**UNITED********STATES**
 **SEC****U****R****I****TIES
        A****N****D
        EXCHA****N****GE********COMM****I****S****S****ION**
 **Washing** **t** **o** **n,** **** **D.C.** **** **20549**
 
 **FORM
        1****0****-K**
  þ
              **ANNUAL****REPORT****PURSUANT****TO****SECTION****13****OR****15****(****d)****OF****THE****SECURITIES****EXCHANGE****ACT****OF****1934**
 
 For the fiscal year ended
        June30,2008
  **OR**
  o
              **TRANSITION****REPORT****PURSUANT****TO
                  SECTION****13****OR****15(d)****OF****THE****S****E****CURITI****E****S
                  EXCHA****N****GE****ACT****OF****1934**
 
 For  the  transition  period  from    to
 
 Commission
        file number : 00 0 - 51312
  **SHENGTAI
        PH****A****RMAC****E****UTI****C****AL,****I****NC.**
 **(** **formerly** **** **known** **** **as** **** **West** **** **Coast** **** **Car** **** **Company)**
 ( Exact  name  of  registrant
        as  spe c ifi e d  i n  i t sch a rte r )
 
 Delaware
              
              54-2155579State
                  or other jurisdiction of
                organization
              
              (I.R.S.
                  Employer incorporation or
                identification
                  No.)
  
 Changda
                  Road East, Development District, Changle County, Shandong,
                  P.R.C.
              
              262400(Address
                  of principal executive offices)
              
              (Zip
                  Code)
 
 Registran t ’s  telephone  number,  including ; area  code  011-86-536-6295802
 
 Securities  registered  p u r s uant
        to  Section
        12(b)  of
        the
        Act:
 
 Title
                  of each class
              
              Name
                  of each exchange on which registered
 Securities  r e gistered  pursuant  to  section  12(g)  of  the  Act:
  Common  Stock
 par
        value
        $0.001
 ( Ti t le
        of  c l a s s)
  I ndicate  by  check  mark  if  the  registr a nt  is  a  w
        ell-known  seasoned  issuer,  as  d e fined  in  Rule  405  of  the
        Securities Act.  ̈  Ye s  þ No
 I ndicate  by  check  mark  if  the  registrant  is  not  required  to  file  repo r ts  pursuant  to  Section  13  or  Section  15(d)  of  the Act.  ̈  Ye s  þ No
  **Note** - Checking the box above will not r elieve any registrant r e quired to file reports pursuant to Section 13 o r 15(d) of the Excha n ge
        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. þ  Ye s   ̈ No
 
 I ndicate by  check mark if disclosure of delinquent filers p u r s uant 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 r e gistrant’s knowledg e , in definitive proxy or information statements incorporated by re f erence in Part III of this Form 1 0 -K or any amendment to this Form 10-K. þ  Ye s   ̈ No
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, a non-accelerated filer or a smaller reporting company.
        See
        definitions of “large accelerated filer,” “accelerated filer,” and smaller
        reporting companies in Rule 12b-2 of the Exchange Act.
 
 Large
                  accelerated filer ̈
              Accelerated
                  filer ̈Non-accelerated
                  filer ̈
                Do
                  not check if a smaller reporting company
              Smaller
                  reporting company þ
  I ndicate by  check  mark  whether  the  registrant  is  a  shell  company  (as  defined&

amp;
        lt; /font>inRule12b-2oftheAct). ̈YesþNo
  The aggregate market value of the voting and no n -voting common equity held by non-affiliates* (8,041,780 shares of common s t ock) computed by r e ference to the price of $3.16
        per share of common stock at w h ich the common equity was last sold on December
        31, 2007, the last day of our most recently completed second fiscal quarter,
        as reported on
        www.yahoo.com was: $25,412,025.
  *
        Excludes  common  stock  held  by  executi v e  officers,  directors  and  s t ockholders
        whose ind i vidual  ownership  exceeds 10 %  of  common  stock
        outstanding  on  June  30, 2008 .
  There were  19,094,805  shares  of  Common
        Stock,  par  value  $0.001,  issued  and  outstanding  as  of  September  24,  2008.
  DOC U MENTS
        INCO R P OR A TED  BY  REFERENCE
  List here u nder the following documents if inc o rporated by reference and the Part of the F o rm 1 0 -K (e.g., Part
        I, Part II, etc.) in t o whi c h
        the
        do c ument
        is incorporated: (1) Any annual report to
        security holders; (2) Any proxy or information statement; and (3) Any prospectus fil e d pursuant to Rule 424 ( b) or (c) un d er the Securities Act of 1933. The listed documents shou l d be clearly described for identification
        purposes (e.g . , annual report to security
        holders for fiscal year ended December 24, 1980).
 
 None.
  
 
 
  **PA** **R** **T** **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 web
          site 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. 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., and its subsidiaries, Weifang Shengtai Pharmaceutical
          Co.,
          Ltd., a wholly foreign owned entity in the PRC (“Weifang Shengtai”) and Shengtai
          Holding Inc., a New Jersey Corporation. All references to “China” or the “PRC”
refer to the People’s Republic of China.
 
 **Overview**
 
 We
          are
          through our wholly-owned subsidiary, Weifang Shengtai, a PRC-based company,
          a
          leading 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. Most of our sales are made domestically in the PRC.
  -
              2 -
  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).
 
 Approximately
            38.0% of our revenues for the fiscal year ended June 30, 2008, were attributable
            to sales of glucose products.
 
 Approximately
            31.7% of our sales revenues for the fiscal year ended June 30, 2008,
            were
            attributable to sales of starch products.
 
 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, starch, avermectins, and dextrin, which are
            used for
            food, beverage and industrial production **.**
 
 We
            believe that the global market for pharmaceutical grade glucose (dextrose)
            is
            growing and is likely to continue to grow.
 
 In
            the
            PRC alone, from 2002 to 2004, the annual demand for glucose has increased
            from
            approximately 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 materials for the food and beverage processing
            industries.
  ***Pharmaceutical
            and medicinal grade products:***
 These
              products accounted for 32.6% of our sales for the fiscal year ended
              June 30,
              2008. Set forth below is a list of our major pharmaceutical and medical
              grade
              products:
 
 ·
                    Dextrose
                        Monohydrate Transfusion (25kg/bag)
 
 ·
                    Dextrose
                        Anhydrous (25kg/bag)
 
 ·
                    Dextrin
                        (25kg/bag)
 
 ·
                    Pharmaceutical
                        Grade Cornstarch (25kg/bag)
 
 ***Raw
              Materials for the Food and Beverage and Processing Industries:***
 
 We
              produce the following raw materials for the food and beverage and processing
              industries:
 
 ·
                    Industrial
                        Glucose (25kg/bag,40kg/bag,500kg/bag)
 
 ·
                    Dextrose
                        Monohydrate Oral (25kg/bag)
 
 ·
                    Food
                        and Beverage Grade Cornstarch (25kg/bag, 500kg/bag)
 
 ·
                    Fibers
                        (25kg/bag,30kg/bag)
 
 ·
                    Corn
                        Embryo(30kg/bag)
 
 ·
                    Protein
                        Powders(50kg/bag)
 
 ·
                    Phytin
                        (Block)
  ***Other
            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. However, we discontinued this product line
            in May 2008
            because we did not achieve economies of scale for this product and we
            wanted to
            focus our limited resources on our main product lines.
 
 **Sales
            of Products by Type and Geographic Locations**
 
 Approximately
            89.3% of our revenues for the fiscal year ended June 30, 2008 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 from such sales.
  -
                3 -
 Sales
                    by Product
                  Dextrose
                      Monohydrate (DMH)
                
                FY
                    06/30/2006(Revenue)
                    $
                
                %
                    of Total
                
                FY
                    06/30/2007
                  (Revenue)
                    $
                
                %
                    of Total
                
                FY
                    06/30/2008
                  (Revenue)
                    $
                
                %
                    of TotalDomestic
                
                
                9,474,787.00
                
                
                26.70
                
                
                14,110,347.00
                
                
                27.00
                
                
                15,895,933.82
                
                
                17.49International
                
                
                1,363,569.00
                
                
                3.90
                
                
                1,516,334.00
                
                
                2.90
                
                
                1,399,039.25
                
                
                1.54Dextrose
                    AnhydrousDomestic
                
                
                762,238.00
                
                
                2.20
                
                
                1,409,117.00
                
                
                2.70
                
                
                3,801,014.49
                
                
                4.18International
                
                
                534,253.00
                
                
                1.40
                
                
                1,009,844.00
                
                
                1.90
                
                
                3,376,338.41
                
                
                3.72Dextrose
                    Monohydrate OralDomestic
                
                
                17,123,772.00
                
                
                47.50
                
                
                11,398,510.00
                
                
                22.00
                
                
                2,974,842.00
                
                
                3.30International
                
                
                2,431,263.00
                
                
                6.70
                
                
                2,553,863.00
                
                
                4.90
                
                
                4,341,758.00
                
                
                4.80Pharmaceutical
                    Grade CornstarchDomestic
                
                
                768,148.00
                
                
                2.10
                
                
                1,845,796.00
                
                
                3.60
                
                
                2,579,995.00
                
                
                2.80International
                
                
                1,685.00
                
                
                0.01
                
                
                8,436.00
                
                
                0.02
                
                
                236,814.00
                
                
                0.30




-
          4 -


**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, 2008, all the provinces except
        Tibet
        in the mainland PRC have been covered by our domestic sales network. We have
        established representative offices in 4 cities (Chengdu, Hangzhou, Nanchang,
        and
        Guangzhou) 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. We export our products to customers to over
        seventy
        countries, and we plan to increase our global sales.
 
 In
        July,
        2008, we restructured our sales department to better serve our customers
        and
        better accommodate expansion. We hired additional sales staff and subdivided
        the
        sales department into five separate sales departments, four of which represent
        different product lines: monohydrate glucose, anhydrous glucose, dextrose
        anhydrate oral and corn starch. Our fifth sales department focuses on sales
        outside of the PRC.
 
 **Delivery
        Methods**
 
 We
        utilize the following delivery methods: ground transportation, shipment by
        sea
        and by rail. Products sold internationally are shipped by sea. Approximately
        89.3% of our products are delivered by ground transportation. We generally
        bear
        the costs and risks of transportation unless a customer specifies another
        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 from 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***
 **Cornstarch
        Manufacturing Facility**
 
 Last
        year
        we completed the construction of a new cornstarch production complex with
        an
        annual production capacity of 240,000 tons, which can be expanded to 300,000
        tons per year, if necessary. The complex is close to our existing glucose
        production plant. It started producing cornstarch in January, 2007.
 
 During
        fiscal year 2008, approximately 37.13% of the new cornstarch production plant’s
        output was used as raw materials for glucose production, and the other 62.87%
        was sold to customers in the food and beverage, pharmaceutical and industrial
        industries.
 
 Our
        cornstarch production complex consists of the following areas:
 
 ·
              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
 -
              5 -
  ***Enzyme
          Preparations***
 
 We
          purchased a total of 278 tons of enzyme preparations from our sole supplier,
          Novozymes (China) Biotechnology Co. Ltd., during the previous three fiscal
          years. 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 3,327
          tons
          of active carbon from it over the past three fiscal 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
          Glucose Manufacturing Facility**
 
 In
          July
          2008, we completed construction of a new glucose manufacturing facility
          to boost
          our production capacity and at the end of September, 2008, the facility
          passed
          its GMP inspection. The facility has a production capacity of 120,000 tons,
          and
          with our pre-existing facility, we can produce a total of 180,000 tons
          (we can
          increase capacity in the old facility by 30,000 tons, if necessary, for
          a total
          of 210,000 tons). The final cost was approximately $32 million, out of
          which the
          building accounted for approximately $10 million and machinery and equipment
          approximately $22 million.. We are commencing start up operations in the
          new
          facility in stages with small amounts first and building up to larger
          quantities.
 
 **Quality
          Control**
 
 Our
          PRC
          production facilities are fully certified by applicable PRC regulations
          for GMP,
          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.
 
 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 the 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%
 
 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.
 -
            6 -


The
        diverse range of transfusion media can 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.
 
 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. IMS Health estimates the global
        pharmaceutical market at $712 in 2007. It estimates global market growth
        in 2007
        at 6.4% with 13.3% in Asia, including 25.7% in China. IMS Media Advisory
        April
        16, 2008. In its 2008 forecast, IMS identifies the following key market
        dynamics: The seven markets of China, Brazil, Mexico, South Korea, India,
        Turkey
        and Russia are expected to grow 12 - 13 percent in 2008. “In these markets,
        there is significantly greater access both to generic and innovative new
        medicines as primary care improves and becomes more available in rural areas,
        and as private health insurance becomes more commonly held.” IMS Health's 2008
        Global Pharmaceutical Market and Therapy Forecast November 1, 2007.
 
 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, 2007 total global pharmaceutical sales grew 6.4%
        at
        constant exchange rates, to $712 billion. In the top ten major markets, audited
        growth was 5.1% in 2007. 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 web site
        (http://www.ynetc.gov.cn/Art icle_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 Web site (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 Web site, 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
        web
        site (www.yd210.com)).
  -
            7 -
  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 healthcare.
 
 ***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 with 50%
        of
        its total production being exported. 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 web site,
        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 Materials 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
        healthcare 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.
 
 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 web site, 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
        materials 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.
 
 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 the domestic market, as well
        as
        the public awareness of quality healthcare 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:
 
 ·
              Healthcare
                  Institutions
 
 ·
              Medical
                  supply companies
 
 ·
              Physician
                  offices
 
 ·
              Pharmaceutical
                  companies
 
 ·
              Medical
                  supply exporters
  -
            8 -
   ·
              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 healthcare
        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, we are able to 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
 FY2006
                
                FY2007
                
                FY2008$
                370,467
                
                $
                548,172
                
                $
                3,103,805
 
 Russia
 
 Import
          approval permit issued in 2004
 Products
          exported: Dextrose Monohydrate Oral, Dextrose Monohydrate
          transfusion
 
 FY2006
                
                FY2007
                
                FY2008$
                258,115
                
                $
                1,006,133
                
                $
                1,248,805
  Australia
 
 Import
          approval permit issued in 2003
 Product
          exported: Dextrose Monohydrate Oral
 
 FY2006
                
                FY2007
                
                FY2008$
                278,202
                
                $
                813,746
                
                $
                433,312.6
  *Singapore* ** *(plus* ** *re-export* ** *to* ** *Thailand)*
  Import
              approval permit issued in 2003
 Products  exported:
              Dextrose  Monohydrate  Injection
  FY2006
                  
                  FY2007
                  
                  FY2008$
                  28,285
                  
                  $
                  29,345
                  
                  $
                  60,573  **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)
  -
            9 -
  •  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)
  •  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. Internationally, although our foreign competitors
        may be better-capitalized, we have significant   advantages as
        follows:
 
 **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 292,275 square meters of land, of which approximately
        only
        81.29% is being utilized, leaving room for expansion. We have only started
        to
        export to markets such as South Korea, Russia, Australia and Singapore and
        seventy 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, the existing glucose manufacturing facility and
        the 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 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 focus more on 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 our goals
        for growth:
 
 •  Vertical
        integration of our manufacturing capabilities by building and operating a
        cornstarch plant.
 
 We
        believe the cornstarch plant can lower production costs and improve profit
        margin because higher-quality and lower cost raw materials could be produced
        in-house and there is 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.
 
 -
            10 -
  •  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 240,000
        tons (it can be easily expanded to 300,000 tons) 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 commenced construction of our
        new
        glucose manufacturing facility, which was completed in July
        2008.
  •  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 our business, (ii)
        reorganize sales department, (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 the 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
  •  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 for fiscal years ended
        June
        30, 2008, 2007, and 2006.
 
 **Intellectual
        Property**
 
 We
        formally acquired the registered "Heng De Bao" trademark from Changle Medical
        Starch Factory on or about July 28, 2000. The trademark 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
        is
        valid through 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 plants, and flowers;
        and malt which is animal food.
 
 **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.
 
 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, February
        14,
        2013, and April 18, 2009, respectively.
  -
            11 -
  Additionally,
        we have obtained Drug Registration Certificates for glucose and glucose pro
        oral
        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.
 
 All
        of
        our production lines including the new glucose production lines have passed
        inspection by the Environmental Protection Bureau of the PRC and was issued
        a
        Certificate of Qualification.
 
 **Employees**
 
 As
        of
        June 30, 2008, we employed approximately 825 full-time employees. Of these,
        7
        are group administrators, 20 are managers, approximately 45 are in sales,
        approximately 50 perform administrative functions, and approximately 703
        are in
        production, storage and distribution.
 
 **Item
        1A. Risk Factors.**
 
 Investment
        in our common stock involves risks. You should carefully consider the risks
        we
        describe below before deciding to invest. The market price of our common
        stock
        could decline due to any of these risks, in which case you could lose all
        or
        part of your investment. In assessing these risks, you should also refer
        to the
        other information included in this Annual Report, including our consolidated
        financial statements and the accompanying notes. You should pay particular
        attention to the fact that we are a holding company with substantial operations
        in China and are subject to legal and regulatory environments that in many
        respects differ from that of the United States. Our business, financial
        condition or results of operations could be affected materially and adversely
        by
        any of the risks discussed below and any others not foreseen. This discussion
        contains forward-looking statements.
 
 **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, we are subject
        to the
        environmental rules and regulations such as the Integrated Wastewater Discharge
        Standard (GB8978-1996).
 
 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. 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.
 
 -
            12 -
  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 continued to reform 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
        no 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 austere
        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.
 
 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 our
        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 rules mandate accounting practices, which are not consistent
        with
        U.S. generally accepted accounting principles. PRC’s accounting rules require
        that an annual "statutory audit" be performed in accordance with PRC accounting
        standards and that the books of accounts of Foreign Invested Enterprises
        are
        maintained in accordance with Chinese accounting rules. 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 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, Ms. Yiru Shi, 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.
 
 -
            13 -
  ***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 revenues
        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 rates 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 rates 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—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.
 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 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
        PRC regulations relating to the establishment of offshore special purpose
        companies by PRC domestic residents and registration requirements for employee
        stock ownership plans or share option plans may subject our PRC resident
        beneficial owners or the plan participants to personal liability, limit our
        ability to inject capital into our PRC subsidiaries, limit our subsidiaries’
ability to increase their registered capital or distribute profits to us,
        or may
        otherwise adversely affect us.
  The
        China
        State Administration of Foreign Exchange ("SAFE") issued a public notice
        in
        October 2005 requiring PRC domestic residents to register with the local
        SAFE
        branch before establishing or controlling any company outside of China for
        the
        purpose of capital financing with assets or equities of PRC companies, referred
        to in the notice as an "offshore special purpose company." PRC domestic
        residents who are shareholders of offshore special purpose companies and
        have
        completed round trip investments but did not make foreign exchange registrations
        for overseas investments before November 1, 2005 were retroactively required
        to
        register with the local SAFE branch before March 31, 2006. PRC resident
        shareholders are also required to amend their registrations with the local
        SAFE
        in certain circumstances. After consultation with China counsel, we do not
        believe that any of our PRC domestic resident shareholders are subject to
        the
        SAFE registration requirement, however, we cannot provide any assurances
        that
        all of our shareholders who are PRC residents will not be required to make
        or
        obtain any applicable registrations or approvals required by these SAFE
        regulations in the future. The failure or inability of our PRC resident
        shareholders to comply with the registration procedures set forth therein
        may
        subject us to fines and legal sanctions, restrict our cross-border investment
        activities, or limit our PRC subsidiaries’ ability to distribute dividends or
        obtain foreign-exchange-dominated loans to our company.
 
 As
        it is
        uncertain how the SAFE regulations will be interpreted or implemented, we
        cannot
        predict how these regulations will affect our business operations or future
        strategy. For example, we may be subject to more stringent review and approval
        process with respect to our foreign exchange activities, such as remittance
        of
        dividends and foreign-currency-denominated borrowings, which may adversely
        affect our results of operations and financial condition. In addition, if
        we
        decide to acquire a PRC domestic company, we cannot assure you that we or
        the
        owners of such company, as the case may be, will be able to obtain the necessary
        approvals or complete the necessary filings and registrations required by
        the
        SAFE regulations. This may restrict our ability to implement our acquisition
        strategy and could adversely affect our business and prospects.
  -
            14 -
    In
        December 2006, the People’s Bank of China promulgated the Implementation Rules
        of the Administrative Measures for Individual Foreign Exchange, or the
        Individual Foreign Exchange Rules, setting forth the respective requirements
        for
        foreign exchange transactions by PRC individuals under either the current
        account or the capital account. In January 2007, SAFE issued implementing
        rules
        for the Individual Foreign Exchange Rules, which, among other things, specified
        approval requirements for certain capital account transactions such as a
        PRC
        citizen’s participation in the employee stock ownership plans or stock option
        plans of an overseas publicly-listed company. On March 28, 2007, SAFE
        promulgated the Application Procedure of Foreign Exchange Administration
        for
        Domestic Individuals Participating in Employee Stock Holding Plan or Stock
        Option Plan of Overseas-Listed Company, or the Stock Option Rule. Under the
        Stock Option Rule, PRC citizens who are granted stock options by an overseas
        publicly-listed company are required, through a PRC agent or PRC subsidiary
        of
        such overseas publicly-listed company, to register with SAFE and complete
        certain other procedures. We and our PRC employees who may be granted stock
        options are subject to the Stock Option Rule. If we or our PRC optionees
        fail to
        comply with these regulations, we or our PRC optionees may be subject to
        fines
        and legal sanctions.
 
 ***The
        new provisions of the PRC Employment Contract Law may substantially increase
        our
        labor-related costs in the future.***
 
 The
        PRC
        Employment Contract Law, which became effective as of January 1, 2008, contains
        many more provisions favorable to employees than existing labor regulations
        in
        effect in China. This may substantially increase our labor-related costs
        in our
        future operations. According to the new law, an employee is entitled to
        terminate his or her employment relationship with his or her employer for
        certain causes, such as delay in payment of wages or social insurance
        contribution or dissatisfactory labor protection, and under such circumstances
        the employer is liable to pay compensation to the employee. The amount of
        such
        compensation payment shall be one month's salary for each year that the employee
        has served the employer, subject to a cap of twelve months' salary. An employer
        shall also be liable to compensate an employee when the employer decides
        not to
        renew an existing employment contract that is about to expire, unless the
        employee refuses to renew the employment contract even though the employer
        offers equal or more favorable terms than those in the existing employment
        contract. In addition, an employer is obligated to conclude an open-ended
        employment contract with an employee after two consecutive terms of fixed-term
        employment, which means the employer will be liable to pay damages to an
        employee if it terminates this employee without cause, until the employee
        reaches an age at which he or she is eligible for pension payment. We may
        have
        greater difficulty terminating underperforming employees and may incur higher
        levels of labor costs in order to comply with the provisions of the new law,
        which may have a material adverse effect on our business, financial condition
        and operating results.
 
 **Risks
        related to our business**
 
 ***We
        cannot give any assurance 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.
 
 ***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, 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.
 
 ***We
        face stiff 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 financial resources than we do. This additional experience
        and financial backing 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 assure you that we can
        successfully remain competitive. If our competitors develop a more efficient
        product or undertake more aggressive and costly marketing campaigns than
        us,
        this could have a material adverse effect on our business, results of operations
        or financial condition.
 
 -
            15 -
  ***A
        slowdown in the PRC economy may adversely affect our
        operations.***
 
 As
        all of
        our operations are conducted in the PRC and most 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.
 
 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, 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
        have identified significant deficiencies in our internal
        controls.***
 
 As
        set
        forth in Item 9A, below, we have identified significant deficiencies in our
        internal controls. While we are taking steps to address these significant
        deficiencies, there can be no assurance that such steps will be adequate
        to
        entirely cure the deficiencies.
  ***Inadequate
        funding for our capital expenditures may affect our growth and
        profitability***
  Our
          sales
          revenues have increased from $19,999,826 for the year ended June 30, 2004,
          to $
          90,871,223 for the year ended June 30, 2008. 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 and regulations.
 
 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.
 
 ***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 materials 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 supplies 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.
  -
            16 -
 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 reasons beyond our control.
 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, in which the plant is now operational. This
          will
          not only lower production costs and improve profit margins, but it will
          also
          allow Weifang Shengtai to produce higher quality, lower-cost cornstarch.
          We
          cannot guarantee these measures will be effective in eliminating all risks
          attendant to the supply of raw materials. In the event
          that our cost of materials increase, we may have to raise prices of our
          products, making us less competitive in price.
  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
        materials costs to our customers.
 
 ***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.
 
 ***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 policy 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
        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, such as the
          United
          States, where product liability claims are more prevalent.
 
 Except
          for automobile insurance, and Directors & Officers Liability and Company
          Reimbursement 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 38.64% 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."
 
 -
            17 -
  ***There
        is currently a 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 American Stock Exchange. 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
        successfully 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.
 
 **Item
        1B. Unresolved Staff Comments.**
 
 Not
        applicable.
 
 **Item
        2. Properties.**
 
 Our
        facility in the PRC is located at the 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 June 2007 Weifang Shengtai purchased various land
        use
        rights in succession for a total price of approximately $2,243,000. Weifang
        Shengtai obtained another land use right in July 2007 for a price of
        approximately $314,000. Weifang Shengtai obtained a new land use right in
        March
        2008 for a price of $346,410. In May 2008, the Company paid approximately
        $734,000 to a local government which enabled the land use right to be classified
        from industrial use to commercial use. As a result Weifang Shengtai has the
        right to use various parcels of land that range from 20 to 50 years in term,
        all
        of which are currently being used by Weifang Shengtai for its business.
 
 Weifang
        Shengtai occupies an area of approximately 292,275 square meters (72 acres)
        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
                
                14,696
                
                (Reserved
                    for future growth)
                
                January
                    14, 2030Changle
                    Economic and Technology Development Zone
                
                73,313.38
                
                Old
                    glucose production facility
                
                April
                    28, 2052Changle
                    Economic and Technology Development Zone
                
                40,000
                
                (Reserved
                    for future growth)
                
                March
                    10, 2058Changle
                    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
  -
            18 -
 Item3.LegalProceedings.
 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.
  Item4.SubmissionofMatterstoaVoteofSecurityHolders.
  None.
 
 PARTII
 
 Item
          5.Market
          for
          Registrant’sCommon
          Equity,RelatedStockholderMatters
          andIssuerPurchases
          of
          Equity
          Securities.
 
 *Market****I**n**format**i**on*
  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
            24, 2008,
            the last reported bid price of our common stock was $2.50 per share and
            the last
            reported ask price was $2.70 per share.
  CALENDAR
                    QUARTER ENDED
                
                HIGH
                    BID(S)
                
                LOW
                    BID(S)September
                    30, 2007
                
                $
                6
                
                $
                1.01December
                    31, 2007
                
                $
                5.51
                
                $
                2.45March
                    31, 2008
                
                $
                3.45
                
                $
                2.61June
                    30, 2008
                
                $
                3.5
                
                $
                2.75
  ***Holders***
  As
            of
            September 24, 2008, there were 19,094,805 shares of our common stock
            issued and
            outstanding and there were 46 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.
 
 ***Equity
            Compensation Plan Information and Warrants and Options***
 
 As
            of
            September 24, 2008 we had 4,473,945 outstanding warrants to purchase
            4,473,945
            shares of common stock. 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.
 
 On
            January 4, 2008, the Company adopted “Shengtai Pharmaceutical, Inc. 2007 Stock
            Incentive Plan” (the “Stock Incentive Plan”).
 
 On
            May
            14, 2008, the Company granted 500,000 stock options and 160,000 non-qualified
            stock options pursuant to the Stock Incentive Plan. All options have
            an exercise
            price of $3.34, which is the closing price on the date of grant, and
            expire five
            years after the date of grant. All options vest over a period of three
            years
            from the date of grant.
  **Plan
                    category**
                
                **Number of securities to be issued**
                  **upon exercise of outstanding**
                  **options, warrants and rights**
                
                **Weighted-average exercise price**
                  **of outstanding options, warrants**
                  **and rights**
                
                **Number of securities remaining available for**
                  **future issuance under equity compensation**
                  **plans (excluding securities reflected in column**
                  **(a))**(a)
                
                (b)
                
                (c)Equity
                    compensation plans approved by security holders
                
                
                0
                
                
                0
                
                
                0Equity
                    compensation plans not approved by security holders
                
                
                660,000
                
                $
                3.34
                
                
                1,340,000Total
                
                
                660,000
                
                $
                3.34
                
                
                1,340,000
  -
              19 -
 **Item
          6. S** **e** **l** **e** **c** **ted
          Fina** **n** **c** **ial
          Data.**
 The
            following selected financial data for the fiscal years ended 2008,2007,
            2006,
            2005 and2004 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.
 **Consolidated
                        Statements of
                        Operations******
                    
                    **2008**
                    
                    **2007**
                    
                    **2006**
                    
                    **2005**
                    
                    **2004**(audited)
                    
                    (audited)
                    
                    (audited)
                    
                    (audited)
                    
                    (audited)Sales
                        revenue
                    
                    $
                    90,871,223
                    
                    $
                    51,706,215
                    
                    $
                    36,029,179
                    
                    $
                    24,860,399
                    
                    $
                    19,999,826Cost
                        of good sold
                    
                    
                    70,613,757
                    
                    
                    39,527,662
                    
                    
                    27,568,092
                    
                    
                    19,557,743
                    
                    
                    16,487,240Gross
                        profit
                    
                    
                    20,257,466
                    
                    
                    12,178,553
                    
                    
                    8,461,087
                    
                    
                    5,302,656
                    
                    
                    3,512,586Selling,
                        general and administrative expenses
                    
                    
                    7,390,623
                    
                    
                    4,674,679
                    
                    
                    3,831,778
                    
                    
                    3,242,330
                    
                    
                    2,474,813Operating
                        Income
                    
                    
                    12,866,843
                    
                    
                    7,503,874
                    
                    
                    4,629,309
                    
                    
                    2,060,326
                    
                    
                    1,037,773Other
                        net income
                    
                    
                    (1,810,530
                    )
                    
                    524,088
                    
                    
                    (418,398
                    )
                    
                    (445,169
                    )
                    
                    (550,196
                    )Income
                        before Income taxes
                    
                    
                    11,056,313
                    
                    
                    8,027,962
                    
                    
                    4,210,911
                    
                    
                    1,615,157
                    
                    
                    487,577Provision
                        for Income Taxes
                    
                    
                    645,988
                    
                    
                    878,836
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —Net
                        income
                    
                    $
                    10,410,325
                    
                    $
                    7,149,126
                    
                    $
                    4,210,911
                    
                    $
                    1,615,157
                    
                    $
                    487,577Foreign
                        Currency Translation Adjustment
                    
                    
                    3,890,123
                    
                    
                    641,596
                    
                    
                    185,402
                    
                    
                    —
                    
                    
                    —Comprehensive
                        Income
                    
                    $
                    14,300,448
                    
                    $
                    7,790,722
                    
                    $
                    4,396,313
                    
                    $
                    11,615,157
                    
                    $
                    487,577Earning
                        per share - basic
                    
                    $
                    0.55
                    
                    $
                    0.64
                    
                    $
                    0.42
                    
                    $
                    0.16
                    
                    $
                    0.05Earning
                        per share - diluted
                    
                    $
                    0.52
                    
                    $
                    0.62
                    
                    $
                    0.42
                    
                    $
                    0.16
                    
                    $
                    0.05Basic
                        weighted average common shares outstanding
                    
                    
                    18,993,789
                    
                    
                    11,251,712
                    
                    
                    10,125,000
                    
                    
                    10,125,000
                    
                    
                    10,125,000Diluted
                        weighted average common shares outstanding
                    
                    
                    19,874,486
                    
                    
                    11,477,545
                    
                    
                    10,125,000
                    
                    
                    10,125,000
                    
                    
                    10,125,000
  **Year
                    Ended June 30,****Consolidated
                    Balance Sheets**
                
                **2008**
                
                **2007**
                
                **2006**
                
                **2005**
                
                **2004**(audited)
                
                (audited)
                
                (audited)
                
                (audited)
                
                (audited)Current
                    Assets
                
                $
                24,282,846
                
                $
                31,266,489
                
                $
                12,149,634
                
                $
                11,981,783
                
                $
                7,900,644Total
                    Assets
                
                
                101,313,662
                
                
                73,760,133
                
                
                31,271,457
                
                
                23,672,498
                
                
                17,644,345Current
                    Liabilities
                
                
                51,904,264
                
                
                38,468,085
                
                
                23,612,427
                
                
                19,564,316
                
                
                14,447,904Total
                    Liabilities
                
                
                54,558,259
                
                
                42,129,557
                
                
                24,614,027
                
                
                20,411,316
                
                
                16,141,904Total
                    Stockholders’ Equity
                
                
                46,755,403
                
                
                31,630,576
                
                
                6,657,430
                
                
                3,261,182
                
                
                1,502,441
  **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, youcan 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.
 
 -
                20 -
  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.
 
 **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, we increased our production of pharmaceutical grade
            glucose products, in particular dextrose monohydrate. 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
            cornstarch production facility with the design capacity to produce 240,000
            tons
            of cornstarch a year was completed and started production in January
            2007. This
            new complex is close to our existing glucose production plant and new
            glucose
            production complex which was completed in July, 2008. Additionally, this
            new
            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 eliminate 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 have
            produced
            other product lines of glucose and starch products such as industrial
            glucose,
            syrup, starch, Avermectins, and dextrin, which are used for food, beverage
            and
            industrial production. In May 2008 we stopped producing Avermectins because
            we
            can not currently produce and sell this product on an efficient scale
            and we
            want to focus our limited resources to our main product line for the
            time
            being.
 
 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 healthcare 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 evelopment Zone. We developed
            the
            land and built a new glucose production complex with an expected production
            capacity of 120,000 tons per year ( It can expanded to 150,000 if necessary).
            The construction has been finished at the end of July 2008. The new facility
            will be used to produce pharmaceutical grade glucose.
 
 In
            July
            2007, we acquired the right to use a piece of land measuring 40,000 square
            meters in the Changle Economic and Technology Development Zone. We plan
            to use
            the land as reserve for future development. During the reporting period
            under
            review, we managed to successfully expand our domestic sales network.
            As of June
            30, 2008, all the provinces except Tibet in the PRC have been covered
            by our
            domestic sales network. We have established representative offices in
            4
            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 seventy 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. Our top ten customers accounted
            for
            only 34.08% for our total sales for the fiscal year ended June 30,
            2008.
 
 -
                21 -
  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, 2008 Compared with Year Ended June 30, 2007**
 
 *The
            following table shows our operating results for the fiscal years ended
            June 30,
            2008 and 2007.*
 **Fiscal Year ended**
                        **June 30, 2008**
                      
                      **Fiscal Year ended**
                        **June 30, 2007**Sales Revenue
                      
                      $
                      90,871,223
                      
                      $
                      51,706,215Costs
                          of Goods Sold
                      
                      
                      70,613,757
                      
                      
                      39,527,662Gross
                          Profit
                      
                      
                      20,257,466
                      
                      
                      12,178,553Sales,
                          General and Administrative Expenses
                      
                      
                      7,390,623
                      
                      
                      4,674,679Operating
                          Income
                      
                      
                      12,866,843
                      
                      
                      7,503,874Other
                          Net Income (Expense)
                      
                      
                      (1,810,530
                      )
                      
                      524,088Income
                          before Income Taxes
                      
                      
                      11,056,313
                      
                      
                      8,027,962Provision
                          for Income Taxes
                      
                      
                      645,988
                      
                      
                      878,836Net
                          income
                      
                      
                      10,410,325
                      
                      
                      7,149,126
  Sales
        revenue for the fiscal year ended June 30, 2008 was $90,871,223, an increase
        of
        $37,165,008, or 75.75% compared with the corresponding period in 2007. This
        increase was mostly the result of the increase in sales of our corn starch
        and
        other products which include Fibers, Dextrin, corn embryo, Protein Powders,
        and
        Phytin. The increased revenue of these two categories is mainly because we
        completed the new cornstarch plant in September, 2006, and the cornstarch
        plant
        production capacity achieved 73.33% utilization rate in FY 2008. Glucose
        revenues did not increase because our old glucose plant has reached full
        production capacity. In addition, the sales prices increased, especially
        the
        price of the other products which include Fibers, Dextrin, corn embryo, Protein
        Powders, and Phytin .
  Costs
          of
          goods sold for the year ended June 30, 2008 was $70,613,757, an increase
          of
          $31,086,095, or 78.64% compared with the corresponding period in 2007.
          The
          increase in cost of goods sold is in tandem with the increase in sales
          of our
          products and because of the increase of our main raw material - corn.
 
 Gross
          profit for the year ended June 30, 2008 was $20,257,466, an increase of
          $8,078,913, or 66.34% compared with the corresponding period in
          2007.
          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.
 
 However,
          the profit margin of 2008 is lower than 2007. Gross profit margin for the
          year
          ended June 30, 2008 was 22.3%, while it was 23.6% for the same period in
          2007.
          The decreased gross profit margin is because of the increased corn price
          and
          increased sales of lower gross profit margin corn products. As the product
          capacity of cornstarch is improved, we produced a large scale of cornstarch,
          and
          the new plant of glucose had not been completed, we cannot use most of
          the
          cornstarch, so we have to sell most of the cornstarch, and the sales composition
          of our products changed. We expect after the completion of our new glucose
          plant, most cornstarch will be consumed internally, and the sales of glucose
          will increase, so the sales will be composed of mainly higher gross profit
          margin products. Then the total gross profit margin should be
          higher.
 
 Selling,
          general and administrative expenses for the year ended June 30, 2008 was
          $7,390,623, an increase of $2,715,944, or 58.10% compared with the corresponding
          period in 2007. 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
          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. In addition, the
          expense
          of stock options $317,636 was also a part of selling, general and administrative
          expenses.
 
 Net
          income for the year ended June 30, 2008 was $10,410,325, an increase of
          $3,261,199, or 45.62% compared with the corresponding period in 2007.
          The
          increase of net income was due to our increase in production output, sales
          volume and gross profit.
 
 **Fiscal
          Year Ended June 30, 2007 and Fiscal 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, 2007**
                  
                  **Fiscal Year ended******
                    **June 30, 2006**Sales Revenue
                  
                  $
                  51,706,215
                  
                  $
                  36,029,179Costs
                      of Goods Sold
                  
                  
                  39,527,662
                  
                  
                  27,568,092Gross
                      Profit
                  
                  
                  12,178,553
                  
                  
                  8,461,087Sales,
                      General and Administrative Expenses
                  
                  
                  4,674,679
                  
                  
                  3,831,778Operating
                      Income
                  
                  
                  7,503,874
                  
                  
                  4,629,309Other
                      Net Income (Expense)
                  
                  
                  524,088
                  
                  
                  (418,398
                  )Income
                      before Income Taxes
                  
                  
                  8,027,962
                  
                  
                  4,210,911Provision
                      for Income Taxes
                  
                  
                  878,836
                  
                  
                  —Net
                      income
                  
                  
                  7,149,126
                  
                  
                  4,210,911
  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.
 -
                22 -
  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.
 
 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.
 
 **Liquidity
            and Capital Resources**
 
 *Operating
            Activities*
 
 **Fiscal
            Year Ended June 30, 2008 compared to Fiscal Year Ended June
            30,2007**
 
 Net
            cash
            provided by operating activities for fiscal year 2008 was $7,482,153,
            compared
            to $5,552,502 provided by operating activities for fiscal year 2007.
            The
            increase of net cash provided by operations was mostly because of the
            following
            reasons: We have increased sales. More other receivables have been collected,
            and all other receivable -related parties and receivable- shareholders
            have been
            collected.
 
 *Investing
            Activities*
 
 **Fiscal
            Year Ended June 30, 2008 compared to Fiscal Year Ended June 30,
            2007**
 
 Net
            cash
            used in investing activities for fiscal 2008 was $13,986,437, compared
            to
            $21,151,410 used in investing activities for fiscal 2007. The decrease
            of net
            cash used in investing activities is because we spent most of our capital
            expenditures for building our cornstarch and glucose factories in fiscal
            year
            2007. In fiscal year 2008, we are in the process of completing the glucose
            factory and there is less capital expenditure. The glucose factory was
            completed
            in July 2008.
 
 *Financing
            Activities*
 
 **Fiscal
            Year Ended June 30, 2008 Compared to Fiscal year Ended June 30,
            2007**
 
 Net
            cash
            provided by financing activities for fiscal 2008 was $3,176,334 compared
            to
            $21,677,695 for the same period in fiscal 2007. The decrease was mostly
            because
            there was an equity financing of $15,256,428 in 2007 while there was
            no equity
            financing in 2008.
 Contractual
                        obligationsPayments due
                      by periodTotal
                    
                    Less than 1 year
                    
                    1-3 years
                    
                    3-5 years
                    
                    More than 5
                      yearsLong-Term
                        Debt Obligations
                    
                    $
                    5,099,205
                    
                    $
                    2,039,682
                    
                    $
                    3,059,523
                    
                    $
                    —
                    
                    $
                    —Capital
                        Lease Obligations
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —Operating
                        Lease Obligations
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —Purchase
                        Obligations
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —Other
                        Long-Term Liabilities Reflected on the Registrant's Balance
                        Sheet under
                        GAAP
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    —Total
                    
                    $
                    5,099,205
                    
                    $
                    $2,039,682
                    
                    $
                    3,059,523
                    
                    $
                    —
                    
                    $
                    —
  **Loans**
 Other
          than the equity financing last year, 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
          $22,658,270,$18,870, 250, and $8,576,200 short term bank loans outstanding
          as of
          June 30, 2008, 2007, and 2006, respectively. The loans were secured by
          Weifang
          Shengtai’s properties and accounts receivable. The terms of all these short term
          loans were for one year. Weifang Shengtai has never defaulted on any
          loans.
 
 Weifang
          Shengtai does not have any 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 $2,653,995, $3,661,472, and $1,001,600 as
          of June
          30, 2008, 2007, and 2006, respectively.
  -
              23 -
 
 **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 $7,295,000, $8,560,650 and $14,270,880 as of June 30, 2008, 2007 and
          2006.
          Some unrelated third parties have guaranteed approximately $ 13,729,190,
          $
          14,925,250 and $ 5,158,240 of our debt, as of June 30, 2008, 2007 and 2006.
 
 **Future
          cash commitments**
 
 We
          estimate the need for $6 million to $10 million to run the new glucose
          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 condition and consider
          financing
          either with the cash internally generated, bank loans, or with additional
          equity.
 
 **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 3% residual value, over the estimated
          useful lives of the assets.
 
 ***Foreign
          currency translation***
 
 Our
          functional currency is the Chinese 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.
 
 ***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 the Renminbi into 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.
  -
              24 -
 
 **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, 2008, there were no changes in and disagreements
          with accountants and financial disclosure.
 
 **Item
          9A Controls and Procedures**
  **Management's
          Report on Internal Control over Financial Reporting**
 
 Our
          management is responsible for establishing and maintaining adequate internal
          control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
          under the Securities Exchange Act. Our management is also required to assess
          and
          report on the effectiveness of our internal control over financial reporting
          in
          accordance with Section 404 of the Sarbanes-Oxley Act of 2002 ("Section
          404").
          Management assessed the effectiveness of our internal control over financial
          reporting as of June 30, 2008. In making this assessment, we used the criteria
          set forth by the Committee of Sponsoring Organizations of the Treadway
          Commission (COSO) in Internal Control - Integrated Framework. During our
          assessment of the effectiveness of internal control over financial reporting
          as
          of June 30, 2008, management identified significant deficiencies related
          to the
          following:
 
 1.
                Accounting
                    and Finance Personnel Weaknesses - US GAAP expertise - The current
                    staff
                    in the accounting department is relatively new and inexperienced,
                    and
                    needs substantial training so as to meet with the higher demands
                    of being
                    a U.S. public company. The accounting skills and understanding
                    necessary
                    to fulfill the requirements of U.S. GAAP-based reporting, including
                    the
                    skills of subsidiary financial statements consolidation, are
                    inadequate
                    and were inadequately supervised.
  2.
                Lack
                    of internal audit function - The Company lacks qualified resources
                    to
                    perform the internal audit functions properly. In addition, the
                    scope and
                    effectiveness of the internal audit function are yet to be developed.
 
 Our
          accounting staff is well versed in ensuring compliance with PRC accounting
          and
          reporting requirements for our operating subsidiaries and prior to our
          May, 2007
          transaction in which we became a public company, was not required to meet
          or
          apply U.S. GAAP requirements. As a result, with the exception of certain
          additional persons hired to address these deficiencies, our current accounting
          department responsible for financial reporting of the Company, on a consolidated
          basis, is relatively new to U.S. GAAP and the related internal control
          procedures required of U.S. public companies. Although our accounting staff
          is
          professional and experienced in accounting requirements and procedures
          generally
          accepted in the PRC, management has determined that they require additional
          training and assistance in U.S. GAAP matters. Management has determined
          that our
          internal audit function is also significantly deficient due to insufficient
          qualified resources to perform internal audit functions.
 
 In
          order
          to correct the foregoing deficiencies, we have taken the following remedial
          measures:
 
 1.
                In
                    May 2008, we engaged Ms. Yiru Shi, a CPA with experience as an
                    independent
                    auditor as well as financial experience at Sun Microsystems and
                    Hewlett
                    Packard, to serve as our chief financial officer. Ms. Yiru Shi
                    has
                    extensive experience in internal control and U.S. GAAP reporting
                    compliance and an MBA from the University of California-Irvine
                    and
                    together with our chief executive officer will oversee and manage
                    our the
                    financial reporting process and required training of the accounting
                    staff.
 
 2.
                In
                    July, 2008 we engaged independent consultants to assist the Company
                    in
                    improving the internal control system based on the criteria set
                    forth by
                    the Committee of Sponsoring Organizations of the Treadway Commission
                    (COSO) in Internal Control - Integrated Framework. The consultants
                    are
                    currently in the process of conducting an evaluation of our internal
                    control over financial reporting, and designing and implementing
                    enhanced
                    processes and procedures to improve our internal control over
                    financial
                    reporting.
 
 3.
                We
                    plan to train our internal accountants well in U.S. GAAP principles
                    and
                    reporting. Although our accounting staff is professional and
                    experienced
                    in accounting requirements and procedures generally accepted
                    in the PRC,
                    management has determined that they require additional training
                    and
                    assistance in U.S. GAAP matters.
 
 4.
                We
                    are also planning to establish an internal audit unit to establish
                    effective internal control. We plan to allocate sufficient resources
                    to
                    achieve an effective internal audit
                    function.
 
 5.
                We
                    plan to recruit and train additional accounting personnel with
                    experience
                    in U.S. GAAP.
 
 We
          believe that the foregoing steps will remediate the significant deficiencies
          identified above, and we will continue to monitor the effectiveness of
          these
          steps and make any changes that our management deems appropriate.
 
 A
          material weakness (within the meaning of PCAOB Auditing Standard No. 5)
          is a
          deficiency, or a combination of deficiencies, in internal control over
          financial
          reporting, such that there is a reasonable possibility that a material
          misstatement of our annual or interim financial statements will not be
          prevented
          or detected on a timely basis. A significant deficiency is a deficiency,
          or a
          combination of deficiencies, in internal control over financial reporting
          that
          is less severe than a material weakness, yet important enough to merit
          attention
          by those responsible for oversight of the company's financial reporting.
 
 Our
          management is not aware of any material weaknesses in our internal control
          over
          financial reporting, and nothing has come to the attention of management
          that
          causes them to believe that any material inaccuracies or errors exist in
          our
          financial statements as of June 30, 2008. The reportable conditions and
          other
          areas of our internal control over financial reporting identified by us
          as
          needing improvement have not resulted in a material restatement of our
          financial
          statements. Nor are we aware of any instance where such reportable conditions
          or
          other identified areas of weakness have resulted in a material misstatement
          or
          omission in any report we have filed with or submitted to the Securities
          and
          Exchange Commission.
 
 Because
          of its inherent limitations, internal control over financial reporting
          may not
          prevent or detect misstatements. Projections of any evaluation of effectiveness
          to future periods are subject to the risk that controls may become inadequate
          because of changes in conditions, or that the degree of compliance with
          the
          policies and procedures may deteriorate.
 
 Auditor
          Attestation
 
 This
          annual report does not include an attestation report of our registered
          public
          accounting firm regarding internal control over financial reporting.
          Management's report was not subject to attestation by our registered public
          accounting firm pursuant to temporary rules of the Securities and Exchange
          Commission that permit us to provide only management's report in this annual
          report.
 
 **Item
          9B. Other Information.**
 
 None.
 
 -
              25 -
 **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 ExecutiveOfficers
                  
                  Position/Title
                  
                  AgeQingtaiLiu
                  
                  Chief
                      ExecutiveOfficer/Director
                  
                  50YongqiangWang
                  
                  Director
                  
                  39ChrisW.Wang
                  
                  Director
                  
                  37ChangxinLi
                  
                  Director
                  
                  48Winfred
                      Lee
                  
                  Director
                  
                  48Yiru
                      Shi
                  
                  ChiefFinancial
                      Officer
                  
                  35
 
 The
          following is a summary of the biographical information of our directors
          and
          officers:
 
 **Qingtai
          Liu**, 50, 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**, 39, 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**, 37, 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 o
          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.
 
 **Changxin
          Li**, 48, 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**, 48, 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
 
 **Yiru
          Shi**, 35, Served as audit manager for Kabani & Co., Inc., Controller
          at Aroa Marketing, Channel Program Manager at Sun Microsystems and financial
          analyst at Hewlett Packard China, obtained MBA from University of California,
          Irvine, Bachelors degrees in Computer Science and International Trade and
          Business from Beijing Polytechnic University and is a Certified Public
          Accountant
 
 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:
 
 ཫ
                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,
 
 ཫ
                been
                    convicted in a criminal proceeding and is not subject to a pending
                    criminal proceeding,
 
 ཫ
                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
  -
              26 -
  ཫ
                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
          have
          formed a Compensation Committee of the Board of Directors comprised solely
          of
          independent directors to oversee the compensation of our named executive
          officers. The members of our Compensation Committee are Wenbing Christopher
          Wang
          (Chairman) Changxin Li; and Winfred Lee.
 
 **Summary
          Compensation Table**
 
 The
          following is a summary of the compensation we paid for each of the two
          years
          ended June 30, 2008, and 2007, respectively (i) to the person who acted
          as our
          principal executive officer during our fiscal year ended June 30, 2008
          and (ii)
          to the former employee who received compensation in excess of $100,000
          for one
          of these years . None of our other executive officers received compensation
          in
          excess of $100,000 for any of these two 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
                    Compension
                    ($)
                  
                  Total
                      ($)Qingtai
                      Liu (1)
                  
                  
                  2008
                  
                  
                  133,714
                  
                  
                  —
                  
                  
                  —
                  
                  
                  96,253
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  229,9672007
                  
                  
                  19,662
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  19,662Yizhao
                      Zhang (2)
                  
                  
                  2008
                  
                  
                  105,500
                  
                  
                  —
                  
                  
                  —
                  
                  
                  77,003
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  207,0032007
                  
                  
                  12,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  12,000
 
 (1)
                Chairman
                    and Chief Executive Officer (Principal Executive
                    Officer).
 
 (2)
                Mr.
                    Zhang joined us as our Chief Financial Officer in May 2007 and
                    resigned in
                    May 2008.
   -
              27 -
 
 ***Grants
          of Plan-Based Awards in Fiscal 2008***
 
 On
          January 4, 2008, the Company adopted “Shengtai Pharmaceutical, Inc. 2007 Stock
          Incentive Plan” (the “Stock Incentive Plan”).
 
 On
          May
          14, 2008, the Company granted 500,000 stock options and 160,000 non-qualified
          stock options pursuant to the Stock Incentive Plan. All options have an
          exercise
          price of $3.34, which is the closing price on the date of grant, and expire
          five
          years after the date of grant. All options vest over a period of three
          years
          from the date of grant.
 
 ***Outstanding
          Equity Awards at 2008 Fiscal Year End***
 
 As
          of
          June 30, 2008, there are 660,000 shares of options outstanding.
 
 **Equity
          Compensation Plan Information at June 30, 2008**
  The
          following table sets forth information as of June 30, 2008 regarding
          compensation plans under which the Company’s equity securities are authorized
          for issuance.
 **(a)**
                  
                  **(b)**
                  
                  **(c)****Plan Category**
                  
                  
                  **Number
                      of securities****to
                      be issued upon****exercise
                      of****outstanding
                      equity****awards**
                  
                  
                  **Weighted-average****exercise
                      price of****outstanding
                      equity****awards($**)****
                  
                  
                  **Number
                      of securities****remaining
                      available for****future
                      issuance under****equity
                      compensation plans****(excluding
                      securities****reflected
                      in column(a)**)******Equity
                      compensation plans approved by security holders**Shengtai
                      Pharmaceutical, Inc. 2007 Stock Incentive Plan.
                  
                  
                  —
                  
                  
                  
                  
                  
                  —**Equity
                      compensation plans not approved by security holder**s
                      Issuances of non-qualified options to employees
                  
                  
                  660,000
                  
                  $
                  3.34
                  
                  
                  1,340,000Total
                  
                  
                  660,000
                  
                  $
                  3.34
                  
                  
                  1,340,000
 
 ***Option
          Exercises and Stock Vested in Fiscal 2008.***
 
 There
          were no option exercises or stock vested in 2008.
 
 ***Employment
          Agreements***
 
 We
          have
          no employment agreements with any executive officer, except for our employment
          agreement dated May 1, 2008 with Yiru (Melody) Shi, our Chief Financial
          Officer.
 
 ***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 officers are not compensated for services they perform as directors
          of
          the Company. The details of such compensation are:
  ཫ
                annual
                    compensation of $15,000;
 
 ཫ
                additional
                    annual compensation of $15,000 if the director serves as the
                    Chairman of
                    the Audit Committee; and
 
 ཫ
                we
                    may also grant the non-executive directors certain options to
                    purchase our
                    shares, the amount and terms of which shall be determinedby
                    the Board of Directors.
 
 The
          non-executive directors are also 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,
          2008.
  -
              28 -
 NameandAddressof
                    BeneficialOwner
                
                Title ofClass
                
                AmountandNature
                  ofBeneficial
                  Ownership(1)(2)
                
                Percent of
                  Class(4)Qingtai
                    Liu (3)Chief
                    Executive officer and PresidentHi-Tech
                    Industrial Park of Changle County, Shandong Province, PRC
                    262400
                
                
                Common Stock
                
                
                7,378,025
                
                
                38.64
                %Yiru
                    Shi (3)Chief
                    Financial Officer, President and a directorHi-Tech
                    Industrial Park of Changle County, Shandong Province, PRC
                    262400
                
                
                —
                
                
                —
                
                
                —Yongqiang
                    Wang (3)directorHi-Tech
                    Industrial Park of Changle County, Shandong Province, PRC
                    262400
                
                
                —
                
                
                —
                
                
                —Chris
                    Wenbing Wang (3)directorHi-Tech
                    Industrial Park of Changle County, Shandong Province, PRC
                    262400
                
                
                —
                
                
                —
                
                
                —Winfred
                    Lee (3)directorHi-Tech
                    Industrial Park of Changle County, Shandong Province, PRC
                    262400
                
                
                —
                
                
                —
                
                
                —Changxin
                    Li (3)directorHi-Tech
                    Industrial Park of Changle County, Shandong Province, PRC
                    262400
                
                
                —
                
                
                —
                
                
                —China
                    Private Equity Partners Co., Limited15
                    Church Street, Alpine, NJ 07620Common Stock
                
                
                Common Stock
                
                
                1,025,000
                
                
                5.37
                %Pope
                    Investments LLC5150
                    Poplar Avenue, Suite 805, Memphis, TN 38137
                
                
                Common Stock
                
                
                2,650,000
                
                
                13.88
                %
  (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).
 
 (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. Ms Shi was appointed as our Chief Financial Officer in May 2008. Messrs.
        Wang, Li and Lee were appointed directors of the Company on June 22, 2007.
 
 (4)
        Based
        on 19,094,805 shares of common stock issued and outstanding on June 30, 2008.
        In
        addition, in determining the percent of common stock owned by a person on
        June
        30, 2008, (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,
        2008, 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.
 
 **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 sell
        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, 2008, total
        investment of approximately $3,607,912 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 $714,776, $858,881 and $348,366 of accounts payable
        to
        Changle Shengshi at June 30, 2008,2007 and 2006, respectively. The utilities
        expenses amounted to $9,851,833 $4,958,249 and $1,705,675, for the years
        ending
        June 30, 2008,2007 and 2006, respectively.
  -
            29 -
  The  Company  loaned  money  to  C hangle  Shengshi  and  e nt e red  i nto
        two  lo a n
        contr a cts
        as
        fol l o w s:
 
 June 30, 2008
              
              June 30, 2007Due
                  on November 19, 2007, unsecured, 7.95% interest rate per
                  annum
              
              $
              —
              
              $
              657,500Due
                  on September 14, 2009, unsecured, 7.6% interest rate per
                  annum
              
              
              437,700
              
              
              394,500Total
              
              $
              437,700
              
              $
              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. As of June 30, 2008, total receivable
          due from Changle Shengshi was $0.
 
 **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
              
              Fiscal 2008 (3)Audit
                  Fees (1)
              
              $
              145,000
              
              $
              145,000Audit-Related
                  Fees
              
              
              —
              
              
              —Tax
                  Fees (2)
              
              
              —
              
              
              5,000All
                  Other Fees
              
              
              —
              
              
              —Total
              
              $
              145,000
              
              $
              150,000
 (1)
                Comprised
                    the audit of the Company's annual financial statements and reviews
                    of the
                    Company's quarterly financial statements, as well asconsents
                    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,
                    2008.
 
 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)Audit
                  Fees(1)
              
              $
              10,792Audit-Related
                  Fees
              
              
              —TaxFees(2)
              
              $
              250All
                  Other Fees
              
              
              —Total
              
              $
              11,042
 (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
  Report
                  of Independent Registered Public Accounting Firm
              F-1Consolidated
                  Balance Sheets as of June 30, 2008 and 2007
              F-2Consolidated
                  Statements of Income and Other Comprehensive Income for the Years
                  Ended
                  June 30, 2008, 2007 and 2006
              F-3Consolidated
                  Statements of Shareholders' Equity for the Years Ended June 30,
                  2008, 2007
                  and 2006
              F-4Consolidated
                  Statements of Cash Flows for the Years Ended June 30, 2008, 2007
                  and
                  2006
              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.
 
 -
            30 -
  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 (the “Company”) as of June 30, 2008 and 2007, and the
        related consolidated statements of income and other comprehensive income,
        shareholders’ equity, and cash flows for each of the years in the three-year
        period ended June 30, 2008. Shengtai Pharmaceutical Inc.’s management is
        responsible for these financial statements. Our responsibility is to express
        an
        opinion on these financial statements based on our audits.
 
 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, 2008 and 2007, and the results of its operations
        and its cash flows for each of the years in the three-year period ended June
        30,
        2008 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, 2008
  F-1
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
          BALANCE SHEETS
 AS
          OF
          JUNE 30, 2008 AND 2007
 
 2008
                
                2007ASSETSCURRENT
                    ASSETS:Cash
                    and cash equivalents
                
                $
                3,405,606
                
                $
                6,420,439Restricted
                    cash
                
                
                6,763,500
                
                
                6,128,500Accounts
                      receivable, net of allowance for doubtful accounts of $440,701and
                      $431,178 as of June 30, 2008 and 2007, respectively
                
                
                7,614,236
                
                
                5,779,967Notes
                    receivable
                
                
                458,630
                
                
                984,675Other
                    receivables
                
                
                691,215
                
                
                2,984,484Other
                    receivables - related parties
                
                
                —
                
                
                2,491,656Other
                    receivables - shareholder
                
                
                —
                
                
                1,229,625Loan
                    to related party
                
                
                —
                
                
                657,500Inventories
                
                
                5,039,278
                
                
                4,449,267Prepayments
                
                
                310,381
                
                
                140,376Total
                    current assets
                
                
                24,282,846
                
                
                31,266,489PLANT
                    AND EQUIPMENT, net
                
                
                69,943,021
                
                
                30,178,074OTHER
                    ASSETS:Investment
                    in unconsolidated affiliate
                
                
                3,607,912
                
                
                2,675,678Loan
                    to related party - non-current
                
                
                437,700
                
                
                394,500Prepayments
                    - non-current
                
                
                —
                
                
                7,429,371Intangible
                    assets, net
                
                
                3,042,183
                
                
                1,816,021Total
                    other assets
                
                
                7,087,795
                
                
                12,315,570Total
                    assets
                
                $
                101,313,662
                
                $
                73,760,133LIABILITIES
                    AND SHAREHOLDERS' EQUITYCURRENT
                    LIABILITIES:Accounts
                    payable
                
                $
                7,669,728
                
                $
                3,807,997Accounts
                    payable - related party
                
                
                714,776
                
                
                949,992Notes
                    payable - banks
                
                
                10,942,500
                
                
                8,942,000Short
                    term loans
                
                
                22,658,270
                
                
                18,870,250Accrued
                    liabilities
                
                
                261,187
                
                
                229,643Other
                    payable
                
                
                2,146,108
                
                
                1,526,903Employee
                    loans
                
                
                1,382,287
                
                
                596,516Employee
                    loan - officer
                
                
                53,605
                
                
                —Third
                    party loan
                
                
                640,228
                
                
                318,274Customer
                    deposits
                
                
                804,323
                
                
                796,228Long
                    term loan - current maturities
                
                
                —
                
                
                381,350Taxes
                    payable
                
                
                4,631,252
                
                
                2,048,932Total
                    current liabilities
                
                
                51,904,264
                
                
                38,468,085LONG
                    TERM LIABILITIESOther
                    payable - noncurrent
                
                
                2,653,995
                
                
                3,661,472Total
                    long term liabilities
                
                
                2,653,995
                
                
                3,661,472Total
                    liabilities
                
                
                54,558,259
                
                
                42,129,557COMMITMENTS
                    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,19,094,805
                      and 18,875,000 shares issued and outstandingas
                      June 30, 2008 and 2007, respectively
                
                
                19,095
                
                
                18,875Paid-in
                    capital
                
                
                19,987,708
                
                
                19,163,549Statutory
                    reserves
                
                
                2,894,902
                
                
                1,735,484Retained
                    earnings
                
                
                19,136,577
                
                
                9,885,670Accumulated
                    other comprehensive income
                
                
                4,717,121
                
                
                826,998Total
                    shareholders' equity
                
                
                46,755,403
                
                
                31,630,576Total
                    liabilities and shareholders' equity
                
                $
                101,313,662
                
                $
                73,760,133
 
 See
          report of independent registered public accounting firm.
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
 
 F-2
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
          STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
 FOR
          THE
          YEARS ENDED JUNE 30, 2008, 2007 AND 2006
 
 2008
                
                2007
                
                2006SALES
                    REVENUE
                
                $
                90,871,223
                
                $
                51,706,215
                
                $
                36,029,179COST
                    OF SALES
                
                
                70,613,757
                
                
                39,527,662
                
                
                27,568,092GROSS
                    PROFIT
                
                
                20,257,466
                
                
                12,178,553
                
                
                8,461,087SELLING,
                    GENERAL AND ADMINISTRATIVE EXPENSES
                
                
                7,390,623
                
                
                4,674,679
                
                
                3,831,778INCOME
                    FROM OPERATIONS
                
                
                12,866,843
                
                
                7,503,874
                
                
                4,629,309OTHER
                    (EXPENSE) INCOME:Equity
                    in income of unconsolidated affiliate
                
                
                272,239
                
                
                131,420
                
                
                41,635Gain
                    from sales of land use rights
                
                
                —
                
                
                1,647,833
                
                
                —Other
                    income
                
                
                584,749
                
                
                121,798
                
                
                181,874Other
                    expense
                
                
                (391,858
                )
                
                (225,898
                )
                
                (214,641
                )Interest
                    expense and other charges
                
                
                (2,447,608
                )
                
                (1,270,418
                )
                
                (555,572
                )Interest
                    income
                
                
                171,948
                
                
                119,353
                
                
                128,306Other
                    income (expense), net
                
                
                (1,810,530
                )
                
                524,088
                
                
                (418,398
                )INCOME
                    BEFORE PROVISION FOR INCOME TAXES
                
                
                11,056,313
                
                
                8,027,962
                
                
                4,210,911PROVISION
                    FOR INCOME TAXES
                
                
                645,988
                
                
                878,836
                
                
                —NET
                    INCOME
                
                
                10,410,325
                
                
                7,149,126
                
                
                4,210,911OTHER

                    COMPREHENSIVE INCOME:Foreign
                    currency translation adjustments
                
                
                3,890,123
                
                
                641,596
                
                
                185,402COMPREHENSIVE
                    INCOME
                
                $
                14,300,448
                
                $
                7,790,722
                
                $
                4,396,313EARNINGS
                    PER SHAREBasic
                
                $
                0.55
                
                $
                0.64
                
                $
                0.42Diluted
                
                $
                0.52
                
                $
                0.62
                
                $
                0.42WEIGHTED
                    AVERAGE NUMBER OF SHARESBasic
                
                
                18,993,789
                
                
                11,251,712
                
                
                10,125,000Diluted
                
                
                19,874,486
                
                
                11,477,545
                
                
                10,125,000
 
 See
          report of independent registered public accounting firm.
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
 
 F-3
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
          STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR
          THE
          YEARS ENDED JUNE 30, 2008, 2007 AND 2006
 
 Common stock
                
                
                
                Capital
                
                Retained earnings
                
                AccumulatedotherPaid-in
                
                contribution
                
                Statutory
                
                
                
                comprehensiveShares
                
                Par value
                
                capital
                
                receivable
                
                reserves
                
                Unrestricted
                
                income
                
                TotalsBALANCE,
                    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
                
                $
                31,630,576Issuance
                    of common stock
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                —Exercised
                    warrants
                
                
                219,805
                
                
                220
                
                
                506,523
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                506,743Option
                    issued to employees
                
                
                
                
                
                
                
                
                317,636
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                317,636Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                10,410,325
                
                
                
                
                
                10,410,325Adjustment
                    to statutory reserve
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,159,418
                
                
                (1,159,418
                )
                
                
                
                
                —Foreign
                    currency translation adjustments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,890,123
                
                
                3,890,123BALANCE,
                    June 30, 2008
                
                
                19,094,805
                
                $
                19,095
                
                $
                19,987,708
                
                $
                —
                
                $
                2,894,902
                
                $
                19,136,577
                
                $
                4,717,121
                
                $
                46,755,403
 
 See
          report of independent registered public accounting firm.
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
 
 F-4
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
          STATEMENTS OF CASH FLOWS
 FOR
          THE
          YEARS ENDED JUNE 30, 2008, 2007 AND 2006
 
 2008
                
                2007
                
                2006CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    income
                
                $
                10,410,325
                
                $
                7,149,126
                
                $
                4,210,911Adjustments
                      to reconcile net income to cashprovided
                      by operating activities:Depreciation
                
                
                2,964,678
                
                
                2,239,157
                
                
                1,478,734Amortization
                
                
                57,254
                
                
                42,644
                
                
                41,454Bad
                    debt expense
                
                
                93,557
                
                
                271,602
                
                
                114,780Stock
                    option expense
                
                
                317,636
                
                
                —
                
                
                —(Gain)
                    loss on building and equipment disposal
                
                
                (169,726
                )
                
                186,470
                
                
                —Gain
                    on disposal of land use right
                
                
                —
                
                
                (1,647,833
                )
                
                —Equity
                    in income of unconsolidated investment
                
                
                (603,261
                )
                
                (131,420
                )
                
                (41,635
                )Change
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                (1,127,048
                )
                
                (2,288,351
                )
                
                (261,286
                )Notes
                    receivable
                
                
                (2,274,840
                )
                
                (591,936
                )
                
                (126,992
                )Other
                    receivables
                
                
                1,994,157
                
                
                (582,008
                )
                
                1,567Other
                    receivables - related parties
                
                
                2,608,944
                
                
                (2,427,043
                )
                
                —Other
                    receivables - shareholder
                
                
                1,292,742
                
                
                (366,185
                )
                
                —Inventories
                
                
                (304,476
                )
                
                (2,394,250
                )
                
                173,225Prepayments
                
                
                (165,981
                )
                
                99,957
                
                
                (28,710
                )Prepayments
                    - related party
                
                
                —
                
                
                1,409,944
                
                
                301,037Accounts
                    payable
                
                
                (7,730,549
                )
                
                1,773,031
                
                
                176,458Accounts
                    payable - related party
                
                
                (320,156
                )
                
                390,986
                
                
                200,660Accrued
                    liabilities
                
                
                (781,690
                )
                
                130,238
                
                
                (65,014
                )Other
                    payable
                
                
                (906,285
                )
                
                410,174
                
                
                166,860Customer
                    deposit
                
                
                (74,646
                )
                
                492,586
                
                
                201,045Taxes
                    payable
                
                
                2,201,518
                
                
                1,385,613
                
                
                (14,792
                )Net
                    cash provided by operating activities
                
                
                7,482,153
                
                
                5,552,502
                
                
                6,528,302CASH
                    FLOWS FROM INVESTING ACTIVITIES:Investment
                    in affiliate
                
                
                —
                
                
                (909,439
                )
                
                (124,020
                )Proceeds
                    from building and equipment disposal
                
                
                139,163
                
                
                —
                
                
                —Acquisition
                    of plant and equipment
                
                
                (14,517,157
                )
                
                (11,041,561
                )
                
                (6,232,594
                )Acquisition
                    of intangible assets
                
                
                (296,893
                )
                
                (949,900
                )
                
                —Advances
                    on plant and equipment purchase
                
                
                —
                
                
                (7,225,790
                )
                
                (1,155,999
                )Repayments
                    on loan to related party
                
                
                688,450
                
                
                —
                
                
                —Loan
                    to related party
                
                
                —
                
                
                (1,024,720
                )
                
                —Net
                    cash used in investing activities
                
                
                (13,986,437
                )
                
                (21,151,410
                )
                
                (7,512,613
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES:Increase
                    in restricted cash
                
                
                (524,140
                )
                
                (2,024,720
                )
                
                (279,045
                )Borrowings
                    on notes payable - banks
                
                
                11,703,650
                
                
                8,710,120
                
                
                12,201,088Principal
                    payments on notes payable - banks
                
                
                (10,739,820
                )
                
                (7,173,040
                )
                
                (10,743,853
                )Borrowings
                    on short term loans
                
                
                21,383,257
                
                
                24,785,415
                
                
                8,979,048Principal
                    payments on short term loans
                
                
                (19,758,515
                )
                
                (15,178,665
                )
                
                (8,358,948
                )Borrowings
                    on employee loans
                
                
                1,458,353
                
                
                384,224
                
                
                431,111Principal
                    payments on employee loans
                
                
                (778,444
                )
                
                (458,632
                )
                
                (113,060
                )Borrowings
                    on employee loan - officer
                
                
                53,605
                
                
                1,281
                
                
                —Principal
                    payments on employee loan - officer
                
                
                —
                
                
                (96,580
                )
                
                —Borrowings
                    on third party loan
                
                
                3,139,855
                
                
                251,378
                
                
                57,319Principal
                    payments on third party loan
                
                
                (2,868,909
                )
                
                —
                
                
                —Borrowings
                    on long term loan
                
                
                —
                
                
                —
                
                
                992,160Principal
                    payments on long term loan
                
                
                (399,301
                )
                
                (1,549,889
                )
                
                (868,140
                )Proceeds
                    from issuance of common stock
                
                
                506,743
                
                
                15,256,428
                
                
                —Payments
                    of amounts due officer
                
                
                —
                
                
                (1,925,996
                )
                
                —Proceeds
                    from capital contribution receivable
                
                
                —
                
                
                696,371
                
                
                —Dividends
                    paid to shareholders
                
                
                —
                
                
                —
                
                
                (1,664,503
                )Net
                    cash provided by financing activities
                
                
                3,176,334
                
                
                21,677,695
                
                
                633,177EFFECTS
                    OF EXCHANGE RATE CHANGE IN CASH
                
                
                313,117
                
                
                (160,805
                )
                
                25,408(DECREASE)
                    INCREASE IN CASH
                
                
                (3,014,833
                )
                
                5,917,982
                
                
                (325,726
                )CASH,
                    beginning of year
                
                
                6,420,439
                
                
                502,457
                
                
                828,183CASH,
                    end of year
                
                $
                3,405,606
                
                $
                6,420,439
                
                
                502,457SUPPLEMENTAL
                    DISCLOSURECash
                    paid for Interest, net of capitalized interest
                
                $
                1,901,531
                
                $
                1,270,418
                
                $
                555,572Cash
                    paid for Income taxes
                
                $
                14,809
                
                $
                125,782
                
                $
                —Non-cash
                    investing and financing activities -Acquisition
                    of land use right in exchange for other receivable
                
                $
                692,304
                
                $
                —
                
                $
                —
 
 See
          report of independent registered public accounting firm.
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
 
 F-5
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 
 **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.
 
 On
          May
          15, 2007, the Company entered into a share exchange agreement (the “Share
          Exchange Agreement”) with the shareholders of Shengtai Holding, Inc. (“SHI”).
          Contemporaneously, 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 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. Pursuant to the Share Purchase
          Agreement, the Purchasers acquired 8,750,000 shares of common stock and
          4,375,000 attached warrants for $2.00 per unit (or an aggregate purchase
          price
          of $17,500,000) and for total net proceeds of $15,256,428. The exercise
          price of
          the warrants is $2.60 per share and the term of the warrants is five years.
          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, the 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
          conjunction with the Share Purchase Agreement, Qingtai Liu, the controlling
          shareholder and Chief Executive Officer of the Company, 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 accounting principles
          generally accepted in the United States of America (“US GAAP”) do not reflect
          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. If the audited consolidated
          financial statements of the Company prepared in accordance with US GAAP
          do not
          reflect an after-tax net income of at least $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 escrowed shares will be distributed on a pro-rated basis to the Purchasers.
          The Company determined that the thresholds for the two years ended June
          30, 2008
          and 2007 have 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 (e.g., glucose,
          dehydrated glucose) and drug supplements (e.g., starch, dextrin, polyacrylic
          acid resin). The Company’s primary business operations are conducted in the
          People’s Republic of China (“PRC”).
 
 Weifang
          Shengtai was established in Changle County, Weifang City, Shandong Province,
          in
          People’s Republic of China on February 4, 1999. Qingtai Liu and his management
          team were the original shareholders of Weifang Shengtai.
 
 On
          April
          19, 2006, pursuant to a shareholders’ resolution, 37 Chinese shareholders
          (“Original Shareholders”) of Weifang Shengtai transferred their 17.95% interest
          in the Company to 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 City.
 See
            report of independent registered public accounting firm.
 
 F-6
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 On
          June
          20, 2006, SHI signed an agreement to acquire Bio-One Corporation’s (“Bio-One”)
          51% interest in Weifang Shengtai and Qingtai Liu’s 49% interest in Weifang
          Shengtai. Qingtai Liu, a founding shareholder of Weifang Shengtai, sold
          his 49%
          interest in Weifang Shengtai to SHI for RMB 15,000,000 (USD $1,925,996),
          and
          this amount was 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 stock of Bio-One owned by Qingtai Liu. Weifang Shengtai became
          a
          wholly foreign owned entity (“WFOE”) and obtained the approval of the local
          branch of the MOC in Weifang City on June 21, 2006. The business term is
          20
          years beginning on February 10, 2004, the date Bio-One acquired its 51%
          in
          Weifang Shengtai. In accordance with the laws governing foreign acquisitions
          of
          a Chinese registered company, SHI contributed the $1,925,996 as required
          to
          Weifang Shengtai, and 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. In May and June 2007, SHI contributed $11,080,000 towards
          the
          additional registered capital. This transaction was approved by the local
          branch
          of the MOC in Weifang City and the Company obtained a new business license
          on
          July 16, 2007, for a term of 20 years.
 
 **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, 2005. The Company recorded all normal recurring adjustments considered
          necessary to give a fair presentation of operating results for the periods
          presented.
 
 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
          consolidation.
 
 Use
          of
          estimates
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States of America requires management
          to make
          estimates and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of
          the financial statements, and the reported amounts of revenues and expenses
          during the reporting period. The significant estimates made in the preparation
          of the Company’s consolidated financial statements relate to the assessment of
          the carrying values of accounts receivable. Actual results could be materially
          different from these estimates upon which the carrying values were based.
 See
            report of independent registered public accounting firm.
  F-7
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
  Foreign
          currency translation
 
 The
          reporting currency of the Company is the US dollar. The Company uses the
          Chinese
          Renminbi (“RMB”) as its functional currency. In accordance with Statement of
          Financial Accounting Standards (“SFAS”) No. 52, “Foreign Currency Translation,”
results of operations and cash flows are translated at average exchange
          rates
          during the period, and assets and liabilities are translated at the unified
          exchange rates at the balance sheet dates, and equity is translated at
          the
          historical exchange rates. As a result, amounts related to assets and
          liabilities reported on the statements of cash flows will not necessarily
          agree
          with changes in the corresponding accounts on the balance sheets. Translation
          adjustments resulting from this process are included in accumulated other
          comprehensive income in the statements of shareholders’ equity. Translation
          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 $4,717,121 and $826,998 as of June 30, 2008 and
          2007,
          respectively. Assets and liabilities were translated at 6.85 RMB and 7.60
          RMB to
          $1.00 at June 30, 2008 and 2007, respectively. The average translation
          rates
          applied to consolidated statements of income for the years ended June 30,
          2008,
          2007 and 2006 were 7.26 RMB, 7.81 RMB and 8.06 RMB to $1.00 US dollar,
          respectively.
 
 Revenue
          recognition
 
 The
          Company recognizes revenue when the goods are delivered, title has passed,
          pricing is fixed, and collection is reasonably assured. Sales revenue represents
          the invoiced value of goods, net of value-added tax (“VAT”). Most of the
          Company’s products sold in the PRC are subject to a VAT 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 products and certain freight
          expenses.
 
 Shipping
          and handling
 
 Shipping
          and handling cost related to costs of goods sold are included in selling,
          general and administrative expenses. For the years ended June 30, 2008,
          2007,
          and 2006, shipping and handling costs amounted to $3,097,843, $1,927,118,
          and
          $1,980,055, respectively,
 
 Financial
          instruments
 
 SFAS
          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 payables, accrued liabilities, customer
          deposits, taxes 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 rates of interest.
 
 Stock-based
          compensation
 
 The
          Company records stock-based compensation expense pursuant to SFAS No. 123R
          (“SFAS 123R”), “Share Based Payment.” The Company estimates the fair value of
          the award using the Black-Scholes option pricing model. Under SFAS 123R,
          the
          Company’s expected volatility assumption is based on the historical volatility
          of Company’s stock. The expected life assumption is primarily based on
          historical exercise patterns and employee post-vesting termination behavior.
          The
          risk-free interest rate for the expected term of the option is based on
          the U.S.
          Treasury yield curve in effect at the time of grant.
 See
            report of independent registered public accounting firm.
  F-8
  SHENGTAI
            PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
            30,
            2008
  Stock-based
          compensation expense is recognized based on awards expected to vest, and
          there
          were no estimated forfeitures as the Company has a short history of issuing
          options. FAS 123R requires forfeitures to be estimated at the time of grant
          and
          revised in subsequent periods, if necessary, if actual forfeitures differ
          from
          those estimates.
 
 Earnings
          per share
 
 The
          Company reports earnings per share in accordance with the provisions of
          SFAS No.
          128 (“SFAS 128”), "Earnings Per Share." SFAS 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, 2008, 2007, and 2006:
  2008
                
                2007
                
                2006N
                    Net income for earnings per share
                
                $
                10,371,154
                
                $
                7,149,126
                
                $
                4,210,911Weighted
                    average shares used in basic computation
                
                
                18,993,789
                
                
                11,251,712
                
                
                10,125,000Diluted
                    effect of warrants
                
                
                880,697
                
                
                225,833
                
                
                —Weighted
                    average shares used in diluted computation
                
                
                19,874,486
                
                
                11,477,545
                
                
                10,125,000Earnings
                    per share:Basic
                
                $
                0.55
                
                $
                0.64
                
                $
                0.42Diluted
                
                $
                0.52
                
                $
                0.62
                
                $
                0.42
 
 At
          June
          30, 2008 and 2007, all outstanding warrants were included in the calculation
          of
          diluted earnings per share. At June 30, 2006, the Company did not have
          any
          outstanding warrants or stock options.
 
 Cash
          and cash equivalents
 
 The
          Company considers all highly liquid investments with original maturities
          of
          three months or less to be cash and cash equivalents.
 See
            report of independent registered public accounting firm.
  F-9
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 Restricted
          cash
 
 The
          Company, through its bank agreement, is required to keep certain amounts
          on
          deposit that are subject to withdrawal restrictions. These amounts were
          $6,565,500 and $5,628,500 as of June 30, 2008 and 2007, respectively.
 
 In
          accordance with the Escrow Agreement and the Share Purchase Agreement by
          and
          among Shengtai Holding Inc., West Coast Car Company, Chinamerica Fund LLP,
          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 when certain
          criteria are met. As of June 30, 2008 and June 30, 2007, the undisbursed
          amounts
          were $198,000 and $500,000, respectively, and these are included in restricted
          cash in the consolidated balance sheets.
 
 Accounts
          receivable
 
 In
          the
          normal course of business, the Company extends credit to its customers
          without
          requiring collateral or other security interests. Management reviews its
          accounts receivables at each reporting period to provide for an allowance
          against accounts receivable for an amount that could become uncollectible.
          This
          review process may involve the identification of payment problems with
          specific
          customers. The Company estimates this allowance based on the aging of the
          accounts receivable, historical collection experience, and other relevant
          factors, such as changes in the economy and the imposition of regulatory
          requirements that can have an impact on the industry. These factors continuously
          change, and can have an impact on collections and the Company’s estimation
          process. These impacts may be material.
 
 Certain
          accounts receivable amounts are charged off against allowances after designated
          period of collection efforts. Subsequent cash recoveries are recognized
          as
          income in the period when they occur.
 
 The
          activities in the allowance for doubtful accounts are as follows for the
          years
          ended June 30, 2008 and 2007:
 
 2008
                
                2007Beginning
                    allowance for doubtful accounts
                
                $
                431,178
                
                $
                357,970Additions
                    charged to bad debt expense
                
                
                93,557
                
                
                271,602Write-off
                    charged against the allowance
                
                
                (129,130
                )
                
                (217,838
                )Foreign
                    currency translation adjustments
                
                
                45,096
                
                
                19,444Ending
                    allowance for doubtful accounts
                
                $
                440,701
                
                $
                431,178
 See
            report of independent registered public accounting firm.
 F-10
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 Concentrations
          of risk
 
 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 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
          others.
 
 Management
          believes 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. Cash includes cash on hand and
          demand
          deposits in accounts maintained with state-owned banks within the PRC and
          the
          United States of America. Certain financial instruments, which subject
          the
          Company to concentration of credit risk, consist of cash. The Company maintains
          cash deposits in financial institutions that exceed the amounts insured
          by the
          U.S. government. Balances at financial institutions or state owned banks
          within
          the PRC are not covered by insurance. Non-performance by these institutions
          could expose the Company to losses for amounts in excess of insured balances.
          At
          June 30, 2008 and 2007, the Company’s bank balances exceeded government insured
          limits by approximately $10,175,000 and $12,130,000, respectively. The
          Company
          has not experienced, nor does it anticipate, nonperformance by these
          institutions.
 
 The
          Company’s concentrations of credit risk are primarily in trade accounts
          receivable and accounts payable. There were no customers that individually
          comprised 10% or more of the revenues or trade accounts receivable at June
          30,
          2008, and 2007. For the year ended June 30, 2008, two vendors accounted
          for
          approximately 23% of the Company’s total purchases. As of June 30, 2008,
          accounts payable for these vendors amounted to $362,807. For the years
          ended
          June 30, 2007 and 2006, one vendor accounted for approximately 22% and
          77%,
          respectively, of the Company’s total purchases. There were no accounts payable
          balance for this vendor as of June 30, 2007.
 
 For
          export sales, management frequently requires significant down payments
          or letter
          of credit prior to shipment. For these sales, the Company maintains export
          credit insurance to protect against the risk that the overseas customers
          may
          default on settlement.
 
 The
          following table summarizes financial information for the years ended June
          30,
          2008, 2007 and 2006, concerning the Company’s revenues based on geographic area:
 
 Revenue
                
                2008
                
                2007
                
                2006China
                
                $
                81,160,283
                
                $
                46,607,204
                
                $
                31,282,456International
                
                
                9,710,940
                
                
                5,099,011
                
                
                4,746,723Total
                
                $
                90,871,223
                
                $
                51,706,215
                
                $
                36,029,179
 See
            report of independent registered public accounting firm.
 F-11
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 Inventories
 
 Inventories
          are stated at the lower of cost (weighted average basis) or market and
          consist
          of the following as of June 30, 2008 and 2007:
 
 2008
                
                2007Raw
                    materials
                
                $
                1,409,577
                
                $
                2,297,901Work-in-progress
                
                
                1,688,161
                
                
                1,130,900Finished
                    goods
                
                
                1,941,540
                
                
                1,020,466Total
                
                $
                5,039,278
                
                $
                4,449,267
 
 The
          Company reviews its inventory periodically for possible obsolescence or
          to
          determine if any reserves are necessary. As of June 30, 2008 and 2007, the
          Company determined that no reserves were necessary.
 
 Prepayments
 
 Prepayments
          represent partial payments or deposits for inventory and property and equipment
          purchases. Certain of the prepayments are for those anticipated purchases,
          primarily property and equipment, that are scheduled to occur beyond the
          one-year time frame.
 
 Plant
          and equipment
 
 Plant
          and
          equipment are stated at cost less accumulated depreciation. Additions and
          improvements to property and equipment accounts are recorded at cost.
          Maintenance, repairs, and minor renewals are charged directly to expense
          as
          incurred. Major additions and betterments to property and equipment accounts
          are
          capitalized. Depreciation is computed using the straight-line method over
          the
          estimated useful lives of the assets with 3% residual value.
 
 Estimated
          useful lives of the assets are as follows:
 
 Estimated
                    Useful LifeBuildings
                    and improvements
                
                
                5-20
                
                
                yearsMachinery
                    and equipment
                
                
                5-10
                
                
                yearsAutomobile
                    facilities
                
                
                5-10
                
                
                yearsElectronic
                    equipment
                
                
                5-7
                
                
                years
 See
            report of independent registered public accounting firm.
 F-12
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 Impairment
          of long-lived assets
 
 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, 2008, the Company
          expects these assets to be fully recoverable.
 Investment
          in unconsolidated affiliate
 
 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.
 
 Intangible
          assets
 
 Intangible
          assets are primarily comprised of land use rights. All land in the PRC
          is owned
          by the Chinese government. However, the government grants “land use rights” for
          terms ranging from 20 to 50 years. From March 2000 to June 2007, the Company
          acquired various land use rights for approximately $2,243,000. The Company
          obtained another land use right in July 2007 for approximately $314,000.
          In May
          2008, the Company paid approximately $734,000 to a local government which
          enabled the land use right to be classified from industrial use to commercial
          use. The Company amortizes the cost of land use rights over the usage terms
          using the straight-line method.
 
 On
          June
          30, 2007, the Company sold a land use right at an auction due to relocation
          of
          one of the Company’s manufacturing plants. At the time of the sale, the net book
          value of the land use right was $306,984, and the sale price for the land
          use
          right was $1,954,817, for a gain of approximately $1,648,000. As of June
          30,
          2008, total proceeds had been received.
 
 Intangible
          assets of the Company are reviewed at least annually, 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, 2008, the Company determined that there had been no impairment. For
          the
          years ended June 30, 2008, 2007 and 2006, amortization expense relating
          to these
          intangible assets amounted to $57,254, $42,644 and $41,454 respectively.
 
 Income
          taxes
 
 The
          Company accounts for income taxes in accordance with SFAS
          N o.
          109
          (“SFAS 109”), “Accounting for Income Taxes.” Under the asset and liability
          method as required by SFAS 109, deferred income taxes are recognized for
          the tax
          consequences of temporary differences by applying enacted statutory tax
          rates
          applicable to future years to differences between the financial statement
          carrying amounts and the tax bases of existing assets and liabilities.
          Under
          SFAS 109, the effect on deferred income taxes of a change in tax rates
          is
          recognized in income in the period that includes the enactment date. A
          valuation
          allowance is recognized if it is more likely than not that some portion,
          or all
          of, a deferred tax asset will not be realized. As of June 30, 2008 and
          2007, the
          Company did not have any deferred tax assets or liabilities, and as such,
          no
          valuation allowances were recorded at June 30, 2008 and 2007.
 See
            report of independent registered public accounting firm.
 F-13
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 In
          July
          2006, the Financial Accounting Standards Board (“FASB”) issued FASB
          Interpretation No. 48 (“FIN 48”), "Accounting for Uncertainty in Income Taxes -
          an interpretation of FASB Statement No. 109," which clarifies the accounting
          and
          disclosure for uncertain tax positions. This interpretation is effective
          for
          fiscal years beginning after December 15, 2006, and the Company has implemented
          this interpretation as of July 1, 2007. FIN 48 prescribes a recognition
          threshold and measurement attribute for recognition and measurement of
          a tax
          position taken or expected to be taken in a tax return. FIN 48 also provides
          guidance on de-recognition, classification, interest and penalties, accounting
          in interim periods, disclosure and transition.
 
 Under
          FIN
          48, evaluation of a tax position is a two-step process. The first step
          is to
          determine whether it is more-likely-than-not that a tax position will be
          sustained upon examination, including the resolution of any related appeals
          or
          litigation based on the technical merits of that position. The second step
          is to
          measure a tax position that meets the more-likely-than-not threshold to
          determine the amount of benefit to be recognized in the financial statements.
          A
          tax position is measured at the largest amount of benefit that is greater
          than
          50 percent likely of being realized upon ultimate settlement. Tax positions
          that
          previously failed to meet the more-likely-than-not recognition threshold
          should
          be recognized in the first subsequent period in which the threshold is met.
          Previously recognized tax positions that no longer meet the more-likely-than-not
          criteria should be de-recognized in the first subsequent financial reporting
          period in which the threshold is no longer met.
 
 The
          adoption of FIN 48 at July 1, 2007, did not have a material effect on the
          Company's consolidated financial statements.
 
 The
          Company’s operations are subject to income and transaction taxes in the United
          States and in the PRC jurisdictions. Significant estimates and judgments
          are
          required in determining the Company’s worldwide provision for income taxes. Some
          of these estimates are based on interpretations of existing tax laws or
          regulations, and as a result the ultimate amount of tax liability may be
          uncertain. However, the Company does not anticipate any events that would
          lead
          to changes to these uncertainties.
 
 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 standard value added tax rate is 17% of the gross sales
          price,
          however, for the Company’s corn plumules products, the VAT rate is 13%. 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
          products.
 
 VAT
          on
          sales and VAT on purchases amounted to $13,794,406 and $9,840,077, respectively,
          for the year ended June 30, 2008. For the year ended June 30, 2007, VAT
          on sales
          and VAT on purchases amounted to $7,453,346 and $6,991,599, respectively.
          For
          the year ended June 30, 2006, VAT on sales and VAT on purchases amounted
          to
          $5,571,553 and $4,545,708, respectively. Sales and purchases are recorded
          net of
          VAT collected and paid as the Company acts as an agent for the Chinese
          government. VAT taxes are not impacted by the income tax holiday in the
          PRC.
 See
            report of independent registered public accounting firm.
  F-14
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 
 Guarantees
 
 From
          time
          to time, the Company guarantees the debt of others unrelated to the Company.
          Pursuant to FIN 45, “Guarantor’s Accounting for and Disclosure Requirements for
          Guarantees, Including Indirect Guarantees of Indebtedness to Others,” the
          Company must record guarantees at the fair value of the expected future
          payments. However, the Company estimates that it will not be required to
          make
          any payments under these guarantees based on the past experience and the
          financial condition of the companies to which the guarantees were
          made.
 
 Recently
          issued accounting pronouncements
 
 In
          September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), Fair Value
          Measurements. SFAS 157 establishes a framework for measuring fair value
          and
          expands disclosures about fair value measurements. The changes to current
          practice resulting from the application of this statement relate to the
          definition of fair value, the methods used to measure fair value, and the
          expanded disclosures about fair value measurements. SFAS 157 is effective
          for
          financial statements for fiscal years beginning after November 15, 2007,
          with
          earlier adoption permitted. The Company is evaluating the impact, if any,
          that
          the adoption of this statement will have on its consolidated results of
          operations and financial position.
 
 On
          February 14, 2008, the FASB issued FASB Staff Position No. FAS 157-1 ("FSP
          FAS
          157-1"), "Application of FASB Statement No. 157 to FASB Statement No. 13
          and
          Other Accounting Pronouncements That Address Fair Value Measurements for
          Purposes of Lease Classification or Measurement under Statement 13". FSP
          FAS
          157-1 does not apply under FASB Statement No. 13 (“Statement 13”), "Accounting
          for Leases," and other accounting pronouncements that address fair value
          measurements for purposes of lease classification or measurement under
          Statement
          13. This scope exception does not apply to assets acquired and liabilities
          assumed in a business combination that are required to be measured at fair
          value
          under SFAS No. 141 or SFAS No. 141R, regardless of whether those assets
          and
          liabilities are related to leases.
 
 On
          February 12, 2008, the FASB issued FASB Staff Position No. FAS 157-2 ("FSP
          FAS
          157-2"), "Effective Date of FASB Statement No. 157." With the issuance
          of FSP
          FAS 157-2, the FASB agreed to: (a) defer the effective date in SFAS No.
          157 for
          one year for certain nonfinancial assets and nonfinancial liabilities,
          except
          those that are recognized or disclosed at fair value in the financial statements
          on a recurring basis (at least annually), and (b) remove certain leasing
          transactions from the scope of SFAS No. 157. The deferral is intended to
          provide
          the FASB time to consider the effect of certain implementation issues that
          have
          arisen from the application of SFAS No. 157 to these assets and
          liabilities.
 
 In
          February 2007, the FASB issued SFAS No. 159, (“SFAS 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 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 impact, if
          any, that the adoption of SFAS 159 will have on its consolidated results
          of
          operations or financial position.
 See
            report of independent registered public accounting firm.
  F-15
 SHENGTAI
              PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
              30,
              2008
 In
          December 2007, the Securities and Exchange Commission (“SEC”) issued Staff
          Accounting Bulletin No. 110 (“SAB 110”). SAB 110 amends and replaces Question 6
          of Section D.2 of Topic 14, *Share-Based
          Payment* of
          the
          Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14
          expresses the views of the staff regarding the use of the “simplified” method in
          developing an estimate of expected term of “plain vanilla” share options and
          allows usage of the “simplified” method for share option grants prior to
          December 31, 2007. SAB 110 allows public companies which do not have
          historically sufficient experience to provide a reasonable estimate to
          continue
          use of the “simplified” method for estimating the expected term of “plain
          vanilla” share option grants after December 31, 2007. The Company currently uses
          the “simplified” method to estimate the expected term for share option grants as
          the Company does not have enough historical experience to provide a reasonable
          estimate. The Company intends on using the “simplified” method until the Company
          has enough historical experience to provide a reasonable estimate of expected
          term in accordance with SAB 110. The Company adopted SAB 110 on January
          1, 2008,
          and the Company is currently assessing the impact, if any, of this adoption.
  In
          December 2007, the FASB issued SFAS No. 141(R) "Business Combinations"
          ("SFAS
          141R"). The statement retains the purchase method of accounting for
          acquisitions, but requires a number of changes, including changes in the
          way
          assets and liabilities are recognized in the purchase accounting as well
          as
          requiring the expensing of acquisition-related costs as incurred. Furthermore,
          SFAS 141R provides guidance for recognizing and measuring the goodwill
          acquired
          in the business combination and determines what information to disclose
          to
          enable users of the financial statements to evaluate the nature and financial
          effects of the business combination. SFAS 141R is effective for fiscal
          years
          beginning on or after December 15, 2008. Earlier adoption is prohibited.
          The
          Company is evaluating the impact, if any, that the adoption of this statement
          will have on its consolidated results of operations or financial
          position.
 
 In
          December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling
          Interests in Consolidated Financial Statements — An Amendment of ARB No. 51.”
SFAS 160 amends ARB No. 51 to establish accounting and reporting standards
          for
          the noncontrolling interest in a subsidiary and for the deconsolidation
          of a
          subsidiary. It is intended to eliminate the diversity in practice regarding
          the
          accounting for transactions between equity and noncontrolling interests
          by
          requiring that they be treated as equity transactions. Further, it requires
          consolidated net income to be reported at amounts that include the amounts
          attributable to both the parent and the noncontrolling interest. SFAS 160
          also
          establishes a single method of accounting for changes in a parent’s ownership
          interest in a subsidiary that do not result in deconsolidation, requires
          that a
          parent recognize a gain or loss in net income when a subsidiary is
          deconsolidated, requires expanded disclosures in the consolidated financial
          statements that clearly identify and distinguish between the interests
          of the
          parent’s owners and the interests of the noncontrolling owners of a subsidiary,
          among others. SFAS 160 is effective for fiscal years beginning on or after
          December 15, 2008, with early adoption permitted, and it is to be applied
          prospectively. SFAS 160 is must be applied prospectively as of the beginning
          of
          the fiscal year in which it is initially applied, except for the presentation
          and disclosure requirements, which must be applied retrospectively for
          all
          periods presented. The Company has not yet evaluated the impact that SFAS
          160
          will have on its consolidated financial position or results of
          operations.
 
 In
          March
          2008, the FASB issued SFAS No. 161 ("SFAS 161"), "Disclosures about Derivative
          Instruments and Hedging Activities." SFAS 161 is intended to improve financial
          reporting of derivative instruments and hedging activities by requiring
          enhanced
          disclosures to enable financial statement users to better understand the
          effects
          of derivatives and hedging on an entity's financial position, financial
          performance and cash flows. The provisions of SFAS 161 are effective for
          interim
          periods and fiscal years beginning after November 15, 2008. The Company
          does not
          anticipate that the adoption of SFAS 161 will have a material impact on
          its
          consolidated results of operations or financial position.
 
 In
          May
          2008, the FASB issued SFAS No. 162 (“SFAS 162”), "The Hierarchy of Generally
          Accepted Accounting Principles." SFAS 162 is intended to improve financial
          reporting by identifying a consistent framework, or hierarchy, for selecting
          accounting principles to be used in preparing financial statements that
          are
          presented in conformity with GAAP for nongovernmental entities. SFAS 162
          is
          effective 60 days following the SEC's approval of the Public Company Accounting
          Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly
          in
          Conformity with Generally Accepted Accounting Principles." The Company
          does not
          expect the adoption of SFAS 162 will have a material impact on its consolidated
          results of operations or financial position.
 See
            report of independent registered public accounting firm.
  F-16
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 On
          May 9,
          2008, the FASB issued FASB Staff Position No. APB 14-1 ("FSP APB 14-1"),
          "Accounting for Convertible Debt Instruments That May Be Settled in Cash
          upon
          Conversion (Including Partial Cash Settlement)." FSP APB 14-1 clarifies
          that
          convertible debt instruments that may be settled in cash upon conversion
          (including partial cash settlement) are not addressed by paragraph 12 of
          APB
          Opinion No. 14, "Accounting for Convertible Debt and Debt Issued with Stock
          Purchase Warrants." Additionally, FSP APB 14-1 specifies that issuers of
          such
          instruments should separately account for the liability and equity components
          in
          a manner that will reflect the entity's nonconvertible debt borrowing rate
          when
          interest cost is recognized in subsequent periods. FSP APB14-1 is effective
          for
          financial statements issued for fiscal years beginning after December 15,
          2008,
          and interim periods within those fiscal years. The Company has not yet
          evaluated
          the impact that FSP APB 14-1 will have on its consolidated results of operations
          or financial position.
 
 In
          June
          2008, the FASB issued Emerging Issues Task Force Issue 07-5 (“EITF 07-5”),
“Determining whether an Instrument (or Embedded Feature) is indexed to an
          Entity’s Own Stock.” EITF No. 07-5 is effective for financial statements issued
          for fiscal years beginning after December 15, 2008, and interim periods
          within
          those fiscal years. Early application is not permitted. Paragraph 11(a)
          of SFAS
          133 “Accounting for Derivatives and Hedging Activities” specifies that a
          contract that would otherwise meet the definition of a derivative but is
          both
          (a) indexed to the Company’s own stock and (b) classified in
          stockholders’ equity in the statement of financial position would not be
          considered a derivative financial instrument. EITF 07-5 provides a new
          two-step
          model to be applied in determining whether a financial instrument or an
          embedded
          feature is indexed to an issuer’s own stock and thus able to qualify for the
          SFAS 133 paragraph 11(a) scope exception. This standard triggers liability
          accounting on all options and warrants exercisable at strike prices denominated
          in any currency other than the functional currency of the operating entity
          in
          the PRC (Renminbi). Management is currently evaluating the impact of adoption
          of
          EITF 07-5 on the accounting for related warrants transactions.
 
 Reclassifications
 
 Certain
          prior period amounts have been reclassified to conform to the current period
          presentation with no impact on the previously reported net income or cash
          flows.
 See
            report of independent registered public accounting firm.
  F-17
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 **Note
          3 - Plant and equipment**
 
 Plant
          and
          equipment consist of the following at June 30, 2008 and 2007:
 
 2008
                
                2007Buildings
                    and improvements
                
                $
                6,343,954
                
                $
                5,272,190Machinery
                    and equipment
                
                
                37,239,847
                
                
                22,257,978Automobile
                    facilities
                
                
                562,039
                
                
                487,319Electronic
                    equipment
                
                
                368,550
                
                
                307,391Construction-in-progress
                
                
                36,373,688
                
                
                9,055,482Total
                
                
                80,888,078
                
                
                37,380,360Accumulated
                    depreciation
                
                
                (10,945,057
                )
                
                (7,202,286
                )Total
                
                $
                69,943,021
                
                $
                30,178,074
 
 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. Depreciation expense for the years ended June 30,
          2008,
          2007 and 2006 amounted to $2,964,678, $ 2,239,157 and $1,478,734, respectively.
          Interest costs totaling $598,953, $759,372 and $189,904 was capitalized
          into
          construction-in-progress for the years ended June 30, 2008, 2007 and 2006
          respectively.
 
 **Note
          4 - Investment in unconsolidated affiliate**
 
 On
          September 16, 2003, the Company entered into a joint venture partnership
          with
          Weifang City Investment Company and Changle Century Sun Paper Industry
          Co., Ltd,
          and formed Changle Shengshi Redian Co., Ltd (“Changle Shengshi”). Changle
          Shengshi was incorporated in Weifang City, Shandong Province, PRC. Changle
          Shengshi’s principal activity is to produce and sell electricity and heat. The
          Company accounts for this investment under the equity method of
          accounting.
 
 On
          April
          12, 2005, the Company’s ownership percentage in Changle Shengshi was reduced
          from 30% to 20% as a result of an additional investment to Changle Shengshi
          by
          another party. This did not have any material impact on the Company’s
          consolidated financial statements.
 See
            report of independent registered public accounting firm.
  F-18
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 Summarized
          financial information of Changle Shengshi is as follows as of June 30,
          2008 and
          2007:
 
 2008
                
                2007Current
                    assets
                
                $
                14,117,813
                
                $
                8,065,168Non-current
                    assets
                
                
                27,231,806
                
                
                23,027,549Total
                    assets
                
                
                41,349,619
                
                
                31,092,717Current
                    liabilities
                
                
                20,333,700
                
                
                14,137,526Non-current
                    liabilities
                
                
                2,976,360
                
                
                3,576,800Shareholders'
                    equity
                
                
                18,039,559
                
                
                13,378,391Total
                    liabilities and shareholders' equity
                
                $
                41,349,619
                
                $
                31,092,717
 
 Summarized
          financial information of Changle Shengshi is as follows for the years ended
          June
          30, 2008, 2007, and 2006:
 
 2008
                
                2007
                
                2006Net
                    sales
                
                $
                31,653,752
                
                $
                17,366,341
                
                $
                7,622,505Gross
                    profit
                
                $
                6,247,654
                
                $
                3,586,157
                
                $
                1,249,000Income
                    before taxes
                
                $
                4,571,573
                
                $
                2,308,837
                
                $
                431,747Net
                    income
                
                $
                3,016,305
                
                $
                1,546,921
                
                $
                430,682Company
                    share of income
                
                
                603,261
                
                
                309,384
                
                
                86,136Elimination
                    of intercompany profit
                
                
                (331,022
                )
                
                (177,964
                )
                
                (44,501
                )Company's
                    share of net income
                
                $
                272,239
                
                $
                131,420
                
                $
                41,635
 
 **Note
          5 - Related party transactions**
 
 Through
          September 2006, the Company purchased certain volume of starch from Shouguang
          Shengtai Starch Co. Ltd. (“Shouguang Shengtai”), an entity in which Qingtai Liu,
          the Company’s Chief Executive Officer, has a 40% interest. From September 2006,
          the Company began its own production of starch, and no additional purchases
          were
          made from Shouguan Shengtai for the procurement of starch. As Shouguang
          Shengtai
          is partially owned by the Company’s Chief Executive Officer, prepayments made by
          the Company has been reclassified to other receivable - related party,
          as the
          balance was to be refunded by Shouguang Shengtai. As of June 30, 2007,
          other
          receivable - related party was $992,449. For the years ended June 30, 2007
          and
          2006, the Company made purchases of approximately from Shouguang Shengtai
          $7,652,465 and $13,794,612, respectively, which was approximately 22% and
          77% of
          the Company’s total purchases of raw materials. For the year ended June 30,
          2008, the Company did not make any purchases from Shouguang Shengtai.
 See
            report of independent registered public accounting firm.
  F-19
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 In
          connection with the Company’s purchase of Qingtai Liu’s 49% interest in Weifang
          Shengtai as described in Note 1, and the 17.95% ownership interest transfer
          from
          the Original Shareholders of Weifang Shengtai to Qingtai Liu on April 19,
          2006,
          Qingtai Liu assumed the liabilities of the Original Shareholders’ capital
          contribution and was entitled to contribute this amount as a capital
          contribution to the Company. On December 20, 2007, Qingtai Liu repaid the
          remaining balance of $1,229,625.
 
 The
          Company’s utilities are partially provided by Changle Shengshi. (See Note 4). As
          of June 30, 2008 and 2007, the Company’s accounts payable due to Changle
          Shengshi was approximately $715,000 and $950,000, respectively, which related
          to
          a portion of the Company’s utilities being provided by Changle Shengshi. The
          utilities expense amounted to approximately $9,852,000, $4,958,000 and
          $1,706,000 for the years ended June 30, 2008, 2007 and 2006, respectively.
 
 As
          of
          June 30, 2008 and 2007, the Company’s receivables from two loan contracts with
          Changele Shengshi were as follows:
 
 June
                    30, 2008
                
                June
                    30, 2007Due
                    on November 19, 2007, unsecured, 7.95% interest rate per annum
                
                $
                —
                
                $
                657,500Due
                    on September 14, 2009, unsecured, 7.60% interest rate per annum
                
                
                437,700
                
                
                394,500Total
                
                $
                437,700
                
                $
                1,052,000
 
 Periodically,
          the Company advances monies to Changle Shengshi for temporary cash flow
          purposes. This transaction is recurring in nature and the Company does
          not
          charge interest on these advances, which are due on demand. As of June
          30, 2007,
          total receivable due from Changle Shengshi was $1,499,207. As of June 30,
          2008,
          the Company did not have any amounts due from Changle Shengshi.
 
 The
          following table summarizes other receivable - related parties as of June
          30,
          2008 and 2007 is as follows:
 
 2008
                
                2007Changle
                    Shengshi Redian Co., Ltd
                
                $
                —
                
                $
                1,499,207Shouguang
                    Shengtai Starch Co. Ltd
                
                
                —
                
                
                992,449Total
                
                $
                —
                
                $
                2,491,656
 See
            report of independent registered public accounting firm.
 F-20
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 
 **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. As of June 30,
          2008 and
          2007, the Company’s short term bank loans consisted of the following:
  2008
                  
                  2007Loan
                      from Bank of China, due various dates from January 2008 to
                      June 2009;
                      monthly interest only payments; interest rates ranging from
                      7.47% to 8.96%
                      per annum, guaranteed by an unrelated third party and secured
                      by certain
                      properties.
                  
                  $
                  13,656,240
                  
                  $
                  10,993,400Loan
                      from Industrial and Commercial Bank of China, due various dates
                      from
                      August 2007 to May 2009; monthly interest only payments; interest
                      rates
                      ranging from 7.47% to 8.96% per annum, guaranteed by an unrelated
                      third
                      party and secured by certain properties.
                  
                  $
                  3,895,530
                  
                  $
                  3,945,000Loan
                      from Agriculture Bank of China, due various dates from February
                      2008 to
                      February 2009; monthly interest only payments; interest rate
                      of 8.96% per
                      annum, guaranteed by an unrelated third party and secured by
                      certain
                      properties
                  
                  $
                  2,188,500
                  
                  $
                  1,959,350Loan
                      from Communication Bank, due July 2007; monthly interest only
                      payments;
                      interest rate of 7.2% per annum, guaranteed by an unrelated
                      third party.
                  
                  $
                  —
                  
                  $
                  1,972,500Loan
                      from Commercial Bank, due July 2008; monthly interest-only
                      payments;
                      interest rate at 8.019% per annum, guaranteed by an unrelated
                      third party,
                      unsecured.
                  
                  $
                  1,459,000
                  
                  $
                  —Loan
                      from ShangHai PuFa Bank, due October 2008; monthly interest-only
                      payments;
                      interest rate of 8.384% per annum, guaranteed by an unrelated
                      third party,
                      unsecured.
                  
                  $
                  1,459,000
                  
                  $
                  —Total
                  
                  $
                  22,658,270
                  
                  $
                  18,870,250
 See
            report of independent registered public accounting firm.
  F-21
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 The
          loans
          are secured by buildings and improvements, machinery and equipment, and
          land use
          rights with carrying values as follows:
 
 June
                    30, 2008Buildings
                    and improvements
                
                $
                4,637,104Machinery
                    andequipment
                
                
                4,150,330Land
                    use rights
                
                
                4,860,224Total
                
                $
                13,647,658
 
 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. As of June 30, 2008
          and
          2007, the Company’s notes payables consisted of the following:
 2008
                  
                  2007Bank
                      of China, due November 2008, 0.05% transaction fee, restricted
                      cash
                      required 100% of loan amount, guaranteed by an unrelated third
                      party.
                  
                  $
                  729,500
                  
                  $
                  4,997,000Industrial
                      and Commercial Bank of China, due in September 2008, 0.05%
                      transaction
                      fee, restricted cash required 50% of loan amount, guaranteed
                      by an
                      unrelated third party.
                  
                  
                  4,377,000
                  
                  
                  3,945,000Shenzhen
                      Development Bank, due in December 2008, 0.05% transaction fee,
                      restricted
                      cash required 50% of loan amount, guaranteed by an unrelated
                      third party.
                  
                  
                  4,377,000
                  
                  
                  —Shenzhen
                      Development Bank, due in December 2008, 0.05% transaction fee,
                      restricted
                      cash required 100% of loan amount, guaranteed by an unrelated
                      third party.
                  
                  
                  1,459,000
                  
                  
                  —Total
                  
                  $
                  10,942,500
                  
                  $
                  8,942,000
 See
            report of independent registered public accounting firm.
 F-22
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 Employee
          loans
 
 From
          time
          to time, the Company borrows monies from certain employees for cash flow
          purposes of the Company. These loans do not require collateral and bear
          interest
          at 7.2% for the first six months, and then 10.8% thereafter until the full
          principal amounts are paid by the Company and the principal is due upon
          demand.
          Employee loans amounted to $1,382,287 and $596,516 as of June 30, 2008
          and June
          30, 2007, respectively. Interest expense amounted to $105,672, $45,856,
          and
          $56,425 for the years ended June 30, 2008, 2007, and 2006, respectively.
          These
          loans are payable upon demand.
 
 Employee
          loan - officer
 
 From
          time
          to time, the Company has borrowed monies from Qingtai Liu for cash flow
          purposes
          of the Company. The loan does not require collateral and bear interest
          at 7.2%
          for the first six months, and then 10.8% until the full principal amount
          is paid
          by the Company and the principal is due upon demand. Employee loan from
          officer
          amounted to $53,605 and $0 as of June 30, 2008 and June 30, 2007, respectively.
          Interest expense was de minimis on this loan for the years ended June 30,
          2008,
          2007, and 2006.
 
 Third
          party loan
 
 From
          time
          to time, the Company borrowed money from an unrelated individual for use
          in
          operations. The loan does not require collateral and bears interest at
          7.2% for
          the first six months, and then 10.8% until the full principal amount is
          paid by
          the Company . The principal is due upon demand. Balance on this loan as
          of June
          30, 2008 and 2007 was $640,228 and $318,274, respectively.
 
 Long
          term loan - current portion
 
 Long
          term
          loan - current portion represents an amount due to a bank which was normally
          due
          within one year. During the year ended June 30, 2008, the outstanding amount
          was
          paid in full. As of June 30, 2008 and 2007, long term loan - current portion
          was:
 
 June
                    30, 2008
                
                June
                    30, 2007Agricultural
                    Credit Union, interest at 7.84% per annum, due May 2008
                
                $
                —
                
                $
                381,350
 
 Interest
 
 Total
          interest expense, net of capitalized interest, for the years ended June
          30,
          2008, 2007, and 2006 on all debt, amounted to $1,901,531, $1,270,418, and
          $555,572 respectively. Interest capitalized into construction-in-progress
          totaled $598,953, $759,372 and $189,904 for the years ended June 30, 2008,
          2007
          and 2006, respectively.
 
 **Note
          7 - Income taxes**
 
 The
          Company is governed by the Income Tax Law of the PRC concerning Foreign
          Investment Enterprises (“FIEs”) and Foreign Enterprises and various local income
          tax laws (the “Income Tax Laws”). Under the Income Tax Laws, FIEs are generally
          subject to an effective income tax 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, FIEs scheduled to operate for
          a period
          of 10 years or more and engaged in manufacturing and production may be
          exempt
          from income taxes for up to 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-23
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 In
          February 2004, the Company became a Sino-foreign joint venture. In August
          2004,
          the state government granted the Company income tax exemptions as follows:
          100%
          exemption for the first two years from September 2004 to August 2006, and
          50%
          exemption for years three to five from September 2006 to August 2009. In
          addition, the Company is located in a Special Economic Zone and the PRC
          tax
          authority has offered it with a special income tax rate of 24%. With the
          approval of the local government, the Company is subject to income taxes
          at a
          reduced rate of 12% from September 2006 to August 2009, after the two-year
          24%
          exemption for income taxes until its exemption and reduction periods expire
          in
          August 2009.
 
 Beginning
          on January 1, 2008, the new Enterprise Income Tax (“EIT”) law replaced the
          existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises
          (“FIEs”).
 
 The
          key
          changes were:
 
 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 pay 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 five
                    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 to be taxed at the reduced rate
          as
          described above until the tax holiday term is completed. Starting on September
          1, 2009, the Company will be subject to a 25% income tax rate pursuant
          to the
          new income tax laws.
 
 For
          the
          years ended June 30, 2008, 2007, and 2006, provision for income taxes was
          $645,988, $878,836 and $0, respectively,
 
 The
          following table reconciles the U.S. statutory rates to the Company’s effective
          tax rate for the years ended June 30:
 
 2008
                
                2007
                
                2006U.S.
                    statutory rates
                
                
                34.0
                %
                
                34.0
                %
                
                34.0
                %Foreign
                    income not recognized in the U.S.
                
                
                (34.0
                )
                
                (34.0
                )
                
                (34.0
                )China
                    income taxes
                
                
                29.0
                
                
                33.0
                
                
                33.0China
                    income tax exemption
                
                
                (17.0
                )
                
                (21.0
                )
                
                (33.0
                )Applicable
                    income tax rate
                
                
                12.0
                %
                
                12.0
                %
                
                —
                %
 See
            report of independent registered public accounting firm.
 F-24
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 The
          estimated tax savings due to the tax exemption for the years ended June
          30,
          2008, 2007 and 2006 amounted to $1,468,820, $1,537,963 and $1,389,601,
          respectively. The net effect on basic earnings per share if income taxes
          had
          been applied would decrease basic earnings per share for the years ended
          June
          30, 2008, 2007 and 2006 by $0.08, $0.13 and $0.14 respectively. The net
          effect
          on diluted earnings per share if income taxes had been applied would decrease
          diluted earnings per share for the years ended June 30, 2008, 2007 and
          2006 by
          $0.07, $0.13 and $0.14 respectively.
 
 Taxes
          payable
 
 Taxes
          payable consisted of the following as of June 30, 2008 and 2007:
 
 2008
                  
                  2007VAT
                      payable
                  
                  $
                  3,049,000
                  
                  $
                  1,273,390Individual
                      income tax withheld
                  
                  
                  767
                  
                  
                  1,316Income
                      tax payable
                  
                  
                  1,518,278
                  
                  
                  764,827Housing
                      property tax payable
                  
                  
                  9,903
                  
                  
                  7,306Others
                  
                  
                  53,304
                  
                  
                  2,093Total
                      taxes payable
                  
                  $
                  4,631,252
                  
                  $
                  2,048,932
 
 **Note
          8 - Dividends**
 
 Prior
          to
          June 30, 2006, the Board of Directors of Weifang Shengtai approved and
          declared
          dividends of $2,468,400. As of June 30, 2008, the Company does not have
          any
          outstanding dividends payable. As of, and for the years ended June 30,
          2008,
          2007 and 2006, the dividends paid or declared by the company to its original
          shareholders were as follows:
 
 June
                    30,
                  2008
                
                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
 See
            report of independent registered public accounting firm.
 F-25
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 **Note
          9 - Shareholders’ equity**
 
 Warrants
 
 In
          connection with the Share Purchase Agreement, the 4,375,000 warrants (“Investor
          Warrants”) carry an exercise price of $2.60 and a 5-year term. The Investor
          Warrants are callable if the Company’s shares trade at or above $8.00 per share
          for 20 consecutive trading days and underlying shares are registered for
          resale.
          The Investor Warrants contain standard adjustment provisions upon stock
          dividend, stock split, stock combination, recapitalization, and a change
          of
          control transaction.
 
 Also
          in
          connection with the Share Purchase Agreement, the Company issued 218,750
          warrants (“Placement Agent Warrants”) to Brill Securities, the Placement Agent.
          These Placement Agent Warrants have the same terms as the Investor Warrants.
          These warrants were issued on August 8, 2007.
 
 Concurrent
          with the offering related to the Share Purchase Agreement, the Company
          issued
          75,000 warrants to Chinamerica Fund, LLP and 25,000 warrants to Jeff Jenson
          (collectively as “Lead Investor Warrants”) to compensate Chinamerica Fund LLP as
          the lead investor and for Jeff Jenson in assisting in providing the shell
          of
          West Coast Car Company. These warrants have the same terms as the Investor
          Warrants except with an exercise price of $0.01 per share. In June 2008,
          Jeff
          Jenson exercised the 25,000 warrants issued to him.
 
 All
          Investor Warrants, Placement Agent Warrants, and Lead Investor Warrants
          meet the
          conditions for equity classification pursuant to SFAS No. 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 for as common stock issuance
          cost.
 See
            report of independent registered public accounting firm.
 F-26
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 Weighted
                
                AverageWarrants
                
                Warrants
                
                Average
                    Exercise
                
                RemainingOutstanding
                
                Exercisable
                
                Price
                
                Contractual
                    LifeOutstanding,
                    June 30, 2006
                
                
                —
                
                
                —
                
                $
                —
                
                
                —Granted
                
                
                4,475,000
                
                
                4,475,000
                
                
                2.54
                
                
                5.00Forfeited
                
                
                —
                
                
                —
                
                
                —
                
                
                —Exercised
                
                
                —
                
                
                —
                
                
                —
                
                
                —Outstanding,
                    June 30, 2007
                
                
                4,475,000
                
                
                4,475,000
                
                $
                2.54
                
                
                4.87Granted
                
                
                218,750
                
                
                218,750
                
                
                2.60
                
                
                5.00Forfeited
                
                
                —
                
                
                —
                
                
                —
                
                
                —Exercised
                
                
                219,805
                
                
                219,805
                
                
                2.31
                
                
                —Outstanding,
                    June 30, 2008
                
                
                4,473,945
                
                
                4,473,945
                
                $
                2.54
                
                
                3.88
 
 Stock
          options
 
 On
          January 4, 2008, the Company adopted “Shengtai Pharmaceutical, Inc. 2007 Stock
          Incentive Plan” (the “Stock Incentive Plan”). The Company believes that such
          awards better align the interests of its employee with those of its
          shareholders. Option awards are generally granted with an exercise price
          equal
          to the fair value of the Company’s stock at the date of grant.
 
 On
          May
          14, 2008, the Company granted 500,000 stock options and 160,000 non-qualified
          stock options pursuant to the Stock Incentive Plan. All options have an
          exercise
          price of $3.34, which is the closing price on the date of grant, and expire
          five
          years after the date of grant. All options vest over a period of three
          years on
          a quarterly basis from the date of grant.
 
 The
          Company uses the Black-Scholes option pricing model which was developed
          for use
          in estimating the fair value of options. Option pricing models require
          the input
          of highly complex and subjective variables including the expected life
          of
          options granted and the Company’s expected stock price volatility over a period
          equal to or greater than the expected life of the options. Because changes
          in
          the subjective assumptions can materially affect the estimated value of
          the
          Company’s employee stock options, it is management’s opinion that the
          Black-Scholes option valuation model may not provide an accurate measure
          of the
          fair value of the Company’s employee stock options. Although the fair value of
          employee stock options is determined in accordance with SFAS 123R using
          an
          option pricing model, that value may not be indicative of the fair value
          observed in a willing buyer/willing seller market transaction.
 
 The
          assumptions used in calculating the fair value of options granted using
          the
          Black-Scholes option pricing model are as follows:
 
 Weighted
                    average risk-free interest rate
                
                
                3.22
                %Expected
                    term
                
                
                4
                    yearsExpected
                    volatility
                
                
                146
                %Expected
                    dividend yield
                
                
                0
                %Weighted
                    average grant-date fair value per option
                
                $
                3.34
 See
            report of independent registered public accounting firm.
 F-27
  SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 The
          volatility of the Company’s common stock was estimated by management based on
          the historical volatility; the risk free interest rate was based on Treasury
          Constant Maturity Rates published by the U.S. Federal Reserve for periods
          applicable to the estimated life of the options; and the expected dividend
          yield
          was based on the current and expected dividend policy. The fair value of
          the
          options was based on the Company’s common stock price on the date the options
          were granted. SFAS 123R allows use of the “simplified” method to determine the
          term when other information is not available. Because the Company does
          not have
          sufficient applicable history of employee stock options activity, the Company
          uses the simplified method to estimate the life of the options by taking
          the sum
          of the vesting period and the contractual life and then calculating the
          midpoint
          which is the estimated term of the options.
 
 The
          stock
          option activity was as follows for the year ended June 30, 2008:
  Options
                  outstanding
                
                Weighted
                  Average
                  Exercise
                    Price
                
                Aggregate
                  Intrinsic
                    ValueOutstanding,
                    June 30, 2007
                
                
                —
                
                
                —
                
                
                —Granted
                
                
                660,000
                
                $
                3.34
                
                $
                —Forfeited
                
                
                —
                
                
                —
                
                
                —Exercised
                
                
                —
                
                
                —
                
                
                —Outstanding,
                    June 30, 2008
                
                
                660,000
                
                $
                3.34
                
                $
                —
 
 As
          the
          options were first granted in May 2008, there was no stock option activity
          for
          the year ended June 30, 2007, and prior.
 
 Following
          is a summary of the status of options outstanding at June 30, 2008:
 Outstanding
                      Options
                  
                  Exercisable
                      OptionsAverage
                    Exercise
                      Price
                  
                  Outstanding
                      Options
                  
                  Average
                      Remaining
                    Contractual
                      Life
                  
                  
                  Average
                    Exercise
                      Price
                  
                  Exercisable
                      Options$
                  3.34
                  
                  660,000
                  
                  4.87
                  
                  $
                  3.34
                  
                  —
 
 Compensation
          expense from stock options recognized for the year ended June 30, 2008
          was
          $317,636 **.** There
          were no such expenses recognized for the years ended June 30, 2007 and
          2006.
 
 **Note
          10 - Commitments and Contingencies**
 
 Guarantees
 
 During
          the year ended June 30, 2008, the Company guaranteed $7.3 million of short
          term
          bank loans for an unrelated party, Shangdong Kuangji Group, Inc. (Shangdong
          Kuangji”). The Company is obligated to perform under the guarantee if Shangdong
          Kuangji fails to pay principal and interest payments when due. The maximum
          potential amount of future undiscounted payments under the guarantee is
          $8.0
          million including accrued interest. As of June 30, 2008, the Company did
          not
          record a liability for the guarantee because management believes Shangdong
          Kuangji is current in its payment obligations, and the likelihood of the
          Company
          having to make good on the guarantee is remote. As of June 30, 2008, Shangdong
          Kuangji’s outstanding short term bank loan balance was $7,295,000
 
 See
          report of independent registered public accounting firm.
 F-28
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
 
 
 Litigation
 
 In
          the
          Company’s ordinary course of business, the Company may be subject to certain
          legal proceedings. After review and consultation with the Company’s legal
          counsel, management believes that the outcome of the legal matters will
          not have
          a materially adverse effect on the consolidated results of operations or
          consolidated financial position of the Company.
 
 **Note
          11 - Statutory reserves**
 
 The
          laws
          and regulations of the PRC require 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 reserves. 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’s 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, 2008, 2007, and 2006, the Company
          transferred $1,159,418, $734,396, and $616,256, 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.
 
 Enterprise
          fund
 
 The
          enterprise fund may be used to acquire fixed assets or to increase the
          working
          capital to expand production and operations of the Company. No minimum
          contribution is required and the Company has not made any contribution
          to this
          fund.
 
 **Note
          12 - Retirement benefit plans**
 
 Regulations
          in the PRC require the Company to contribute to a defined contribution
          retirement plan for the benefit of all permanent employees. The Company
          is
          required to make contributions to the state retirement plan at 15% to 20%
          of the
          monthly base salaries of all current permanent employees. The PRC government
          is
          responsible for the administration and benefit liability to retired employees.
          For the years ended June 30, 2008, 2007 and 2006, the Company made contributions
          in the amounts of $308,399, $207,308, and $170,533, respectively to the
          Company’s retirement plan.
 
 See
          report of independent registered public accounting firm.
 F-29
 
 SHENGTAI
          PHARMACEUTICAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
          30,
          2008
   **Note
            13- Subsequent event**
  Short
            term loans
  In
            July
            2008, the Company paid in full the outstanding amount of $1,459,000 to
            Commercial Bank, in satisfaction of its loan terms. In August 2008, the
            Company
            paid $977,530 to Industrial and Commercial Bank of China in accordance
            with the
            loan agreement.
  In
            September 2008, the Company borrowed $1,459,854 loan from Commercial
            Bank, due
            June 2009, monthly interest-only payments; interest rate at 9.71% per
            annum,
            secured by certain properties.
  Notes
            payable
  By
            September 2008, the Company paid in full the outstanding amount of $4,377,000
            to
            Industrial and Commercial Bank of China, in satisfaction of its loan
            terms.
  In
            September 2008, the Company borrowed $1,956,204 notes payable from Industrial
            and Commercial Bank of China, due in March 2009, 0.05% transaction fee,
            restricted cash required 50% of loan amount, secured by certain
            properties.
 F-30
   (2)
              Exhibits
 
 Incorporated
        by Reference
 
 FilingExhibit
              
              
              
              
              
              Date/periodNumber
              
              ExhibitDescription
              
              Form
              
              End Date3.1
              
              AmendedandRestatedCertificateofIncorporation
              
              Form10-SB
              
              September26,20063.2
              
              By
                  Laws
              
              Form10-SB
              
              September26,20064.1
              
              FormofWarrantstoInvestors
              
              Form8-K
              
              May21,200710.1
              
              ShareExchangeAgreementdatedMay15,2007byandamong
                  theCompanyandShengtaiHolding,Inc
              
              Form8-K
              
              May21,200710.2
              
              SharePurchaseAgreementdateda


                  sofMay15,2007between
                  the Company and the Purchasers
              
              Form8-K
              
              May21,200716.1
              
              LetterdatedMay17,2007f


                  romWestCoastCarCompanyto
                  MantylaMcRobersLLC
              
              Form8-K
              
              May21,200716.2
              
              LetterdatedMay23,2007f


                  romMantylaMcReynoldsLLCtothe
                  Securities
                  and Exchange
                  Commission
              
              Form8-K/A
              
              May24,200721.1
              
              ListofSubsidiaries
              
              Form8-K
              
              May21,200799.1
              
              Press
                  release dated May 21, 2007issuedbyWestCoastCar
                  Company
              
              Form8-K
              
              May21,2007Filed
                    and Furnished herewith10.3
              
              Employment
                  Agreement dated May 1, 2008 between the Company and Yiru
                  Shi
              
              Form10-K
              
              May29,2008
 
 
  **SIGN** **A** **TU** **R** **ES**
  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 Liu
              
              Chief
                  Executive Officer (Principal Executive
              
              September
                  28, 2008Qingtai Liu
              
              Officer)
                  and Director/s/
                  Yiru Shi
              
              Chief Financial Officer (Principal Financial and
              
              September
                  28, 2008Yiru
                  Shi
              
              Accounting Officer)/s/
                  Yongqiang Wang
              
              Director
              
              September
                  28, 2008Yongqiang Wang/s/
                  Wenbing Christopher Wang
              
              Director
              
              September
                  28, 2008Wenbing
                  Christopher Wang/s/
                  Changxin Li
              
              Director
              
              September
                  28, 2008Changxin Li/s/ Winfred Lee
              
              Director
              
              September
                    28, 2008Winfred
                  Lee
 -
        31
        -