      Risk.* Substantial
      portion of our business, assets and operations are located and conducted in
      the
      PRC. While the PRC’s economy has experienced significant growth in the past
      twenty years, growth has been uneven, both geographically and among various
      sectors of the economy. The PRC government has implemented various measures
      to
      encourage economic growth and guide the allocation of resources. Some of these
      measures benefit the overall economy of the PRC, but may also have a negative
      effect on us. For example, our operating results and financial condition may
      be
      adversely affected by government control over capital investments or changes
      in
      regulations applicable to us. If there are any changes in any policies by the
      PRC government and our business is negatively affected as a result, then our
      financial results, including our ability to generate revenues and profits,
      will
      also be negatively affected.





*Foreign
      Currency Risk.* Substantially
      all of our operations are conducted in the PRC. Our sales and purchases are
      conducted within the PRC in Renminbi. Conversion of Renminbiinto foreign
      currencies is regulated by the People’s Bank of China through a unified floating
      exchange rate system. Although the PRC government has stated its intention
      to
      support the value of the Renminbi, there can be no assurance that such exchange
      rate will not again become volatile or that the Renminbi will not devalue
      significantly against the U.S. dollar. Exchange rate fluctuations may adversely
      affect the value, in U.S. dollar terms, of our net assets and income derived
      from our operations in the PRC. In addition, the Renminbi is not freely
      convertible into foreign currency and all foreign exchange transactions must
      take place through authorized institutions.





**Item
      8. Financial Statements and Supplementary Data.**





The
      information required by this Item 8 is included in Item 15 of this
      Form 10-K.





**Item
      9. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure.**





During
      the fiscal year ended June 30, 2007, there were no changes in and disagreements
      with accountants and financial disclosure.





**Item
      9A. Controls and Procedures.**





**Evaluation
      of Disclosure Controls and Procedures**





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, has evaluated the effectiveness of our disclosure controls
      and procedures (as defined in Exchange Act Rules 13a-15(e) or
      Rule 15d-15(e)) as of the end of the period covered by this report. Based
      on that evaluation, our Chief Executive Officer and Chief Financial Officer
      have
      concluded that, as of June 30, 2007, our disclosure controls and procedures
      were effective to ensure that information required to be disclosed by us in
      the
      reports that we file or submit under the Exchange Act (i) is recorded,
      processed, summarized and reported, within the time periods specified in the
      SEC’s rules and forms and (ii) is accumulated and communicated to our
      management, including our Chief Executive Officer and Chief Financial Officer,
      as appropriate to allow timely decisions regarding required disclosure.




Our
      Chief
      Executive Officer’s and Chief Financial Officer’s conclusion regarding the
      effectiveness of our disclosure controls and procedures should be considered
      in
      light of the following limitations on the effectiveness of our disclosure
      controls and procedures, some of which pertain to most, if not all, business
      enterprises, and some of which arise as a result of the nature of our business.
      Our management, including our Chief Executive Officer and our Chief Financial
      Officer, does not expect that our disclosure controls and procedures will
      prevent all errors or improper conduct. A control system, no matter how well
      conceived and operated, can provide only reasonable, but not absolute, assurance
      that the objectives of the control system will be met. Further, the design
      of a
      control system must reflect the fact that there are resource constraints, and
      the benefits of controls must be considered relative to their costs. Because
      of
      the inherent limitations in all control systems, no evaluation of controls
      can
      provide absolute assurance that all control issues and instances of improper
      conduct, if any, will be detected. These inherent limitations include the
      realities that judgments in decision-making can be faulty and that breakdowns
      can occur because of simple error or mistake. Additionally, controls can be
      circumvented by the individual acts of some persons, by collusion of two or
      more
      people or by management override of the controls. Further, the design of any
      control system is based, in part, upon assumptions about the likelihood of
      future events, and there can be no assurance that any control system design
      will
      succeed in achieving its stated goals under all potential future conditions.





45




Additionally,
      over time, controls may become inadequate because of changes in conditions
      or
      the degree of compliance with the policies or procedures may deteriorate.
      Because of the inherent limitations in a cost-effective control system,
      misstatements due to error or fraud may occur and not be detected. In addition,
      we depend on certain third parties for certain financial and other information
      that we receive. Because these third parties generate that information, we
      have
      less control over the manner in which that information is
      generated.





**Changes
      in Internal Control over Financial Reporting**





In
      connection with its evaluation of the effectiveness of our internal control
      over
      financial reporting, our management did not identify any changes in our internal
      control over financial reporting that occurred during our most recent fiscal
      quarter that has materially affected, or is reasonably likely to materially
      affect, our internal control over financial reporting.





**Section 302
      Certifications**





Provided
      with this report are certifications of our Chief Executive Officer and Chief
      Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
      and the SEC’s implementing regulations. This Item 9A contains the
      information concerning the evaluations referred to in those certifications,
      and
      you should read this information in conjunction with those certifications for
      a
      more complete understanding of the topics presented.





46




**Item
      9B. Other Information.**





None.





**PART
      III**





**Item
      10. Directors, Executive Officers and Corporate
      Governance.**





Below
      are
      our executive officers and directors. Most of our executive officers and
      directors are residents of the PRC.  As a result, it may be difficult for
      investors to effect service of process within the United States upon them or
      to
      enforce court judgments obtained against them in the United States
      courts.





Directors
                and Executive Officers
            
            Position/Title
            
            AgeQingtai
                Liu
            
            Chief
                Executive Officer/Director
            
            49Yongqiang
                Wang
            
            Director
            
            38Chris
                W. Wang
            
            Director
            
            36Changxin
                Li
            
            Director
            
            47Winfred
                Lee
            
            Director
            
            47Yizhao
                Zhang
            
            Chief
                Financial Officer
            
            37




The
      following is a summary of the biographical information of our
      directors and officers:





**Qingtai
      Liu** ,
      49,
      graduated from the Electrical Engineering Faculty of the Shandong Technical
      University with a Bachelor of Science degree in February 1982. He became the
      workshop director and head of the production department of Changle Wireless
      Device Factory until 1988, whereupon he assumed the position of Head of Science
      and Technology at the Changle Power Factory. In 1990, Mr. Liu became the
      Director of Weifang Fifth Pharmaceutical Plant. From January 1999 to present
      day, he is the Chairman and Chief Executive Officer of Weifang Shengtai
      Pharmaceutical Co., Ltd. Under his leadership, the Company successfully
      developed unique production techniques for the production of glucose and
      medicinal coating products, and has won Technology Innovation awards issued
      by
      the Chang Le County, Weifang City and the Shandong provincial government
      offices. The medicinal coating material technology that Mr Liu jointly developed
      with the Shandong University has been certified by the Technology Development
      Bureau of the Shandong Province to be of international standard.





Over
      the
      years, Mr Liu has been endorsed by the Weifang City Government office as a
      Leading Technology Innovator and a Distinguished Pharmaceutical Production
      Director. He also is the deputy to the People’s Conference of both Weifang City
      and Changle County.





**Yongqiang
      Wang** ,
      38,
      graduated with an Associates degree from the Shandong Economic and Management
      Institute. He joined Weifang Shengtai in April 2006 as the assistant to the
      General Manager of the Accounts Department and was in charged of the finance
      department. He assumed the position of Deputy General Manager of the Accounts
      Department in February 2007. Prior to joining us, Mr. Wang worked as a financial
      manager for various enterprises.





**Chris
      W. Wang** ,
      36, has
      served as the Chief Financial Officer of Fushi International, Inc. since
      December 13, 2005. Since March 2005, Mr. Wang also serves as the Chief Financial
      Officer of Dalian Fushi. Mr. Wang served as an Executive Vice President of
      Redwood Capital, Inc. from November 2004 to March 2005, with specific focus
      on
      providing strategic and financial advisory services to PRC-based clients seeking
      access to the U.S. capital markets. Mr. Wang previously served as Assistant
      VP
      of Portfolio Management at China Century Investment Corporation from October
      2002 to September 2004. Prior to that, Mr. Wang worked for Credit Suisse First
      Boston (HK) Ltd. Fluent in both English and Chinese, Mr. Wang holds an MBA
      in
      Finance and Corporate Accounting from Simon Business School of University of
      Rochester.




47




**Changxin
      Li** ,47, has been
      the Chief of the Department of Medicine, member of the Credentials Committee
      and
      Medical Director of both the Echocardiography Laboratory and Cardiopulmonary
      Department of the Otsego Memorial Hospital since 2005. He has also been an
      internist with the Otsego Memorial Hospital since 1995. Mr. Li graduated with
      an
      MB from the Weifang (formerly Changwei) Medical College, Weifang, Shandong,
      China in 1982 and a PhD from the Department of Physiology, University of
      Alberta, Edmonton, Alberta, Canada in 1990. He is a Fellow of the American
      College of Physicians (USA).





**Winfred
      Lee** ,
      47, has been
      a Contract Administrator with Tenet Healthsystems for South Bay Medical Center,
      North Hollywood Medical Center, Midway Hospital, Century City Hospital, and
      Brotman Medical Center from 1997. Mr. Lee graduated with a Bachelor of Science
      in Business Management from Brigham Young University, Provo, Utah in 1984. He
      then graduated with a Doctor of Medicine from the Medical College of Wisconsin,
      Milwaukee, Wisconsin, in 1988 and a Doctor of Jurisprudence from the **** J.
      Reuben
      Clark Law School at Brigham Young University, Provo, Utah, in 1992. Mr. Lee
      is a
      member of the California Bar and the Phi Delta Phi Legal Society




**Yizhao
      Zhang** ,
      37, has
      over 11 years of experience in portfolio investment, corporate finance,
      financial advisory and accounting. He is a certified public accountant of
      Delaware, and a member of the American Certified Accountants (AICPA). Before
      joining our Company, Mr. Zhang held senior positions in Chinawe Asset Management
      Corporation (OTC BB: CHWE) and China Natural Resources Incorporation (NASDAQ
      CM:
      CHNR). Previously, Mr. Zhang had experiences in portfolio management and asset
      trading in Guangdong South Financial Services Corporation from 1993 to 1999.
      Mr.
      Zhang received a Bachelor degree in Economics from Fudan University, Shanghai
      in
      1992 and obtained an MBA degree with Financial Analysis and Accounting
      concentrations from the State University of New York at Buffalo in 2003. 
He joined the Company in May 2007.





All
      of
      our directors hold offices until the next annual meeting of the shareholders
      of
      the Company, and until their successors have been qualified after being elected
      or appointed.  Officers serve at the discretion of the board of directors.





There
      are
      no family relationships among our directors or executive officers. There is
      no
      arrangement or understanding between or among our officers and directors
      pursuant to which any director or officer was or is to be selected as a director
      or officer, and there is no arrangement, plan or understanding as to whether
      non-management shareholders will exercise their voting rights to continue to
      elect the current Board of Directors.





Our
      directors and executive officers have not, during the past five
      years:





·
            had
                any bankruptcy petition foiled by or against any business of which
                was a
                general partner or executive officer, either at the time of the bankruptcy
                or within two years prior to that
                time,





·
            been
                convicted in a criminal proceeding and is not subject to a pending
                criminal proceeding,




·
            been
                subject to any order, judgment or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring, suspending or otherwise limiting
                his
                involvement in any type of business, securities, futures, commodities
                or
                banking activities; or




48




·
            been
                found by a court of competent jurisdiction (in a civil action), the
                Securities Exchange Commission or the Commodity Futures Trading Commission
                to have violated a federal or state securities or commodities law,
                and the
                judgment has not been reversed, suspended or
                vacated.





Section
      16(A) Beneficial Ownership Reporting Compliance





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires our officers
      and directors and persons who own more than 10% of a registered class of our
      equity securities to file initial reports of ownership and reports of changes
      in
      ownership with the Securities and Exchange Commission (the "SEC"). Such persons
      are required by SEC regulation to furnish us with copies of all Section 16(a)
      forms they file.





Based
      solely on review of the copies of such forms received by us with respect to
      fiscal year 2007, or written representations from certain reporting persons,
      we
      believe that all filing requirements applicable to its directors, officers
      and
      persons who own more than ten percent of a registered class of our equity
      securities have been complied.





**Item
      11. Executive Compensation.**





***Compensation
      Discussion and Analysis***





We
      endeavor to provide our “named executive officers” (as defined in Item 402 of
      Regulation S-K) with a competitive base salary that is in-line with their roles
      and responsibilities when compared to peer companies of comparable size in
      the
      same or similar locality.





It
      is not
      uncommon for PRC private corporations in that locality to have base salaries
      as
      the sole and only form of compensation. The base salary level is established
      and
      reviewed based on the level of responsibilities, the experience and tenure
      of
      the individual and the current and potential contributions of the individual.
      The base salary is compared to the list of similar positions within comparable
      peer companies and with consideration of the executive’s relative experience in
      his or her position.  Base salaries are reviewed periodically and at the
      time of promotion or other changes in responsibilities.




We
      plan
      to implement a more comprehensive compensation program, which takes into account
      other elements of compensation, including without limitation, short and long
      term compensation, cash and non-cash, and other equity-based compensation such
      as stock options. This compensation program shall be comparative to our peers
      in
      the industry and aimed to retain and attract talented individuals.




We
      will
      also consider forming a Compensation Committee comprising predominantly of
      independent directors to oversee the compensation of our named executive
      officers




**Summary
      Compensation Table**




The
      following is a summary of the compensation we paid for each of the three years
      ended June 30, 2007, 2006 and 2005, respectively (unless otherwise provided)
      (i)
      to the persons who acted as our principal executive officers during our fiscal
      year ended June 30, 2007 and (ii) to the person who acted as our principal
      financial officer or acted in a similar capacity during our fiscal year ended
      June 30, 2007. None of our other executive officers received compensation in
      excess of $100,000 for any of these three years.





Name
                and Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
              Awards
              ($)
            
            Option
                Awards
              ($)
            
            Non-equity
                Incentive Plan Compensation
              ($)
            
            Change
                in Pension
              Value
                and Nonqualified Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation
              ($)
            
            Total
              ($)Robert
                Worthington
              (President)
              (1)(3)
            
            
            2006
              2005
              2004
            
            
            12,200
              30,000
              25,000
            
            
            —
              —
              1,000
            (4)
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            12,200
              30,000
              26,000Daniel
                Drummond
              (Acting
                President and Vice President
              (1)(2)(3)
            
            
            2006
              2005
              2004
            
            
            5,000
              —
              —
            
            
            —
              —
              1,000
            (4)
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            5,000
              —
              1,000Qingtai
                Liu (2)(3)
            
            
            2007
              2006
              2005
            
            
            19,662
              9,300
              9,300
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            —
              —
              —
            
            
            19,662
              9,300
              9,300Yizhao
                Zhang (5)
            
            
            2007
            
            
            10,667
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            10,667




(1)
            Mr.
                Worthington began serving as our President in March 2004 and received
                a
                monthly draw of approximately $2,500. On August 30, 2006, Mr. Worthington
                tendered his resignation, effective August 4, 2006, as officer and
                director of the Company. As a result of Mr. Worthington's resignation,
                Mr.
                Daniel Drummond, a director and Vice President, assumed the position
                of
                Acting President until such time as the Board has the opportunity
                to fully
                assess the situation and consider new nominees to the Board.




49




(2)
            On
                May 15, 2007, we entered into and consummated a share exchange
                agreement. As a result of the to the share exchange agreement, Messrs
                Qingtai Liu and Chenghai Du became our majority shareholders. In
                connection with the closing of the Share Exchange Agreement, former
                directors of the Company, Mr. Daniel Drummond and Mr. Alex Ferries
                appointed Mr. Qingtai Liu as a Director of the Company, Chairman
                of the
                Board and Chief Executive Officer of the Company, appointed Mr. Yongqiang
                Wang as director of the Company and submitted their resignation as
                directors and officers of the Company, subject to the filing and
                dissemination of Schedule 14f-1.




On
      May 4,
      2007, we filed an information statement with the SEC relating to the change
      in
      control of our Board of Directors containing the information required under
      Rule
      14f-1 of the Exchange Act and on May 4, 2007, we distributed that information
      statement to all holders of record of our common stock.





(3)
            In
                our Annual Report on Form 10-KSB filed on March 27, 2007, we reported
                that
                our Board of Directors, pursuant to our Bylaws, approved a change
                in our
                fiscal year end from December 31 to June 30. Because Mr. Worthington
                and
                Mr. Drummond are no longer our officers and did not receive any
                compensation in calendar 2007, their executive compensation is reported
                based on a financial year end of December 31. By contrast, our current
                Chief Executive Officer, Mr. Qingtai Liu’s compensation is reported based
                on a financial year end of June 30.





(4)
            On
                April 9, 2004, Mr. Worthington and Mr. Drummond. Ferries each received
                833,333 shares of our common stock, which was valued at
                $1,000.





(5)
            Mr.
                Zhang joined us as our Chief Financial Officer in May
                2007.





***Grants
      of Plan-Based Awards in Fiscal 2007***





There
      were no option grants in 2007.





50




***Outstanding
      Equity Awards at 2007 Fiscal Year End***





There
      were no option exercises or options outstanding in 2007.





***Option
      Exercises and Stock Vested in Fiscal 2007.***





There
      were no option exercises or stock vested in 2007.





***Employment
      Agreements***





We
      have
      no employment agreements with any of our executive officers.





***Compensation
      of Directors.***





Our
      current non-executive directors are compensated for all services they perform
      as
      directors , including attendance at Board of Directors meetings and service
      as
      members of committees of the Board of Directors to which they are appointed.
      Executive directors are not compensated for services they perform as directors
      of the Company. The details of such compensation are:





·
            annual
                compensation of $15,000;




·
            additional
                annual compensation of $15,000 if the director serves as the Chairman
                of
                the Audit Committee; and




·
            we
                may also grant the non-executive directors certain options to purchase
                our
                shares, the amount and terms of which shall be determined by the
                Board of
                Directors.





The
      non-executive directors would also be reimbursed for all of their out-of-pocket
      expenses in traveling to and attending meetings of the Board of Directors and
      committees on which they would serve.





**Item
      12. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following table sets forth certain information with respect to the beneficial
      ownership of our voting securities by (i) any person or group owning more than
      5% of any class of voting securities, (ii) each director, (iii) our chief
      executive officer and the Company’s top three most highly compensated officers
      and (iv) all executive officers and directors as a group as of June 30,
      2007.





Name
                and Address of Beneficial Owner
            
            Title
                of Class
            
            Amount
                and Nature of Beneficial
              Ownership(1)(2)
            
            Percent
                of
              Class(4)Qingtai
                Liu (3)
              Chief
                Executive officer and President
              Hi-Tech
                Industrial Park of Changle County, Shandong Province, PRC
                262400
            
            
            Common
                Stock
            
            
            7,766,325
            
            
            41.15
            %Yizhao
                Zhang (3)
              Chief
                Financial Officer
              Hi-Tech
                Industrial Park of Changle County, Shandong Province, PRC
                262400
            
            
            —
            
            
            —
            
            
            —Yongqiang
                Wang (3)
              director
              Hi-Tech
                Industrial Park of Changle County, Shandong Province, PRC
                262400
            
            
            —
            
            
            —
            
            
            —Chris
                Wenbing Wang (3)
              director
              Hi-Tech
                Industrial Park of Changle County, Shandong Province, PRC
                262400
            
            
            —
            
            
            —
            
            
            —Winfred
                Lee (3)
              director
              Hi-Tech
                Industrial Park of Changle County, Shandong Province, PRC
                262400
            
            
            —
            
            
            —
            
            
            —Changxin
                Li (3)
              director
              Hi-Tech
                Industrial Park of Changle County, Shandong Province, PRC
                262400
            
            
            —
            
            
            —
            
            
            —China
                Private Equity Partners Co., Limited
              15
                Church Street, Alpine, NJ 07620
            
            
            Common
                Stock
            
            
            1,537,500
            
            
            7.9
            %Pope
                Investments LLC 5150 Poplar Avenue, Suite 805, Memphis, TN
                38137
            
            
            Common
                Stock
            
            
            3,975,000
            
            
            19.67
            %All
                executive officers and directors as a group (6) persons)
            
            
            Common
                Stock
            
            
            7,766,325
            
            
            41.15
            %




(1) On
      May
      15, 2007, we entered into the share exchange agreement. Under the share
      exchange agreement Messrs. Qingtai Liu and Chenghai Du, holders of all the
      issued and outstanding shares of common stock of Shengtai Holding, Inc. (SHI),
      exchanged their SHI shares for 8,212,500 and 912,500 newly-issued shares of
      the
      Company’s common stock (representing approximately 91% of the issued and
      outstanding shares then outstanding). The share exchange closed on May 15,
      2007.
      Mr. Qingtai Liu entered into an agreement dated May 8, 2006 with certain foreign
      finders and Hickey Turner Capital, Inc. in which Mr. Liu agreed to transfer
      446,175 shares of the our common stock for the benefit of the foreign finders
      and Hickey Turner Capital, Inc. and/or its designees for consulting services.
        In addition to transferring these shares, on May 15, 2007, he also
      transferred an aggregate of 776,600 shares to his wife and minor child equally
      on the same date (which shares are deemed to be beneficially owned by Mr.
      Liu).




51




(2) On
      May
      15, 2007, we entered into and closed on a share purchase agreement. Under the
      share purchase agreement, certain investors purchased for $2.00 per share (or
      a
      total of $17,500,000) an aggregate of 8,750,000 shares of common stock
      and 4,375,000 attached five year warrants.




(3)  Messrs.
      Qingtai Liu and Yongqiang Wang were appointed directors of the Company on May
      15, 2007. Mr. Zhang was appointed as our Chief Financial Officer in May 2007.
      Messrs. Wang, Li and Lee were appointed directors of the Company on June 22,
      2007.




(4)  Based
      on
      18,875,000 shares of common stock issued and outstanding on June 30, 2007.
      In
      addition, in determining the percent of common stock owned by a person on June
      30, 2007, (a) the numerator is the number of shares of the class beneficially
      owned by such person and includes shares which the beneficial owner may acquire
      within 60 days upon conversion or exercise of a derivative security, and (b)
      the
      denominator is the sum of (i) the shares of that class outstanding on June
      30,
      2007, and (ii) the total number of shares that the beneficial owner may acquire
      upon conversion or exercise of a derivative security within such 60 day period.
      Unless otherwise stated, each beneficial owner has sole power to vote and
      dispose of the shares.





52




**Item
      13. Certain Relationships and Related Transactions, and Director
      Independence.**





Weifang
      Shengtai entered into a joint venture partnership with Weifang City Investment
      Company and Changle Century Sun Paper Industry Co., Ltd on September 16, 2003
      and formed Changle Shengshi Redian Co., Ltd (“Changle Shengshi”). Changle
      Shengshi was incorporated at Weifang City, Shandong Province, People’s Republic
      of China. Changle Shengshi’s principal activity is to produce and sells
      electricity and heat.




Weifang
      Shengtai owned a 30% interest in Changle Shengshi as of June 30, 2004. On April
      12, 2005, its percentage ownership in Changle Shengshi was diluted from 30%
      to
      20% due to an additional investment into Changle Shengshi from another party.
      Changle Shengshi has a registered capital of approximately $10,800,000. Weifang
      Shengtai invested approximately $2,200,000 towards its registered capital,
      which
      accounts for a 20% share of Changle Shengshi’s stock. As of June 30, 2007,
      total investment of approximately $2,675,678 represents 20% of Changle
      Shengshi’s paid-in capital, which includes earnings on equity
      investment.





As
      an
      investor and shareholder of Changle Shengshi, Weifang Shengtai enjoys a
      preferential discount of 19.7% off the market price of electricity supplied
      by
      the plant to Weifang Shengtai. The intercompany profits were eliminated on
      our
      financial statements.





Weifang
      Shengtai had a total of $858,881, $348,366 and $97,488 of accounts payable
      to
      Changle Shengshi at June 30, 2007, 2006 and 2005, respectively. The utilities
      expenses amounted to $4,958,249, $1,705,675 and $581,338, for the years ending
      June 30, 2007, 2006 and 2005, respectively.




The
      Company loaned money to Changle Shengshi and entered into two loan contracts
      as
      follows:


June
                    30, 2007
                
                June
                    30, 2006Due
                    on November 19, 2007, unsecured, 7.95% interest rate per
                    annum
                
                $
                657,500
                
                $
                -Due
                    on September 14, 2009, unsecured, 7.6% interest rate per
                    annum
                
                
                394,500
                
                
                -Total
                
                $
                1,052,000
                
                $
                -
  The
          Company also loaned money to Changle Shengshi in June 2007, for temporary
          cash
          flow needs. This transaction is recurring in nature. The Company does not
          charge
          interest on these receivables and it is due on demand. As of June 30, 2007,
          total receivable due from Changle Shengshi was $1,499,207. This balance
          was
          repaid by Changle Shengshi in July 2007.




“Shougang
      Shengtai” was contractually managed by Mr. Qingtai Liu, who was also a 40%
      stockholder of Shougang Shengtai. Shougang Shengtai provided raw materials,
      namely cornstarch and cornstarch slurry to Weifang Shengtai at market prices.
      It
      ceased operations in early calendar 2007.




Previously
        Shougang Shengtai provided raw materials, namely cornstarch and cornstarch
        slurry to Weifang Shengtai at market prices. It ceased operations in early
        calendar 2007. Weifang
        Shengtai had $0, $1,378,133 and $1,625,608 of prepayments to Shouguang
        Shengtai at June 30, 2007, 2006 and 2005, respectively. Total related party
        purchases for the years ending June 30, 2007, 2006 and 2005 amounted to
        $7,652,465 , $15,963,415, and $13,794,612, respectively.




On
      June
      20, 2006, pursuant to a shareholders’ resolution, Bio-One Corporation,
      (“Bio-One”) and Mr. Qingtai Liu, the original shareholder of Weifang Shengtai
      agreed to transfer their collective 100% ownership in Weifang Shengtai to
      Shengtai Holding Inc. (“SHI”).





Mr.
      Qingtai Liu sold his 49% stock equity in Weifang Shengtai for approximately
      RMB
      15 million (approximately $1.92 million). Bio-One sold its 51% stock equity
      in
      Weifang Shengtai for $1,000,000 as well as a return of $4,180,000 worth
      preferred stock of Bio-One. In accordance with laws governing foreign
      acquisitions of a PRC registered company, the remaining balance of $1,925,996,
      being the amount due from SHI is required to be made within 1 year from the
      date
      of issuance of the business license. As of June 30, 2007, this requirement
      has
      been met by SHI.




As
      of
      June 30, 2006, SHI owed Mr. Qingtai Liu $1,925,996 in connection with the SHI’s
      purchase of his 49% interest in Weifang Shengtai. This amount is unsecured
      and
      non-interest bearing. As of June 30, 2007, the amount owed to Mr. Qingtai Liu
      has been repaid. In connection to this transaction and the 17.95% ownership
      interest transfer transaction from the 37 Chinese original shareholders of
      Weifang Shengtai (“Original Shareholders”) to Mr. Qingtai Liu on April 19, 2006,
      Mr. Qingtai Liu has assumed the liabilities of the Original Shareholders’
capital contribution and is entitled to contribute this amount as capital
      contribution to the Company. As of June 30, 2007, the remaining balance to
      be
      contributed by Mr. Qingtai Liu amounted to $1,229,625. This balance will be
      repaid in form of cash or operating assets by December 31,
      2007.




53




**Item
      14. Principal Accounting Fees and Services.**





Aggregate
      fees billed by our current principal accountants, Moore Stephens Wurth Frazer
      and Torbet, LLP for audit services related to the most recent fiscal year,
      and
      for other professional services billed in the most recent fiscal year, were
      as
      follows:




Fiscal
                  2007 (3)Audit
                  Fees (1)
              
              $
              145,000Audit-Related
                  Fees
              
              
              —Tax
                  Fees (2)
              
              
              —All
                  Other Fees
              
              
              —Total
              
              
              —




(1)
            Comprised
                the audit of the Company's annual financial statements and reviews
                of the
                Company's quarterly financial statements, as well as consents related
                to
                and reviews of other documents filed with the Securities and Exchange
                Commission.


(2)
            Comprised
                preparation of all federal and state corporate income tax returns
                for the
                Company and its subsidiaries.


(3)
            In
                our Annual Report on Form 10-KSB filed on March 27, 2007, we reported
                that
                our Board of Directors, pursuant to our Bylaws, approved a change
                in our
                fiscal year end from December 31 to June 30. Disclosure of the fees
                billed
                by our current accountants, Moore Stephens Wurth Frazer and Torbet,
                LLP is
                for the fiscal year ended June 30,
                2007.




Aggregate
      fees billed by our previous principal accountants, Mantyla McRoberts LLC, for
      audit services related to the most recent two fiscal years, and for other
      professional services billed in the most recent two fiscal years, were as
      follows:


Fiscal
                  2006 (3)
              
              Fiscal
                  2005(3)Audit
                  Fees (1)
              
              $
              10,792
              
              $
              7,187Audit-Related
                  Fees
              
              
              —
              
              
              —Tax
                  Fees (2)
              
              $
              250
              
              $
              381All
                  Other Fees
              
              
              —
              
              $
              463Total
              
              $
              11,042
              
              $
              8031




(1)
            Comprised
                the audit of the Company's annual financial statements and reviews
                of the
                Company's quarterly financial statements, as well as consents related
                to
                and reviews of other documents filed with the Securities and Exchange
                Commission.


(2)
            Comprised
                preparation of all federal and state corporate income tax returns
                for the
                Company and its subsidiaries.


(3)
            In
                our Annual Report on Form 10-KSB filed on March 27, 2007, we reported
                that
                our Board of Directors, pursuant to our Bylaws, approved a change
                in our
                fiscal year end from December 31 to June 30. Disclosure of the fees
                billed
                by our ex accountants, Mantyla McRoberts LLC is for the fiscal years
                ended
                December 31, 2006 and 2005.





Under
      the
      Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our
      independent accountants must now be approved in advance by our Audit Committee
      to assure that such services do not impair our accountants' independence .
      Our
      Audit Committee’s Chairman is Mr. Chris Wang and the other members are Changxin
      Li and Winfred Li. Our Audit Committee reviews and recommends to our Board
      of
      Directors for approval audit and permissible non-audit services performed by
      Moore Stephens Wurth Frazer and Torbet, LLP as well as fees charged by them
      for
      such services. Previously when we did not have an Audit Committee, our Board
      of
      Directors carried out this function.




**PART
      IV**





**Item
      15. Exhibits, Financial Statement Schedules.**




**(a)**
            **Financial
                Statements and Financial Statement
                Schedules**





(1)
            Report
                of Independent Registered Public Accounting
                Firm




54




Report of Independent Registered Public
                Accounting Firm
              F-1Consolidated Balance Sheets as of
                June 30,
                2006 and 2007
              F-2Consolidated
                  Statements of Income and Other Comprehensive Income for the Years
                  Ended
                  June 30, 2005, 2006 and 2007
              F-3Consolidated Statements of Shareholders'
                Equity for the Years Ended June 30, 2005, 2006 and 2007
              F-4Consolidated
                  Statements of Cash Flows for the Years Ended June 30, 2005, 2006
                  and
                  2007
              F-5Notes to Consolidated Financial
                Statements
              F-6All
                  other schedules for which provision is made in the applicable accounting
                  regulations of the SEC are not required under the related instructions
                  or
                  are inapplicable and therefore have been omitted.




(2)
            Exhibits




Incorporated
      by Reference




Exhibit
              Number
            
            Exhibit
                Description
            
            Form
            
            Filing
              Date/period
              End
                Date
            
            Filed
                - FurnishedHerewith3.1
            
            Amended
                and Restated Certificate of Incorporation
            
            Form
                10-SB
            
            September
                26, 20063.2
            
            By
                Laws
            
            Form
                10-SB
            
            September
                26, 20064.1
            
            Form
                of Warrants to Investors
            
            Form
                8-K
            
            May
                21, 200710.1
            
            Share
                Exchange Agreement dated May 15, 2007 by and among the Company and
                Shengtai Holding, Inc.
            
            Form
                8-K
            
            May
                21, 200710.2
            
            Share
                Purchase Agreement dated as of May 15, 2007 between the Company and
                the
                Purchasers
            
            Form
                8-K
            
            May
                21, 200716.1
            
            Letter
                dated May 17, 2007 from West Coast Car Company to Mantyla McRobers
                LLC
            
            Form
                8-K
            
            May
                21, 200716.2
            
            Letter
                dated May 23, 2007 from Mantyla McReynolds LLC to the Securities
                and
                Exchange Commission
            
            Form
                8-K/A
            
            May
                24, 200721.1
            
            List
                of Subsidiaries
            
            Form
                8-K
            
            May
                21, 200799.1
            
            Press
                release dated May 21, 2007 issued by West Coast Car
                Company
            
            Form
                8-K
            
            May
                21, 2007





55




**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following person on behalf of the registrant and in the
      capacity and on the date indicated.


SHENGTAI
                PHARMACEUTICAL, INC.(Registrant)By:
            /s/
                Qingtai LiuQingtai
                LiuChief
                Executive Officer(Principal
                Executive Officer)




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.




**Signature**
            
            **Title**
            
            **Date**/s/
                Qingtai LiuQingtai Liu
            
            Chief
                Executive Officer (Principal Executive
              Officer)
            
            September
                28, 2007/s/
                Yizhao Zhang
              
              Yizhao
                Zhang
            
            Chief
                Financial Officer (Principal Financial and
              Accounting
                Officer)
            
            September
                28, 2007/s/
                Yongqiang Wang
              
              Yongqiang
                Wang
            
            Director
            
            September
                28, 2007/s/
                Chris Wang
              
              Chris
                Wang
            
            Director
            
            September
                28, 2007/s/
                Chanxin Li
              
              Changxin
                Li
            
            Director
            
            September
                28, 2007s/
                Winfred Li
              
              Winfred
                Li
            
            Director
            
            September
                28, 2007




56




**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Shareholders
 of
        Shengtai Pharmaceutical Inc. and Subsidiaries
 
 We
        have
        audited the accompanying consolidated balance sheets of Shengtai Pharmaceutical
        Inc. and Subsidiaries as of June 30, 2007 and 2006, and the related consolidated
        statements of income and comprehensive income, shareholders’ equity, and cash
        flows for each of the years in the three-year period ended June 30, 2007.
        These
        consolidated financial statements are the responsibility of the Company’s
        management. Our responsibility is to express an opinion on these consolidated
        financial statements based on our audit.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audit included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Shengtai Pharmaceutical
        Inc.
        and Subsidiaries as of June 30, 2007 and 2006, and the results of its operations
        and cash flows for each of the years in the three-year period ended June
        30,
        2007, in conformity with accounting principles generally accepted in the
        United
        States of America.
  /s/
        Moore
        Stephens Wurth Frazer and Torbet, LLP
 
 Walnut
        California
 September
        26, 2007
 
 F-1
  SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
  CONSOLIDATED
          BALANCE SHEETS
 AS
          OF
          JUNE 30, 2007 AND 2006
  2007
              
              2006ASSETSCURRENT
                  ASSETS:Cash
              
              $
              6,420,439
              
              $
              502,457Restricted
                  cash
              
              
              5,628,500
              
              
              3,881,200Accounts
                  receivable, net of allowance for doubtful accounts of$431,178
                  and $357,970 as ofJune
                  30, 2007 and 2006, respectively
              
              
              5,779,967
              
              
              3,531,810Notes
                  receivable
              
              
              984,675
              
              
              358,920Other
                  receivables
              
              
              3,484,484
              
              
              369,884Other
                  receivables - related parties
              
              
              2,491,656
              
              
              -Other
                  receivables - shareholder
              
              
              1,229,625
              
              
              -Loan
                  to related party
              
              
              657,500
              
              
              -Inventories
              
              
              4,449,267
              
              
              1,895,878Prepayments
              
              
              140,376
              
              
              231,352Prepayments
                  - related party
              
              
              -
              
              
              1,378,133Total
                  current assets
              
              
              31,266,489
              
              
              12,149,634PLANT
                  AND EQUIPMENT, net
              
              
              30,178,074
              
              
              14,562,974OTHER
                  ASSETS:Investment
                  in Changle Shengshi Redian Co., Ltd.
              
              
              2,675,678
              
              
              2,245,086Loan
                  to related party - non-current
              
              
              394,500
              
              
              -Prepayments
                  - non-current
              
              
              7,429,371
              
              
              1,166,998Intangible
                  assets - land use right, net of accumulated amortization
              
              
              1,816,021
              
              
              1,146,765Total
                  other assets
              
              
              12,315,570
              
              
              4,558,849Total
                  assets
              
              $
              73,760,133
              
              $
              31,271,457LIABILITIES
                  AND SHAREHOLDERS’
                  EQUITYCURRENT
                  LIABILITIES:Accounts
                  payable
              
              $
              3,807,997
              
              $
              1,582,812Accounts
                  payable - related party
              
              
              949,992
              
              
              348,366Notes
                  payable - banks
              
              
              8,942,000
              
              
              7,011,200Short
                  term loans
              
              
              18,870,250
              
              
              8,576,200Investment
                  payable
              
              
              -
              
              
              888,920Accrued
                  liabilities
              
              
              229,643
              
              
              92,862Other
                  payable
              
              
              1,526,903
              
              
              256,291Employee
                  loans
              
              
              596,516
              
              
              640,667Employee
                  loan - officer
              
              
              -
              
              
              93,149Third
                  party loan
              
              
              318,274
              
              
              57,319Dividends
                  payable
              
              
              -
              
              
              389,216Customer
                  deposit
              
              
              796,228
              
              
              276,609Long
                  term liabilities - current maturities
              
              
              381,350
              
              
              876,400Payable
                  - officer
              
              
              -
              
              
              1,925,996Taxes
                  payable
              
              
              2,048,932
              
              
              596,420Total
                  current liabilities
              
              
              38,468,085
              
              
              23,612,427LONG
                  TERM LIABILITIESOther
                  payable - non-current
              
              
              3,661,472
              
              
              -Long
                  term loans
              
              
              -
              
              
              1,001,600Total
                  long term liabilities
              
              
              3,661,472
              
              
              1,001,600Total
                  liabilities
              
              
              42,129,557
              
              
              24,614,027COMMITMENTS
                  AND CONTINGENCIES
              
              
              -
              
              
              -SHAREHOLDERS'
                  EQUITY:Preferred
                  stock, $0.001 par value, 5,000,000 shares authorized,no
                  shares issued and outstanding
              
              
              -
              
              
              -Common
                  stock, $0.001 par value, 100,000,000 shares authorized,18,875,000,
                  and 10,125,000 shares issued andoutstanding
                  as of June 30, 2007 and  2006,
                  respectively
              
              
              18,875
              
              
              10,125Paid-in
                  capital
              
              
              19,163,549
              
              
              3,915,871Capital
                  contribution receivable
              
              
              -
              
              
              (1,925,996
              )Statutory
                  reserves
              
              
              1,735,484
              
              
              1,001,088Retained
                  earnings
              
              
              9,885,670
              
              
              3,470,940Accumulated
                  other comprehensive income
              
              
              826,998
              
              
              185,402Total
                  shareholders' equity
              
              
              31,630,576
              
              
              6,657,430Total
                  liabilities and shareholders' equity
              
              $
              73,760,133
              
              $
              31,271,457
  See
          report of independent registered public accounting firm.
  The
          accompanying notes are an integral part of this statement.
  F-2
  SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 CONSOLIDATED
          STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
 FOR
            THE
            YEARS ENDED JUNE 30, 2007, 2006 AND 2005
  2007
                
                2006
                
                2005SALES
                    REVENUE
                
                $
                51,706,215
                
                $
                36,029,179
                
                $
                24,860,399COST
                    OF SALES
                
                
                39,527,662
                
                
                27,568,092
                
                
                19,557,743GROSS
                    PROFIT
                
                
                12,178,553
                
                
                8,461,087
                
                
                5,302,656SELLING,
                    GENERAL AND ADMINISTRATIVE EXPENSES
                
                
                4,674,679
                
                
                3,831,778
                
                
                3,242,330INCOME
                    FROM OPERATIONS
                
                
                7,503,874
                
                
                4,629,309
                
                
                2,060,326OTHER
                    (EXPENSE) INCOME:Earnings
                    (loss) on equity investment
                
                
                131,420
                
                
                41,635
                
                
                (69,345
                )Other
                    income
                
                
                121,798
                
                
                181,874
                
                
                205,162Gain
                    from sales of land use right
                
                
                1,647,833
                
                
                -
                
                
                -Other
                    expense
                
                
                (225,898
                )
                
                (214,641
                )
                
                (1,683
                )Interest
                    expense and other charges
                
                
                (1,270,418
                )
                
                (555,572
                )
                
                (606,539
                )Interest
                    income
                
                
                119,353
                
                
                128,306
                
                
                27,236Other
                    income (expense), net
                
                
                524,088
                
                
                (418,398
                )
                
                (445,169
                )INCOME
                    BEFORE PROVISION FOR INCOME TAXES
                
                
                8,027,962
                
                
                4,210,911
                
                
                1,615,157PROVISION
                    FOR INCOME TAXES
                
                
                878,836
                
                
                -
                
                
                -NET
                    INCOME
                
                
                7,149,126
                
                
                4,210,911
                
                
                1,615,157OTHER
                    COMPREHENSIVE INCOME:Foreign
                    currency translation adjustments
                
                
                641,596
                
                
                185,402
                
                
                -COMPREHENSIVE
                    INCOME
                
                $
                7,790,722
                
                $
                4,396,313
                
                $
                1,615,157Earning
                    per share - basic
                
                $
                0.64
                
                $
                0.42
                
                $
                0.16Earning
                    per share - diluted
                
                $
                0.62
                
                $
                0.42
                
                $
                0.16Weighted
                    average number of shares outstanding - basic
                
                
                11,251,712
                
                
                10,125,000
                
                
                10,125,000Weighted
                    average number of shares outstanding - diluted
                
                
                11,477,545
                
                
                10,125,000
                
                
                10,125,000
  See
          report of independent registered public accounting firm.
  The
          accompanying notes are an integral part of this statement.
  F-3
  SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
  CONSOLIDATED
          STATEMENTS OF SHAREHOLDERS’
          EQUITY
 FOR
          THE
          YEARS ENDED JUNE 30, 2007, 2006 AND 2005
 Common
                      stock
                
                
                
                Capital
                
                Retained
                    earnings
                
                Accumulated
                    otherShares
                
                Par
                    value
                
                Paid-incapital
                
                contributionreceivable
                
                Statutoryreserves
                
                Unrestricted
                
                comprehensiveincome
                
                TotalsBALANCE,
                    June 30, 2004
                
                
                10,125,000
                
                $
                10,125
                
                $
                3,915,871
                
                $
                (3,069,645
                )
                $
                142,559
                
                $
                503,531
                
                $
                -
                
                $
                1,502,441Dividends
                    declared
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,000,065
                )
                
                
                
                
                (1,000,065
                )Capital
                    contribution received
                
                
                
                
                
                
                
                
                
                
                
                1,143,649
                
                
                
                
                
                
                
                
                
                
                
                1,143,649Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,615,157
                
                
                
                
                
                1,615,157Adjustment
                    to statutory reserve
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                242,273
                
                
                (242,273
                )
                
                
                
                
                -BALANCE,
                    June 30, 2005
                
                
                10,125,000
                
                $
                10,125
                
                $
                3,915,871
                
                $
                (1,925,996
                )
                $
                384,832
                
                $
                876,350
                
                $
                -
                
                $
                3,261,182Dividends
                    declared
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,000,065
                )
                
                
                
                
                (1,000,065
                )Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                4,210,911
                
                
                
                
                
                4,210,911Adjustment
                    to statutory reserve
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                616,256
                
                
                (616,256
                )
                
                
                
                
                -Foreign
                    currency translation adjustments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                185,402
                
                
                185,402BALANCE,
                    June 30, 2006
                
                
                10,125,000
                
                $
                10,125
                
                $
                3,915,871
                
                $
                (1,925,996
                )
                $
                1,001,088
                
                $
                3,470,940
                
                $
                185,402
                
                $
                6,657,430Issuance
                    of common stock
                
                
                8,750,000
                
                
                8,750
                
                
                15,247,678
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15,256,428Capital
                    contribution received
                
                
                
                
                
                
                
                
                
                
                
                1,925,996
                
                
                
                
                
                
                
                
                
                
                
                1,925,996Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                7,149,126
                
                
                
                
                
                7,149,126Adjustment
                    to statutory reserve
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                734,396
                
                
                (734,396
                )
                
                
                
                
                -Foreign
                    currency translation adjustments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                641,596
                
                
                641,596BALANCE,
                    June 30, 2007
                
                
                18,875,000
                
                $
                18,875
                
                $
                19,163,549
                
                $
                -
                
                $
                1,735,484
                
                $
                9,885,670
                
                $
                826,998
                
                $
                31,630,576
  See
          report of independent registered public accounting firm.
  The
          accompanying notes are an integral part of this statement.
  F-4
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
  CONSOLIDATED
          STATEMENTS OF CASH FLOWS
 FOR
          THE
          YEARS ENDED JUNE 30, 2007, 2006 AND 2005
  2007
              
              2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              7,149,126
              
              $
              4,210,911
              
              $
              1,615,157Adjustments
                  to reconcile net income to cashprovided
                  by operating activities:Depreciation
              
              
              2,239,157
              
              
              1,478,734
              
              
              1,332,533Amortization
              
              
              42,644
              
              
              41,454
              
              
              39,258Allowance
                  for bad debts
              
              
              271,602
              
              
              114,780
              
              
              39,514Loss
                  on building disposal
              
              
              186,470
              
              
              -
              
              
              -Gain
                  on disposal of land use right
              
              
              (1,647,833
              )
              
              -
              
              
              -(Earnings)
                  loss on equity investment
              
              
              (131,420
              )
              
              (41,635
              )
              
              69,345Change
                  in assets and liabilities:Accounts
                  receivable
              
              
              (2,288,351
              )
              
              (261,286
              )
              
              (1,548,602
              )Notes
                  receivable
              
              
              (591,936
              )
              
              (126,992
              )
              
              (44,307
              )Other
                  receivables
              
              
              (1,082,008
              )
              
              1,567
              
              
              (152,818
              )Other
                  receivables - related party
              
              
              (2,427,043
              )
              
              -
              
              
              -Other
                  receivables - shareholder
              
              
              (366,185
              )
              
              -
              
              
              -Inventories
              
              
              (2,394,250
              )
              
              173,225
              
              
              (879,841
              )Prepayments
              
              
              99,957
              
              
              (28,710
              )
              
              377,245Prepayments
                  - related party
              
              
              1,409,944
              
              
              301,037
              
              
              (562,560
              )Accounts
                  payable
              
              
              1,773,031
              
              
              176,458
              
              
              10,660Accounts
                  payable - related party
              
              
              390,986
              
              
              200,660
              
              
              102,260Accrued
                  liabilities
              
              
              130,238
              
              
              (65,014
              )
              
              (28,497
              )Other
                  payable
              
              
              410,174
              
              
              166,860
              
              
              (62,102
              )Customer
                  deposit
              
              
              492,586
              
              
              201,045
              
              
              16,292Taxes
                  payable
              
              
              1,385,613
              
              
              (14,792
              )
              
              382,665Net
                  cash provided by operating activities
              
              
              5,052,502
              
              
              6,528,302
              
              
              706,202CASH
                  FLOWS FROM INVESTING ACTIVITIES:Acquisition
                  of equity investment
              
              
              (909,439
              )
              
              (124,020
              )
              
              (453,750
              )Purchase
                  plant and equipment
              
              
              (731,295
              )
              
              (418,498
              )
              
              (363,660
              )Additions
                  to construction in progress
              
              
              (10,308,985
              )
              
              (5,814,096
              )
              
              (2,575,510
              )Acquisition
                  of land use right
              
              
              (949,900
              )
              
              -
              
              
              -Purchase
                  of software program
              
              
              (1,281
              )
              
              -
              
              
              -Advance
                  on plant and equipment purchase
              
              
              (7,225,790
              )
              
              (1,155,999
              )
              
              -Loan
                  to related party
              
              
              (1,024,720
              )
              
              -
              
              
              -Net
                  cash used in investing activities
              
              
              (21,151,410
              )
              
              (7,512,613
              )
              
              (3,392,920
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Increase
                  in restricted cash
              
              
              (1,524,720
              )
              
              (279,045
              )
              
              (1,663,750
              )Borrowings
                  on notes payable - banks
              
              
              8,710,120
              
              
              12,201,088
              
              
              7,132,950Payments
                  on notes payable - banks
              
              
              (7,173,040
              )
              
              (10,743,853
              )
              
              (3,835,700
              )Borrowings
                  on short term loans
              
              
              24,785,415
              
              
              8,979,048
              
              
              7,683,500Payments
                  on short term loans
              
              
              (15,178,665
              )
              
              (8,358,948
              )
              
              (7,435,390
              )Borrowings
                  on employee loans
              
              
              384,224
              
              
              431,111
              
              
              117,734Payments
                  on employee loans
              
              
              (458,632
              )
              
              (113,060
              )
              
              (84,255
              )Borrowings
                  on employee loan - officer
              
              
              1,281
              
              
              -
              
              
              -Payments
                  on employee loan - officer
              
              
              (96,580
              )
              
              -
              
              
              -Borrowings
                  on third party loan
              
              
              251,378
              
              
              57,319
              
              
              -Borrowings
                  on long term loans
              
              
              -
              
              
              992,160
              
              
              -Payments
                  on long term loans
              
              
              (1,549,889
              )
              
              (868,140
              )
              
              (726,000
              )Cash
                  proceeds from issuance of common stock
              
              
              15,256,428
              
              
              -
              
              
              1,143,649Payments
                  of amounts due officer
              
              
              (1,925,996
              )
              
              -
              
              
              -Proceeds
                  from capital contribution receivable
              
              
              696,371
              
              
              -
              
              
              -Dividend
                  paid to shareholders
              
              
              -
              
              
              (1,664,503
              )
              
              -Net
                  cash provided by financing activities
              
              
              22,177,695
              
              
              633,177
              
              
              2,332,738EFFECTS
                  OF EXCHANGE RATE CHANGE IN CASH
              
              
              (160,805
              )
              
              25,408
              
              
              -INCREASE
                  (DECREASE) IN CASH
              
              
              5,917,982
              
              
              (325,726
              )
              
              (353,980
              )CASH,
                  beginning of year
              
              
              502,457
              
              
              828,183
              
              
              1,182,163CASH,
                  end of year
              
              $
              6,420,439
              
              $
              502,457
              
              $
              828,183
  See
          report of independent registered public accounting firm.
  The
          accompanying notes are an integral part of this statement.
 F-5
  SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
        30,
        2007
  **Note
        1 - Organization background and principal activities**
 Shengtai
          Pharmaceutical Inc, (the “Company”), formerly known as West Coast Car Company
          was incorporated
          in March 2004 in the State of Delaware as West Coast Car Company. In the
          State
          of California, the Company has operated as West Coast Car Company d/b/a
          So Cal
          Car Company. The Company operated as a “traditional” pre-owned dealership,
          whereby it sought out vehicles from various sources, and then sell the
          vehicles
          to the general public. Starting from 2007, the Company changed its business
          to
          acquiring, or merging with, an operating business.
 
 On
          May
          15, 2007, the Company entered into a share exchange agreement (the “Share
          Exchange Agreement”) with the shareholders of Shengtai Holding Inc. (“SHI”).
          Pursuant to the Share Exchange Agreement, Qingtai Liu and Chenghai Du,
          shareholders of all the issued and outstanding shares of common stock of
          SHI,
          exchanged all SHI’s common stock for 9,125,000 newly-issued shares of the
          Company. As a result of the Share Exchange Agreement and the Share Purchase
          Agreement, the Company acquired all of the outstanding capital stock of
          SHI.
          Because SHI owns 100% of Weifang Shengtai Pharmaceutical Co., Ltd (hereinafter
          known as “Weifang Shengtai”), Weifang Shengtai is now an indirect wholly-owned
          subsidiary of the Company. For
          accounting purposes, t he
          acquisition of SHI has been treated as a recapitalization of SHI with SHI
          as the
          acquirer. The historical financial statements prior to May 15, 2007 are
          those of
          SHI.
 
 In
          addition, on May 15, 2007, the Company entered into and consummated a share
          purchase agreement (the “Share Purchase Agreement”) with nineteen accredited
          investors (the “Purchasers”). Pursuant to the Share Purchase agreement, the
          Purchasers purchased from the Company an aggregate of 8,750,000 shares
          of common
          stock and 4,375,000 attached warrants for $2.00 per share (or an aggregate
          purchase price of $17,500,000) and for total net proceeds of $15,256,428.
          The
          exercise price of the warrants $2.60 per share and the term of the warrants
          is
          five years.
  In
          conjunction with this Share Purchase Agreement, Mr. Qingtai Liu, the controlling
          stockholder and chief executive officer, placed an aggregate 5,000,000
          shares of
          common stock in an escrow account held with Tri-State Title & Escrow, LLC
          upon closing of the Share Purchase Agreement. Pursuant to the Share Purchase
          Agreement, one half of the escrowed shares are to be released to the Purchasers
          on a pro-rated basis if the audited consolidated financial statements of
          the
          Company prepared in accordance with US generally accepted accounting principles
          (GAAP) do not reflect at least after-tax net income of at least $7,000,000
          or
          fully diluted earnings per share of $0.33 for the fiscal year ended June
          30,
          2007; and if the audited consolidated financial statements of the Company
          prepared in accordance with US
          GAAP do not
          reflect at least an after-tax net income of $9,000,000 or fully diluted
          earnings
          per share of $0.43 for the fiscal year ending June 30, 2008, the second
          half of
          the escrow shares will be distributed on a pro-rated basis to the Purchasers.
          The Company determined that the threshold for the year ended June 30, 2007
          has
          been met.
 
 SHI was
          incorporated in the state of New Jersey on February 27, 2006. The Company,
          through its Chinese subsidiary, **** Weifang
          Shengtai, manufactures and distributes raw drug materials (glucose, dehydrate
          glucose) and drug supplements (starch, dextrin, polyacrylic acid
          resin).
 See
            report of independent registered public accounting firm.
 
 F-6
 
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2007
 Weifang
          Shengtai was established in Changle County, Weifang City, Shandong Province,
          People’s Republic of China on February 4, 1999. Mr. Qingtai Liu and his
          management team were the original shareholders.
 
 On
          December 25, 2003, Bio-One Corporation (referred to as “Bio-One”), a Nevada
          corporation signed a joint venture agreement with Weifang Shengtai. Pursuant
          to
          the Joint Venture Agreement, Bio-One acquired a 51% interest in Weifang
          Shengtai
          for a cash payment $2,000,000 to fund its share of the registered capital
          and
          2,090,000 shares of Bio-One’s Series A preferred stock to the former
          shareholders of Weifang Shengtai. The business term was for 20 years with
          registered capital of $3,920,000. Bio-One paid its $2,000,000 contribution
          in
          2004. The original shareholders contributed a total of $1,920,000 between
          1999
          and 2004.
 
 On
          April
          19, 2006, pursuant to a shareholders’ resolution, 37 Chinese shareholders of
          Weifang Shengtai transferred their 17.95% interest in the company to Mr.
          Qingtai
          Liu for RMB 5,628,880 ($703,610). On June 3, 2006, the equity exchange
          was
          approved by the local branch of the Ministry of Commerce (MOC) in
          Weifang.
 
 On
          June
          20, 2006, SHI signed an agreement to acquire a 100% ownership in Weifang
          Shengtai from Bio-One Corporation which owned a 51% interest in Weifang
          Shengtai
          and Mr. Qingtai Liu who owned the remaining 49% interest. Mr. Qingtai Liu,
          who
          is one of the founding shareholders of Weifang Shengtai, sold his 49% interest
          in Weifang Shengtai to SHI for RMB 15 million (approximately $1,925,996),
          this
          amount is paid in May 2007. Bio-One sold its 51% interest in Weifang Shengtai
          to
          SHI for $1,000,000 in cash and the return of 4,180,000 Series A preferred
          shares
          of Bio-One owned by Mr. Qingtai Liu. Weifang Shengtai became a wholly foreign
          owned entity or “WFOE” and obtained the approval of the local branch of the
          Ministry of Commerce (MOC) in the City of Weifang on June 21, 2006. The
          business
          term is 20 years starting on February 10, 2004 when Bio-One acquired its
          51% in
          Weifang Shengtai. The registered capital is RMB 32 million (approximately
          $3.92
          million). In accordance with laws governing foreign acquisitions of a Chinese
          registered company, SHI will be required to contribute $1,925,996 which
          required
          to be made within 1 year from the date of approval of the business license.
          As
          of June 30, 2007, this requirement has been met by SHI. As a result of
          this
          transaction, SHI exercised control over Weifang Shengtai.
 
 On
          May
          26, 2007, Weifang Shengtai increased its registered capital from $3,920,000
          to
          $15,000,000. The additional $1,108,000 registered capital was contributed
          by SHI
          in May and June of 2007. This transaction was approved by the local branch
          of
          the MOC in the City of Weifang and the Company obtained a new business
          license
          on July 16, 2007.
 
 **Note
          2 - Summary of significant accounting policies**
 
 The
          reporting entity
 
 The
          consolidated financial statements of Shengtai Pharmaceutical Inc. and
          Subsidiaries reflect the activities of the parent and its wholly owned
          subsidiaries SHI and Weifang Shengtai. The purchase of SHI has been accounted
          for as a reverse acquisition and a recapitalization. The assets and liabilities
          of SHI were transferred at historical cost under the equity structure of
          the
          Company due to the reverse acquisition on May 15, 2007. The consolidated
          financial statements have been presented as if the acquisition occurred
          at June
          30, 2004.
 See
              report of independent registered public accounting firm.
 
 F-7
 
 SHENGTAI
            PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
            30,
            2007
 Basis
          of presentation
 
 The
          accompanying consolidated financial statements have been prepared in accordance
          with accounting principles generally accepted in the United States of America.
          All material inter-company transactions and balances have been eliminated
          in the
          consolidation.
 
 Foreign
          currency translation
 
 The
          reporting currency of the Company is the US dollar. The Company uses their
          local
          currency, Renminbi (RMB), as their functional currency. Results of operations
          and cash flow are translated at average exchange rates during the period,
          and
          assets and liabilities are translated at the unified exchange rate as quoted
          by
          the People’s Bank of China at the end of the period. Translation adjustments
          resulting from this process are included in accumulated other comprehensive
          income in the statement of shareholders’ equity. Transaction gains and losses
          that arise from exchange rate fluctuations on transactions denominated
          in a
          currency other than the functional currency are included in the results
          of
          operations as incurred.
 
 Translation
          adjustments amounted to $826,998 and $185,402 as of June 30, 2007 and 2006,
          respectively. Assets and liabilities were translated at 7.60 RMB and 7.99
          RMB to
          $1.00 USD at June 30, 2007 and 2006, respectively. The equity accounts
          were
          stated at their historical rate. The average translation rates applied
          to income
          statement for the years ended June 30, 2007, 2006 and 2005 were 7.81 RMB,
          8.06
          RMB and 8.26 RMB to $1.00 USD. Cash flows are also translated at average
          translation rates for the period; therefore, amounts reported on the statement
          of cash flows will not necessarily agree with changes in the corresponding
          balances on the balance sheet.
 
 Revenue
          recognition
 
 The
          Company recognizes revenue when the goods are delivered and title has passed.
          Sales revenue represents the invoiced value of goods, net of a value-added
          tax
          (VAT). All of the Company’s products sold in the PRC are subject to a Chinese
          value-added tax at a rate of 17% of the gross sales price or at a rate
          approved
          by the Chinese local government. This VAT may be offset by VAT paid by
          the
          Company on raw materials and other materials included in the cost of producing
          their finished product and certain freight expenses.
 
 Shipping
          and handling
 
 Shipping
          and handling costs related to costs of goods sold are included in selling,
          general and administrative costs. Shipping and handling costs amounted
          to
          $1,927,118, $1,980,055, and $1,494,435, respectively, for the years ended
          June
          30, 2007, 2006 and 2005.
 
 Use
          of
          estimates
 
 The
          preparation of financial statements in conformity with generally accepted
          accounting principles of the United States of America requires management
          to
          make estimates and assumptions that affect the amounts reported in the
          consolidated financial statements and accompanying notes. For example,
          management estimates potential losses on outstanding receivables. Management
          believes that the estimates utilized in preparing its financial statements
          are
          reasonable and prudent. Actual results could differ from these
          estimates.
 See
              report of independent registered public accounting firm.
 
 F-8
 
 SHENGTAI
            PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
            30,
            2007
 Financial
          instruments
 
 Statement
          of Financial Accounting Standards No. 107 (SFAS 107), “Disclosures about Fair
          Value of Financial Instruments” requires disclosure of the fair value of
          financial instruments held by the Company. SFAS 107 defines the fair value
          of
          financial instruments as the amount at which the instrument could be exchanged
          in a current transaction between willing parties. The Company considers
          the
          carrying amount of cash, accounts receivable, notes receivable,
          other **** receivables,
          prepayments, accounts payable, other payable, accrued liabilities, customer
          deposits, tax payable, and loans to approximate their fair values because
          of the
          short period of time between the origination of such instruments and their
          expected realization and their current market rate of interest.
 
 Cash
          and concentration of risk
 
 Cash
          includes cash on hand and demand deposits in accounts maintained with
          state-owned banks within the People’s Republic of China and the United States of
          America. Certain f inancial
          instruments, which subject the Company to concentration of credit risk,
          consist
          of cash. The Company maintains cash balances at financial institutions
          which,
          from time to time, may exceed Federal Deposit Insurance Corporation insured
          limits for the banks located in the Unites States. Balances at financial
          institutions or state owned banks within the PRC are not covered by
          insurance. Total
          cash (including restricted cash balances) in banks at June 30, 2007 and
          2006
          amounted to $12,129,924 and $4,580,468, respectively of which $100,000
          of the 2007 balance is covered by insurance. The
          Company has not experienced any losses in such accounts and believes it
          is not
          exposed to any risks on its cash in bank accounts.
 
 Earnings
          per share
 
 The
          Company reports earnings per share in accordance with the provisions of
          SFAS No.
          128, "Earnings Per Share." SFAS No. 128 requires presentation of basic
          and
          diluted earnings per share in conjunction with the disclosure of the methodology
          used in computing such earnings per share. Basic earnings per share excludes
          dilution and is computed by dividing income available to common stockholders
          by
          the weighted average common shares outstanding during the period. Diluted
          earnings per share takes into account the potential dilution that could
          occur if
          securities or other contracts to issue common stock were exercised and
          converted
          into common stock.
 
 The
          following is a reconciliation of the basic and diluted earnings per share
          computation for the years ended June 30, 2007, 2006 and 2005:
 
 2007
                  
                  2006
                  
                  2005Net
                      income for earnings per share
                  
                  $
                  7,149,126
                  
                  $
                  4,210,911
                  
                  $
                  1,615,157Weighted
                      average shares used in basic computation
                  
                  
                  11,251,712
                  
                  
                  10,125,000
                  
                  
                  10,125,000Diluted
                      effect of warrants
                  
                  
                  225,833
                  
                  
                  -
                  
                  
                  -Weighted
                      average shares used in diluted computation
                  
                  
                  11,477,545
                  
                  
                  10,125,000
                  
                  
                  10,125,000Earnings
                      per share:Basic
                  
                  $
                  0.64
                  
                  $
                  0.42
                  
                  $
                  0.16Diluted
                  
                  $
                  0.62
                  
                  $
                  0.42
                  
                  $
                  0.16
 See
              report of independent registered public accounting firm.
 
 F-9
 
 SHENGTAI
            PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
            30,
            2007
  At
          June
          30, 2007, all outstanding warrants were included in the year ended June
          30, 2007
          calculation of diluted earnings per share.
 
 Restricted
          cash
 
 The
          Company through its bank agreements is required to keep certain amounts
          on
          deposit that are subject to withdrawal restrictions and these amounts are
          $5,628,500 and $3,881,200 as of June 30, 2007 and 2006,
          respectively.
 
 Under
          the
          Escrow Agreement and the Share Purchase Agreement signed by Shengtai Holding
          Inc., West Coast Car Company, Chinamerica Fund LP, and Tri-State Title
&
Escrow, LLC (the “Escrow Agent”), the Company was required to deposit with the
          Escrow Agent $5,500,000 immediately on the Closing Date of the Share Purchase
          Agreement. This fund can only be disbursed until certain criteria are met.
          As of
          June 30, 2007, the amount not disbursed was $500,000 and this balance is
          classified under other receivables in the Company’s consolidated balance
          sheets.
 
 Accounts
          receivable
 
 The
          Company’s business operations are conducted in the People’s Republic of China.
          During the normal course of business, the Company extends unsecured credit
          to
          its customers. Accounts receivable, outstanding at June 30, 2007 and 2006
          amounted to $6,211,145 and $3,889,780, respectively. Management reviews
          its
          accounts receivable on a regular basis to determine if the allowance for
          doubtful accounts is adequate. An estimate for doubtful accounts is made
          when
          collection of the full amount is no longer probable. Known bad debts are
          written
          off against allowance for doubtful accounts when identified.
 
 The
          activity in the allowance for doubtful accounts for trade accounts receivable
          for the periods ended June 30, 2007 and 2006 is as follows:
  June
                      30,
                  
                  June
                      30,2007
                  
                  2006Beginning
                      allowance for doubtful accounts
                  
                  $
                  357,970
                  
                  $
                  233,976Additions
                      charged to bad debt expense
                  
                  
                  271,602
                  
                  
                  114,780Write-off
                      charged against the allowance
                  
                  
                  (217,838
                  )
                  
                  -Foreign
                      currency translation adjustments
                  
                  
                  19,444
                  
                  
                  9,214Ending
                      allowance for doubtful accounts
                  
                  $
                  431,178
                  
                  $
                  357,970
 See
                report of independent registered public accounting firm.
 
 F-10
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 Concentrations
          of credit risk
 
 The
          credit risk on bank deposits is limited because the counterparties are
          banks
          with high credit-ratings assigned by international credit-rating agencies,
          or
          state-owned banks in China. The Company has never experienced any losses
          in such
          accounts and believes it is not exposed to any significant risks on its
          cash in
          bank accounts, either in the People’s Republic of China or in the United
          States.
 
 Our
          financial instruments that potentially expose us to concentrations of credit
          risk are primarily our trade accounts receivable. We conduct credit evaluations
          of our customers but generally have not required collateral or other security
          interests from our customers when we grant them credit. We make a provision
          for
          estimated uncollectible accounts based primarily on the age of the receivables
          but also when we identify potential payment problems with specific customers.
          For the reporting period, the top ten customers account for 29.3% for our
          total
          sales. We have not had significant collections issues for receivables generated
          from sales of our products.
 
 For
          export sales, we frequently require significant down payments or letter
          of
          credit by our customers prior to shipment. During the year, the Company
          maintains export credit insurance to protect the Company against the risk
          that
          the oversea customers may default on settlement.
 
 Inventories
 
 Inventories
          are stated at the lower of cost or market using the weighted average basis
          and
          consists of the following:
  June
                      30,
                  
                  June
                      30,2007
                  
                  2006Raw
                      materials
                  
                  $
                  2,297,901
                  
                  $
                  92,478Work-in-progress
                  
                  
                  1,130,900
                  
                  
                  938,283Finished
                      goods
                  
                  
                  1,020,466
                  
                  
                  865,117Total
                  
                  $
                  4,449,267
                  
                  $
                  1,895,878
  The
          Company reviews its inventory periodically for possible obsolete goods
          or to
          determine if any reserves are necessary. As of June 30, 2007 and 2006, the
          Company has determined that no reserves are necessary.
 
 Plant
          and equipment
 
 Plant
          and
          equipment are stated at cost less accumulated depreciation. Depreciation
          is
          computed using the straight-line method over the estimated useful lives
          of the
          assets with 3% residual value. Depreciation expense for the years ended
          June 30,
          2007, 2006 and 2005 amounted to $ 2,239,157, $ 1,478,734
          and 1,332,533, respectively.
 See
                report of independent registered public accounting firm.
 
 F-11
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 Estimated
          useful lives of the assets are as follows:
 Estimated
                  
                  Useful
                      LifeBuildings
                  
                  
                  5-20
                  
                  
                  yearsMachinery
                      and equipment
                  
                  
                  5-10
                  
                  
                  yearsAutomobile
                      facilities
                  
                  
                  5-10
                  
                  
                  yearsElectronic
                      equipment
                  
                  
                  5-7
                  
                  
                  years
  Construction
            in progress represents the costs incurred in connection with the construction
            of
            buildings or new additions to the Company’s plant facilities. No depreciation is
            provided for construction in progress until such time as the assets are
            completed and placed into service.
 
 Maintenance,
          repairs and minor renewals are charged directly to expenses as incurred.
          Major
          additions and betterment to property and equipment are capitalized.
 
 Long-lived
          assets of the Company are reviewed periodically, or more often if circumstances
          dictate, to determine whether their carrying value has become impaired.
          The
          Company considers assets to be impaired if the carrying value exceeds the
          future
          projected cash flows from related operations. The Company also re-evaluates
          the
          periods of amortization to determine whether subsequent events and circumstances
          warrant revised estimates of useful lives. As of June 30, 2007, the Company
          expects these assets to be fully recoverable.
 
 Plant
          and
          equipment consists of the following:
 June
                      30,
                  
                  June
                      30,2007
                  
                  2006Buildings
                  
                  $
                  5,272,190
                  
                  $
                  3,433,689Machinery
                      and equipment
                  
                  
                  22,257,978
                  
                  
                  8,901,528Automobile
                      facilities
                  
                  
                  487,319
                  
                  
                  242,435Electronic
                      equipment
                  
                  
                  307,391
                  
                  
                  183,433Construction
                      in progress
                  
                  
                  9,055,482
                  
                  
                  7,256,042Total
                  
                  
                  37,380,360
                  
                  
                  20,017,127Accumulated
                      depreciation
                  
                  
                  7,202,286
                  
                  
                  5,454,153Total
                  
                  $
                  30,178,074
                  
                  $
                  14,562,974
  Interest
          costs totaling $759,372 and $189,904 was capitalized into construction
          in
          progress for the years ended June 30, 2007 and 2006, respectively .
 
 Investment
          in Changle Shengshi Redian Co., Ltd.
 
 The
          Company entered into a joint venture partnership with Weifang City Investment
          Company and Changle Century Sun Paper Industry Co., Ltd on September 16,
          2003
          and formed Changle Shengshi Redian Co., Ltd (“Changle Shengshi”). Changle
          Shengshi was incorporated in Weifang City,
          Shandong Province, People’s Republic of China. Changle Shengshi’s principal
          activity is to produce and sell electricity and heat.
 See
                report of independent registered public accounting firm.
 
 F-12
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 On
          April
          12, 2005, the Company’s ownership percentage in Changle Shengshi was diluted
          from 30% to 20% as a result of an additional investment to Changle Shengshi
          by
          another party. The Company accounts for this investment under the equity
          method.
          Equity method investments are recorded at original cost and adjusted to
          recognize the Company’s proportionate share of the investee’s net income or
          losses, additional contributions made and distributions received and
          amortization of basis differences. The Company recognizes a loss if it
          is
          determined that other than temporary decline in the value of the investment
          exists.
 
 Summarized
          financial information of Changle Shengshi is as follows:
 June
                      30,
                  
                  June
                      30,2007
                  
                  2006Current
                      assets
                  
                  $
                  8,065,168
                  
                  $
                  6,809,428Non-current
                      assets
                  
                  
                  23,027,549
                  
                  
                  16,191,704Total
                      assets
                  
                  
                  31,092,717
                  
                  
                  23,001,132Current
                      liabilities
                  
                  
                  14,137,526
                  
                  
                  6,266,901Non-current
                      liabilities
                  
                  
                  3,576,800
                  
                  
                  5,508,800Shareholders'
                      equity
                  
                  
                  13,378,391
                  
                  
                  11,225,431Total
                      liabilities and shareholders' equity
                  
                  $
                  31,092,717
                  
                  $
                  23,001,132
  Summarized
          financial information of Changle Shengshi for the years is as
          follows:
  June
                      30,
                  
                  June
                      30,
                  
                  June
                      30,2007
                  
                  2006
                  
                  2005Net
                      sales
                  
                  $
                  17,366,341
                  
                  $
                  7,622,505
                  
                  $
                  1,906,861Gross
                      profit
                  
                  $
                  3,586,157
                  
                  $
                  1,249,000
                  
                  $
                  (110,418
                  )Income
                      before taxes
                  
                  $
                  2,308,837
                  
                  $
                  431,747
                  
                  $
                  (370,586
                  )Net
                      income
                  
                  $
                  1,546,921
                  
                  $
                  430,682
                  
                  $
                  (370,586
                  )Company
                      share of income
                  
                  $
                  309,384
                  
                  $
                  86,136
                  
                  $
                  (74,117
                  )Elimination
                      of intercompany profit
                  
                  
                  177,964
                  
                  
                  44,501
                  
                  
                  (4,772
                  )Company's
                      share of net income
                  
                  $
                  131,420
                  
                  $
                  41,635
                  
                  $
                  (69,345
                  )
  Intangible
          assets
 
 All
          land
          in the People’s Republic of China is owned by the government and cannot be sold
          to any individual or company. However, the government grants the user a
“land
          use right” to use the land. The Company has purchased land use rights from March
          2000 to December 2003 in succession for a total price of approximately
          $1,295,959. The Company has obtained another land use right in June 2007
          for a
          price of $949,900. The Company has the right to use various parcels of
          land that
          range from 20 to 50 years in length. The Company amortizes the cost of
          the land
          use rights over their useful life using the straight-line method. At June
          30,
          2007 and 2006, accumulated
          amortization amounted to $96,299 and $ 194,178,
          respectively .
 See
                report of independent registered public accounting firm.
 
 F-13
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 On
          June
          30, 2007 the Company sold land use right at an auction due to relocation
          in one
          of the Company’s manufacturing plant. The net book value of the land use right
          sold amounted to $306,984. The gross proceeds from the sales of the land
          use
          right was $1,998,685. This balance has not been received as of June 30,
          2007 and this
          balance is classified under other receivables in the Company’s consolidated
          balance sheets.
 
 Intangible
          assets of the Company are reviewed periodically, or more often if circumstances
          dictate, to determine whether their carrying value has become impaired.
          The
          Company considers assets to be impaired if the carrying value exceeds the
          future
          projected cash flows from related operations. The Company also re-evaluates
          the
          periods of amortization to determine whether subsequent events and circumstances
          warrant revised estimates of useful lives. As of June 30, 2007, the Company
          expects these assets to be fully recoverable.
 
 Total
          amortization expense for the years ended June 30, 2007, 2006 and 2005 amounted
          to $42,644, $41,454 and $39,258 respectively.
 
 Income
          taxes
 
 The
          Company reports income taxes under SFAS 109 which requires the recognition
          of
          deferred income tax liabilities and assets for the expected future tax
          consequences of temporary differences between income tax basis and financial
          reporting basis of assets and liabilities. Provision for income taxes consist
          of
          taxes currently due plus deferred taxes. There are no deferred tax amounts
          at
          June 30, 2007 and 2006.
 
 The
          charge for taxation is based on the results for the year as adjusted for
          items,
          which are non-assessable or disallowed. It is calculated using tax rates
          that
          have been enacted or substantively enacted by the balance sheet
          date.
 
 Deferred
          tax is accounted for using the balance sheet liability method in respect
          of
          temporary differences arising from differences between the carrying amount
          of
          assets and liabilities in the financial statements and the corresponding
          tax
          basis used in the computation of assessable tax profit. In principle, deferred
          tax liabilities are recognized for all taxable temporary differences, and
          deferred tax assets are recognized to the extent that it is probably that
          taxable profit will be available against which deductible temporary differences
          can be utilized.
 
 Deferred
          tax is calculated using tax rates that are expected to apply to the period
          when
          the asset is realized or the liability is settled. Deferred tax is charged
          or
          credited in the income statement, except when it is related to items credited
          or
          charged directly to equity, in which case the deferred tax is also dealt
          with in
          equity.
 
 Deferred
          tax assets and liabilities are offset when they related to income taxes
          levied
          by the same taxation authority and the Company intends to settle its current
          ax
          assets and liabilities on a net basis.
 
 The
          Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
          Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a
          benefit only if it is “more likely than not” that the tax position would be
          sustained in a tax examination, with a tax examination being presumed to
          occur.
          The amount recognized is the largest amount of tax benefit that is greater
          than
          50% likely of being realized on examination. For tax positions not meeting
          the
“more likely than not” test, no tax benefit is recorded. The adoption had no
          affect on the Company’s financial statements.
 See
                report of independent registered public accounting firm.
 
 F-14
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 Value
          Added Tax
 
 Enterprises
          or individuals who sell products, engage in repair and maintenance or import
          and
          export goods in the PRC are subject to a value added tax in accordance
          with
          Chinese laws. The value added tax standard rate is 17% of the gross sales
          price.
          A credit is available whereby VAT paid on the purchases of semi-finished
          products, raw materials used in the production of the Company’s finished
          products, and payment of freight expenses can be used to offset the VAT
          due on
          sales of the finished product.
 
 VAT
          on
          sales and VAT on purchases amounted to $7,453,346 and $6,991,599 for the
          year
          ended June 30, 2007, $5,571,553 and $4,545,708 for the year ended June
          30, 2006,
          and $3,773,090 and $3,589,025 for the year ended June 30, 2005, respectively.
          Sales and purchases are recorded net of VAT collected and paid as the Company
          acts as an agent for the government. VAT taxes are not impacted by the
          income
          tax holiday.
 
 Guarantees
 
 From
          time
          to time, the Company guarantees the debt of others. Pursuant to Financial
          Accounting Standards Board Interpretation 45, “Guarantor’s Accounting for and
          Disclosure Requirements for Guarantees, Including Indirect Guarantees of
          Indebtedness to Others,” the Company records guarantees at the fair value of the
          expected future payments. Management estimates they will not be required
          to make
          any payments under these guarantees based on the past experience and the
          financial condition of the companies (See note 10).
 
 Recently
          issued accounting pronouncements
 
 In
          July
          2006, the FASB issued FASB Interpretation No. 48, “Accounting for
          Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109”
(“FIN 48”). The Company adopted Interpretation No. 48 on January 1, 2007. See
          income taxes section above for details.
 
 In
          September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
          which
          addresses the measurement of fair value by companies when they are required
          to
          use a fair value measure for recognition or disclosure purposes under GAAP.
          SFAS
          No. 157 provides a common definition of fair value to be used throughout
          GAAP
          which is intended to make the measurement of fair value more consistent
          and
          comparable and improve disclosures about those measures. SFAS No. 157 will
          be
          effective for an entity's financial statements issued for fiscal years
          beginning
          after November 15, 2007. The Company is currently evaluating the effect
          SFAS No.
          157 will have on its consolidated financial statements.
 
 In
          February 2007, the Financial Accounting Standards Board (‘‘FASB’’) issued
          Statement of Financial Accounting Standards (‘‘SFAS’’) No. 159, The Fair Value
          Option for Financial Assets and Financials Liabilities — Including an Amendment
          of FASB Statement No. 115. This standard permits measurement of certain
          financial assets and financial liabilities at fair value. If the fair value
          option is elected, the unrealized gains and losses are reported in earnings
          at
          each reporting date. Generally, the fair value option may be elected on
          an
          instrument-by-instrument basis, as long as it is applied to the instrument
          in
          its entirety. The fair value option election is irrevocable, unless a new
          election date occurs. SFAS No. 159 requires prospective application and
          also
          establishes certain additional presentation and disclosure requirements.
          The
          standard is effective as of the beginning of the fiscal year that begins
          after
          November 15, 2007. The Company is currently evaluating the provisions
          of SFAS No. 159 to determine the potential impact, if any, the adoption
          will
          have on the Company’s financial statements.
 See
                report of independent registered public accounting firm.
 
 F-15
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 In
          June
          2007, the
          FASB
          issued FASB Staff Position No. EITF 07-3, “Accounting for Nonrefundable Advance
          Payments for Goods or Services Received for use in Future Research and
          Development Activities” (“FSP EITF 07-3”), which addresses whether nonrefundable
          advance payments for goods or services that used or rendered for research
          and
          development activities should be expensed when the advance payment is made
          or
          when the research and development activity has been performed. The Company
          is
          currently evaluating the effect of this pronouncement on financial
          statements.
 
 Reclassifications
 
 Certain
          prior period amounts have been reclassified to conform to the current period
          presentation. These reclassifications have no effect on net income or cash
          flows.
 
 **Note
          3 - Supplemental disclosure of cash flow information**
 
 Income
          taxes paid for the years ended June 30, 2007, 2006 and 2005 amounted to
          $125,782, $0 and $0, respectively.
 
 Interest
          paid for the years ended June 30, 2007, 2006 and 2005 amounted to $1,820,918,
          $613,288 and $586,480, respectively.
 
 Non-cash
          investing and financing activity
 
 During
          the year ended June 30, 2007, the Company acquired plant and equipment
          and
          construction in progress through non-current prepayment and accounts payables.
          Total plant and equipment and construction in progress acquired in the
          year
          ended June 30, 2007 not purchased by cash amounted to $4,498,494.
 
 During
          2006, the Company used $999,106 of amounts due from Mr. Qingtai Liu to
          offset
          total dividends and other payables due him.
  **Note
          4 - Related party transactions**
 
 For
          business convenience, the Company purchases starch from Shouguang Shengtai
          Starch Co. Ltd. (“Shouguang Shengtai”), of which Mr.
          Qingtai Liu, the Company’s chief executive officer, owns 40%. The
          Company had $1,378,133 of prepayments to Shouguang Shengtai at June 30,
          2006.
          Since the Company initiated production of starch, no more purchases were
          made
          from Shouguang Shengtai. Prepayment balance is reclassified to other receivable
          - related party as the balance is to be refunded. Balance as of June 30,
          2007
          was $992,449. Total related party purchases from Shouguang
          Shengtai for the
          years ended June 30, 2007, 2006 and 2005 amounted to $7,652,465 and $15,963,415
          and $13,794,612, respectively, which represents approximately 22%, 77%
          and 81%
          of the Company’s purchase of raw materials for the years ended June 30, 2007,
          2006 and 2005, respectively.
  See
                report of independent registered public accounting firm.
 
 F-16
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 As
          of
          June 30, 2006, the Company owed Mr. Qingtai Liu $1,925,996 in connection
          with
          the Company’s purchase of his 49% interest in Weifang Shengtai as described in
          note 1. This amount is unsecured and non-interest bearing. As of June 30,
          2007
          the amount owed to Mr. Qingtai Liu has been repaid. In connection to this
          transaction and the 17.95% ownership interest transfer transaction from
          the 37
          Chinese original shareholders of Weifang Shengtai (“Original Shareholders”) to
          Mr. Qingtai Liu on April 19, 2006, Mr. Qingtai Liu has assumed the liabilities
          of the Original Shareholders’ capital contribution and is entitled to contribute
          this amount as capital contribution to the Company. As of June 30, 2007,
          the
          remaining balance to be contributed by Mr. Qingtai Liu amounted to $1,229,625.
          This balance will be repaid in form of cash or operating assets by December
          31,
          2007.
 
 The
          Company’s utilities are partially provided by Changle Shengshi, a related party,
          as described in Note 2 under the caption “Investment in Changle Shengshi Redian
          Co., Ltd”. The Company had a total of $949,992 and $348,366 of accounts payable
          due to Changle Shengshi at June 30, 2007 and 2006, respectively. The utilities
          expense amounted to $4,958,249, $1,705,675 and $581,338 for the years ended
          June
          30, 2007, 2006 and 2005, respectively.
 
 The
          Company loaned money to Changle Shengshi and entered into two loan contracts
          as
          follows:
  June
                      30, 2007
                  
                  June
                      30, 2006Due
                      on November 19, 2007, unsecured, 7.95% interest rate per
                      annum
                  
                  $
                  657,500
                  
                  $
                  -Due
                      on September 14, 2009, unsecured, 7.6% interest rate per
                      annum
                  
                  
                  394,500
                  
                  
                  -Total
                  
                  $
                  1,052,000
                  
                  $
                  -
  The
          Company also loaned money to Changle Shengshi in June 2007, for temporary
          cash
          flow needs. This transaction is recurring in nature. The Company does not
          charge
          interest on these receivables and it is due on demand. As of June 30, 2007,
          total receivable due from Changle Shengshi was $1,499,207. This balance
          was
          repaid by Changle Shengshi in July 2007.
 
 **Note
          5 - Prepayments**
 
 Prepayments
          represent partial payments or deposits on inventory purchases and amounted
          to
          $140,376 and $231,352 as of June 30, 2007 and 2006, respectively.
 
 Prepayments
          - non-current represent partial payments or deposits on plant and equipment
          purchases and amounted to $7,429,371 and $1,166,998 as of June 30, 2007
          and
          2006, respectively.
 See
                report of independent registered public accounting firm.
 
 F-17
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 **Note
          6 - Debt**
 
 Short
          term loans
 
 Short
          term loans represent amounts due to various banks which are normally due
          within
          one year, and these loans can be renewed with the banks. The
          Company’s short
          term bank loans consisted of the follow ing:
 June
                      30, 2007
                  
                  June
                      30, 2006Loan
                      from Bank of China, due varoius dates from July 2007 to June
                      2008. Monthly
                      interest only payments ranging from 7.3125% to 7.668% per annum,
                      guaranteed by unrelated third party and secured by
                      properties
                  
                  $
                  10,993,400
                  
                  $
                  6,710,720Loan
                      from Industrial and Commercial Bank of China, due various dates
                      from July
                      2007 to March 2008 monthly interest only payments ranging from
                      6.120% to
                      8.307% per annum, guaranteed by unrelated third party and secured
                      by
                      properties
                  
                  
                  3,945,000
                  
                  
                  1,252,000Loan
                      from Agriculture Bank of China, due various dates from November
                      to
                      December of 2007. Monthly interest only payments raging from
                      7.956% to
                      8.568%per annum, guaranteed by unrelated third party and secured
                      by and
                      properties
                  
                  
                  1,959,350
                  
                  
                  613,480Loan
                      from Communication Bank, due July 2007. Monthly interest only
                      payments
                      7.2% per annum, guaranteed by unrelated third party
                  
                  
                  1,972,500
                  
                  
                  -Total
                  
                  $
                  18,870,250
                  
                  $
                  8,576,200
  Notes
          payable - banks
 
 Notes
          payable represent amounts due to various banks which are normally due within
          one
          year, and these notes can be renewed with the banks. The Company’s notes
          payables consisted of the following:
 June
                      30, 2007
                  
                  June
                      30, 2006Bank
                      of China, various amounts, due dates from September to October
                      2007,
                      restricted cash required 50% of loan amount, guaranteed by
                      unrelated third
                      party
                  
                  $
                  4,997,000
                  
                  $
                  5,759,200Industrial
                      and Commercial Bank of China, various amounts, various due
                      dates from July
                      to August 2007, restricted cash required 50% of loan amount,
                      guaranteed by
                      unrelated third party
                  
                  
                  3,945,000
                  
                  
                  1,252,000Total
                  
                  $
                  8,942,000
                  
                  $
                  7,011,200
 See
                report of independent registered public accounting firm.
 
 F-18
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 Employee
          loans
 
 The
          Company has borrowed monies from certain employees to fund the Company’s
          operations. The loans bear interest at 7.2% and the principal is due upon
          demand. Employee loans amounted to $596,516 and $640,667 as
          of
          June 30, 2007 and 2006, respectively.
 
 Employee
          loan - officer
 
 The
          chief
          executive officer, Mr. Liu, Qingtai, loaned money to the Company’s operations.
          The loans bear interest at 7.2% and the principal is due upon demand. Employee
          loan - officer amounted to $0 and $93,149 as of June 30, 2007 and 2006,
          respectively.
 
 Third
          party loan
 
 The
          Company borrowed money from an unrelated individual for use in operations.
          The
          loan bears 7.2% interest and the principal is due upon demand. Balance
          of the
          loan as of June 30, 2007 and 2006 amounted to $318,274 and $57,319,
          respectively.
 
 Long
          term loans
 
 Long
          term
          loans represent amounts due to various banks and other outside parties
          which are
          normally due on demand after one year. The Company had a total of $0 and
          $1,001,600 of total long term loans, net of current maturities and consisted
          of
          the following:
 June
                      30,2007
                  
                  June
                      30,2006Bank
                      of China, Chang Le Branch, secured by land use right, building,
                      equipment
                      and unrelated third parties interest at 6.138% per annum, due
                      September
                      2006
                  
                  $
                  -
                  
                  $
                  876,400Agricultural
                      Credit Union, interest at 7.84% per annum, due May 2008
                  
                  
                  381,350
                  
                  
                  363,080San
                      Dong Energy Saving Project Inc., interest at 10.0% per annum,
                      due March
                      2009
                  
                  
                  -
                  
                  
                  638,520Total
                  
                  
                  381,350
                  
                  
                  1,878,000Less
                      current maturities
                  
                  
                  (381,350
                  )
                  
                  (876,400
                  )Total
                  
                  $
                  -
                  
                  $
                  1,001,600
 
 See
                report of independent registered public accounting firm.
 
 F-19
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 Current
          maturities for the next five years are follows:
  AmountJune
                      30, 2008
                  
                  $
                  381,350Thereafter
                  
                  $
                  -
  Total
          interest expense (net of capitalized interest) for the years ended June
          30,
          2007, 2006 and 2005 on all debt amounted to $1,270,418, $555,572 and $606,539,
          respectively. Interest capitalized into construction in progress totaled
          $759,372, $189,904 and $59,669 for the years ended June 30, 2007, 2006
          and 2005,
          respectively .
 
 **Note
          7 - Investment payable**
 
 Investment
          payable represents additional capital that the Company is required to contribute
          into its equity investment, Changle Shengshi. The investment payable amounted
          to
          $0 and $888,920 at June 30, 2007 and 2006, respectively.
 
 **Note
          8 - Income taxes**
 
 The
          Company is governed by the Income Tax Law of the People’s Republic of China
          (PRC) concerning Foreign Investment Enterprises and Foreign Enterprises
          and
          various local income tax laws (the Income Tax Laws). Under the Income Tax
          Laws,
          foreign investment enterprises (FIE) generally are subject to an income
          tax at
          an effective rate of 33% (30% state income taxes plus 3% local income taxes)
          on
          income as reported in their statutory financial statements after appropriate
          tax
          adjustments unless the enterprise is located in specially designated regions
          of
          cities for which more favorable effective tax rates apply. Upon approval
          by the
          PRC tax authorities, FIE's scheduled to operate for a period of 10 years
          or more
          and engaged in manufacturing and production may by exempt from income taxes
          for
          two years, commencing with their first profitable year of operations, after
          taking into account any losses brought forward from prior years, and thereafter
          with a 50% exemption for the next three years.
 See
                report of independent registered public accounting firm.
 
 F-20
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 In
          February 2004, the Company became a Sino-foreign joint venture. In August
          2004,
          the Company was granted by the state government for benefit of income tax
          exemption in first 2 years from September 2004 to August 2006 and 50% exemption
          for the third to fifth years from September 2006 to August 2008. In addition,
          the Company is located in a Special Economic Zone and the PRC tax authority
          has
          offered a special income tax rate of 24% for the company. With the approval
          of
          the local government, the Company is subject to income tax at a reduced
          rate of
          12% from September 2006 to August 2008 after the two-year 24% exemption
          for
          income taxes until its exemption and reduction periods expire in August
          2008.
 
 Beginning
          January 1, 2008, the new Enterprise Income Tax (“EIT”) law will replace the
          existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises
          (“FIEs”).
 
 The
          key
          changes are:
 
 a.
                The
                    new standard EIT rate of 25% will replace the 33% rate currently
                    applicable to both DES and FIEs, except for High Tech companies
                    who pays a
                    reduced rate of 15%;
 
 b.
                Companies
                    established before March 16, 2007 will continue to enjoy tax
                    holiday
                    treatment approved by local government for a grace period of
                    the next 5
                    years or until the tax holiday term is completed, whichever is
                    sooner.
 
 The
          Company’s subsidiary, Weifang Shengtai, was established before March 16, 2007
          and therefore is qualified to continue enjoying the reduced tax rate as
          described above. Since the detailed guidelines of the new tax law is not
          publicized yet, the Company can not determined what the new tax rate will
          be
          applicable to the Company after the end of their respective tax holiday
          terms.
 
 During
          the years ended June 30, 2007, 2006 and 2005, there was $878,836, $0 and
          $0,
          respectively, provision for income taxes.
 
 The
          following table reconciles the U.S. statutory rates to the Company’s effective
          tax rate for the years ended June 30:
 2007
                  
                  2006
                  
                  2005U.S.
                      Statutory rates
                  
                  
                  34.0
                  %
                  
                  34.0
                  %
                  
                  34.0
                  %Foreign
                      income not recoginized in USA
                  
                  
                  (34.0
                  )
                  
                  (34.0
                  )
                  
                  (34.0
                  )China
                      income taxes
                  
                  
                  33.0
                  
                  
                  33.0
                  
                  
                  33.0China
                      income tax exemption
                  
                  
                  (21.0
                  )
                  
                  (33.0
                  )
                  
                  (33.0
                  )Total
                      provision for income taxes
                  
                  
                  12.0
                  %
                  
                  -
                  %
                  
                  -
                  %
  The
          estimated tax savings due to the tax exemption for the years ended June
          30,
          2007, 2006 and 2005 amounted to $1,537,963, $1,389,601 and $533,002,
          respectively. The net effect on basic earnings per share if the income
          tax had
          been applied would decrease basic earnings per share for the years ended
          June
          30, 2007, 2006 and 2005 by $0.13, $0.14 and $0.05, respectively. The net
          effect
          on diluted earnings per share if the income tax had been applied would
          decrease
          diluted earnings per share for the years ended June 30, 2007, 2006 and
          2005 by
          $0.13, $0.14 and $0.05, respectively.
 See
                report of independent registered public accounting firm.
 
 F-21
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 Taxes
          payable
 
 Taxes
          payable consisted of the following:
  June
                      30,
                  
                  June
                      30,2007
                  
                  2006VAT
                      payable
                  
                  $
                  1,273,390
                  
                  $
                  608,602Individual
                      income tax withheld
                  
                  
                  1,316
                  
                  
                  454Income
                      tax payable (credit)
                  
                  
                  764,827
                  
                  
                  (20,586
                  )Housing
                      property tax payable
                  
                  
                  7,306
                  
                  
                  6,956Others
                  
                  
                  2,093
                  
                  
                  994Total
                  
                  $
                  2,048,932
                  
                  $
                  596,420
  **Note
          9 - Dividends**
 
 Prior
          June 30, 2006, the board of directors of Weifang
          Shengtai approved and declared total dividends of $2,468,400.
 
 The
          dividends paid or declared by the company to its original shareholders
          were as
          follows:
 June
                      30,
                    2007
                  
                  June
                      30,
                    2006Dividends
                      payable, beginning
                  
                  $
                  389,216
                  
                  $
                  1,000,065Dividends
                      declared
                  
                  
                  -
                  
                  
                  1,000,065Dividends
                      paid
                  
                  
                  (389,216
                  )
                  
                  (1,664,503
                  )Foreign
                      currency translation adjustment
                  
                  
                  -
                  
                  
                  53,589Dividends
                      payable, ending
                  
                  $
                  -
                  
                  $
                  389,216
  **Note
          10 - Commitments and Contingent liabilities**
 
 Guarantees
 
 As
          of
          June 30, 2007, the Company has guaranteed the debts of others in the following
          amounts:
 Company
                  
                  Short
                      Term Bank Loans
                  
                  Notes
                      Payable
                  
                  TotalsChang
                      Le Century Sun Paper Industry Co.
                  
                  $
                  5,417,800
                  
                  $
                  2,551,100
                  
                  $
                  7,968,900Weifang
                      Yongchang Food Co.
                  
                  
                  591,750
                  
                  
                  -
                  
                  
                  591,750Total
                  
                  $
                  6,009,550
                  
                  $
                  2,551,100
                  
                  $
                  8,560,650
 See
                report of independent registered public accounting firm.
 
 F-22
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 **Note
          11 - Shareholders’ equity**
 
 On
          May
          15, 2007, the Company entered into and consummated a share purchase agreement
          (the “Share Purchase Agreement”) with nineteen accredited investors (the
“Purchasers”). Pursuant to the Share Purchase agreement, the Purchasers
          purchased from the Company an aggregate of 8,750,000 shares of common stock
          and
          4,375,000 attached warrants for $2.00 per share (or an aggregate purchase
          price
          of $17,500,000) and for total net proceeds of $15,256,428. The exercise
          price of
          the warrants $2.60 per share and the term of the warrants is five
          years. In
          connection with the offering, the Company paid a placement fee of 12% of
          the
          proceeds in cash.
 
 Warrants
 
 Concurrent
          with the private placement, the Company issued 4,375,000 warrants with
          an
          exercise price at $2.60 per share (“Investor Warrants”) to investors. These
          warrants issued to the new investors have a 5-year term and shall be callable
          by
          the Company if the Company’s shares trade at $8.00 for 20 consecutive trading
          days and underlying shares are registered for resale. The warrants contain
          a
          standard adjustment provisions upon stock dividend, stock split, stock
          combination, recapitalization and a change of control transaction.
 
 The
          Company also issued 218,750 warrants with exercise price at $2.60 (“Placement
          Agent Warrants”) to Brill Securities, inc., the exclusive placement agent. These
          warrants have the same terms as the Investor Warrants. These warrants were
          issued on August 8, 2007.
 
 In
          connection with the offering, the Company issued Chinamerica Fund, LP 75,000
          warrants and Jeff Jenson 25,000 warrants (collectively as “Lead Investor
          Warrants”) to compensate the former as lead investor and the latter in assisting
          in providing the shell of West Coast Car Company. These warrants have the
          same
          term as the Investor Warrant except with an exercise price of $0.01 per
          share.
 
 All
          Investor Warrants, Placement Agent warrants, and Lead Investor Warrants
          meet the
          conditions for equity classification pursuant to FAS 133 “Accounting for
          Derivatives” and EITF 00-19, “Accounting for Derivative Financial Instruments
          Indexed to, and Potentially Settled in, a Company's Own Stock”. Therefore, these
          warrants were classified as equity and accounted as common stock issuance
          cost.
 Weighted
                  
                  AverageWarrants
                  
                  Warrants
                  
                  Average
                      Exercise
                  
                  RemainingOutsanding
                  
                  Exercisable
                  
                  Price
                  
                  Contractual
                      LifeOutstanding,
                      June 30, 2006
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Granted
                  
                  
                  4,475,000
                  
                  
                  4,475,000
                  
                  $
                  2.54
                  
                  
                  4.88Forfeited
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Outstanding,
                      June 30, 2007
                  
                  
                  4,475,000
                  
                  
                  4,475,000
                  
                  $
                  2.54
                  
                  
                  4.88
 See
                report of independent registered public accounting firm.
 
 F-23
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 **Note
          12 - Statutory reserves**
 
 The
          laws
          and regulations of the People’s Republic of China required that before a
          Sino-foreign cooperative joint venture enterprise distributes profits to
          its
          partners, 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, after the statutory
          reserve. The statutory reserves include the surplus reserve fund, the common
          welfare fund, and the enterprise fund. These statutory reserves represent
          restricted retained earnings.
 
 Surplus
          reserve fund
 
 The
          Company is required to transfer 10% of its net income, as determined in
          accordance with the PRC accounting rules and regulations, to a statutory
          surplus
          reserve fund until such reserve balance reaches 50% of the Company’s registered
          capital.
 
 The
          transfer to this reserve must be made before distribution of any dividends
          to
          shareholders. For the years ended June 30, 2007, 2006 and 2005, the Company
          transferred $734,396, $616,256 and $242,273, respectively, to this reserve.
          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 25% of the registered
          capital.
  Common
          welfare fund
 
 The
          Company is required to transfer 5% to 10% of its net income, as determined
          in
          accordance with the PRC accounting rules and regulations, to the statutory
          common welfare fund. This fund can only be utilized on capital items for
          the
          collective benefit of the Company’s employees, such as construction of
          dormitories, cafeteria facilities, and other staff welfare facilities.
          This fund
          is non-distributable other than upon liquidation. The transfer to this
          fund must
          be made before distribution of any dividend to shareholders. For the years
          ended
          June 30, 2007, 2006 and 2005, the Company transferred $0 and $205,419 and
          $80,758, respectively, to the reserve fund. Effective
          from January 1, 2006, the common welfare fund reserve is no longer required
          by
          the PRC accounting rules and regulations. The balance in this fund at June
          30,
          2006 was transferred to the surplus reserve fund.
 
 Enterprise
          fund
 
 The
          enterprise fund may be used to acquire fixed assets or to increase the
          working
          capital to expend on production and operation of the business. No minimum
          contribution is required and the Company has not made any contribution
          to this
          fund.
 See
                report of independent registered public accounting firm.
 
 F-24
 
 SHENGTAI
              PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2007
 **Note
          13 - Retirement benefit plans**
 
 Regulations
          in the People’s Republic of China require the Company to contribute to a defined
          contribution retirement plan for the benefit of all permanent employees.
          All
          permanent employees are entitled to an annual pension equal to their basic
          salaries at retirement. The PRC government is responsible for the benefit
          liability to these retired employees. The Company is required to make
          contributions to the state retirement plan at 15% to 20% of the monthly
          basic
          salaries of the current employees. For the years ended June 30, 2007, 2006
          and
          2005, the Company made pension contributions in the amount of $207,308,
          $170,533
          and $152,096, respectively.
 
 **Note
          14 - Current vulnerability due to certain concentrations**
 
 The
          Company's operations are carried out 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, and by the general
          state
          of the PRC's economy.
 
 The
          Company's operations in the PRC are subject to specific considerations
          and
          significant risks not typically associated with companies in the North
          America
          and Western Europe. These include risks associated with, among others,
          the
          political, economic and legal environments and foreign currency exchange.
          The
          Company's results may be adversely affected by changes in governmental
          policies
          with respect to laws and regulations, anti-inflationary measures, currency
          conversion and remittance abroad, and rates and methods of taxation, among
          other
          things.
 
 **Note
          15 - Revenue by geographic area**
 
 The
          following table summarized financial information for the periods ended
          June 30,
          2007, 2006 and 2005 concerning the Company’s revenues based on geographic
          area:
 Revenue
                  
                  2007
                  
                  2006
                  
                  2005China
                  
                  $
                  46,607,204
                  
                  $
                  31,282,456
                  
                  $
                  22,393,195International
                  
                  
                  5,099,011
                  
                  
                  4,746,723
                  
                  
                  2,467,204Total
                  
                  $
                  51,706,215
                  
                  $
                  36,029,179
                  
                  $
                  24,860,399
 **Note
          16 - Subsequent event**
 
 In
          July
          2007, the Company began construction of employee dormitory. Construction
          is
          expected to be completed in June 2008 .Total amount expected to be spent
          on the
          construction is approximately $800,000 to $900,000.
 See
                report of independent registered public accounting firm.
 
 F-25