UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





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





For the
quarterly period ended March 31, 2010





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





For the
transition period from ____________ to __________





Commission
file number:000-32253





HUIFENG
BIO-PHARMACEUTICAL TECHNOLOGY, INC.


(Exact
name of registrant as specified in its charter)





Nevada
              87-0650264(State
      or Other Jurisdiction of
              (I.R.S.
      Employer ofIncorporation
      or Organization)
              Identification
      No.)





16B/F
Ruixin Bldg., No. 25 Gaoxin Road


Xi’an
710075 Shaanxi Province, China


(Address
of Principal Executive Offices Including Zip Code)





86-29-8822
4682


(Registrant
's telephone number, including area code)





N/A


(Former
name, former address and former fiscal year, if changed since last
report)





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes  ̈ No  ̈





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





Large
      accelerated filer   ̈
                Accelerated
      filer  ̈Non-accelerated
      filer   ̈
                Smaller
      reporting company  R


(Do not
check if a smaller reporting company)





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


Yes  ̈No R





Number of
shares of Common Stock outstanding as of May 10, 2010, was 23,275,509 shares of
common stock, par value $0.018.








HUIFENG
BIO-PHARMACEUTICAL TECHNOLOGY, INC.





INDEX





PART
      I.
                  FINANCIAL
      INFORMATION
                  
                  4Item
      1.
                  Financial
      Statements
                  
                  4Condensed
      Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December
      31, 2009 (audited)
                  
                  4Unaudited
      Condensed Consolidated Statements of Operations and Other Comprehensive
      Income for the Three Months Ended March 31, 2010 and 2009
                  
                  5Unaudited
      Condensed Consolidated Statements of Cash Flows for the Three Months Ended
      March 31, 2010 and 2009
                  
                  6Notes
      to Unaudited Condensed Consolidated Financial Statements as of March 31,
      2010
                  
                  7Item
      2.
                  Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  
                  13Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  
                  18Item
      4T.
                  Controls
      and Procedures
                  
                  19PART
      II.
                  OTHER
      INFORMATION
                  
                  19Item
      1.
                  Legal
      Proceedings
                  
                  19Item
      1A.
                  Risk
      Factors
                  
                  19Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  
                  19Item
      3.
                  Defaults
      Upon Senior Securities
                  
                  19Item
      4.
                  Reserved
                  
                  19Item
      5.
                  Other
      Information
                  
                  19Item
      6
                  Exhibits
                  
                  20SIGNATURES
                  
                  21


2


SPECIAL
NOTE REGARDING FORWARD—LOOKING STATEMENTS





On one or
more occasions, we may make forward-looking statements in this Quarterly Report
on Form 10-Q regarding our assumptions, projections, expectations, targets,
intentions or beliefs about future events. Words or phrases such as
“anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,”
“intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,”
“will continue” or similar expressions identify forward-looking statements.
Readers are cautioned that these forward-looking statements are only predictions
and are subject to risks, uncertainties, and assumptions that are difficult to
predict, including those identified below, under “ Part II — Other Information,
Item 1A. Risk Factors ” and elsewhere herein. Therefore, actual results may
differ materially and adversely from those expressed in any forward-looking
statements. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. However, your attention is directed to any further
disclosures made on related subjects in our subsequent annual and periodic
reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q
and 8-K and Proxy Statements on Schedule 14A.





Unless
the context requires otherwise, references to “we,” “us,” “our,” the “Company”
and “the Company” refer specifically to Huifeng Bio-Pharmaceutical Technology,
Inc. and our subsidiaries.


3


PART
I. FINANCIAL INFORMATION


Item
1. Financial Statements




HUIFENG
BIO-PHARMACEUTICAL TECHNOLOGY, INC


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





March 31, 2010
                                      (Unaudited)
                                    
                                    
                                    December 31,
                                      2009 (Audited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                    
                                    $
                                    630,953
                                    
                                    
                                    $
                                    556,763Accounts
      receivable, net
                                    
                                    
                                    6,310,407
                                    
                                    
                                    
                                    5,576,321Inventories,
      net
                                    
                                    
                                    5,436,252
                                    
                                    
                                    
                                    5,656,420Other
      assets
                                    
                                    
                                    966,362
                                    
                                    
                                    
                                    573,117Total
      Current Assets
                                    
                                    
                                    13,343,974
                                    
                                    
                                    
                                    12,362,621PROPERTY
      AND EQUIPMENT, NET
                                    
                                    
                                    6,258,320
                                    
                                    
                                    
                                    6,278,619LAND
      USE RIGHTS, NET
                                    
                                    
                                    144,797
                                    
                                    
                                    
                                    145,605TOTAL
      ASSETS
                                    
                                    $
                                    19,747,091
                                    
                                    
                                    $
                                    18,786,845LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESAccounts
      payable
                                    
                                    $
                                    338,337
                                    
                                    
                                    $
                                    397,292Other
      payables and accrued expenses
                                    
                                    
                                    339,279
                                    
                                    
                                    
                                    422,902Income
      tax and other taxes payable
                                    
                                    
                                    641,210
                                    
                                    
                                    
                                    692,532Notes
      payable
                                    
                                    
                                    838,197
                                    
                                    
                                    
                                    838,062Total
      Current Liabilities
                                    
                                    
                                    2,157,023
                                    
                                    
                                    
                                    2,350,788LONG-TERM
      LIABILITIESConvertible
      notes payable (net of unamortized discount of $869,532 and $1,120,447
      as of March 31, 2010 and December 31, 2009, respectively, due on June
      30, 2011)
                                    
                                    
                                    930,468
                                    
                                    
                                    
                                    679,553TOTAL
      LIABILITIES
                                    
                                    
                                    3,087,491
                                    
                                    
                                    
                                    3,030,341COMMITMENTS
      AND CONTINGENCIES
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -EQUITYHFGB
      Stockholders’ EquityPreferred
      stock ($0.001 par value, 5,000,000 shares authorized, none issued and
      outstanding)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Common
      stock ($0.018 par value, 100,000,000 shares authorized,
      23,051,169 shares issued and outstanding as of March 31, 2010 and
      22,991,169 shares issued and outstanding as of December 31,
      2009)
                                    
                                    
                                    416,463
                                    
                                    
                                    
                                    413,838Additional
      paid-in capital
                                    
                                    
                                    10,388,755
                                    
                                    
                                    
                                    10,315,847Deferred
      stock compensation
                                    
                                    
                                    (67,100
                                    )
                                    
                                    
                                    -Retained
      earnings (deficit)Unappropriated
                                    
                                    
                                    3,053,581
                                    
                                    
                                    
                                    2,189,692Appropriated
                                    
                                    
                                    888,185
                                    
                                    
                                    
                                    888,185Accumulated
      other comprehensive income
                                    
                                    
                                    1,400,627
                                    
                                    
                                    
                                    1,398,147Total
      HFGB Stockholders' Equity
                                    
                                    
                                    16,080,511
                                    
                                    
                                    
                                    15,205,709Non-controlling
      Interest
                                    
                                    
                                    579,089
                                    
                                    
                                    
                                    550,795TOTAL
      EQUITY
                                    
                                    
                                    16,659,600
                                    
                                    
                                    
                                    15,756,504TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                    
                                    $
                                    19,747,091
                                    
                                    
                                    $
                                    18,786,845




The
accompanying notes are an integral part of these consolidated financial
statements.


4





HUIFENG
BIO-PHARMACEUTICAL TECHNOLOGY, INC


AND
SUBSIDIARIES


UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


AND
COMPREHENSIVE INCOME





For the Three
                      Months Ended
                      March 31, 2010
                    
                    
                    For the Three
                      Months Ended
                      March 31, 2009NET
      SALES
                    
                    $
                    4,151,886
                    
                    
                    $
                    1,325,895COST
      OF SALES
                    
                    
                    (2,529,154
                    )
                    
                    
                    (1,051,840
                    )GROSS
      PROFIT
                    
                    
                    1,622,732
                    
                    
                    
                    274,055OPERATING
      EXPENSESSelling
      expenses and distribution expenses
                    
                    
                    18,792
                    
                    
                    
                    52,358General
      and administrative expenses
                    
                    
                    244,340
                    
                    
                    
                    408,699Depreciation
      and amortization
                    
                    
                    5,227
                    
                    
                    
                    6,469Total
      Operating Expenses
                    
                    
                    268,359
                    
                    
                    
                    467,526INCOME
      (LOSS) FROM OPERATIONS
                    
                    
                    1,354,373
                    
                    
                    
                    (193,471
                    )OTHER
      INCOME (EXPENSES)Interest
      income
                    
                    
                    1,511
                    
                    
                    
                    232Interest
      expenses
                    
                    
                    (307,782
                    )
                    
                    
                    (142,103
                    )Other
      income
                    
                    
                    92,931
                    
                    
                    
                    -Total
      Other Income (Expenses)
                    
                    
                    (213,340
                    )
                    
                    
                    (141,871
                    )INCOME
      (LOSS) FROM OPERATIONS BEFORE INCOME TAXES
                    
                    
                    1,141,033
                    
                    
                    
                    (335,342
                    )INCOME
      TAX EXPENSE
                    
                    
                    (248,939
                    )
                    
                    
                    (44,997
                    )NET
      INCOME (LOSS) FROM CONTINUING OPERATIONS
                    
                    
                    892,094
                    
                    
                    
                    (380,339
                    )DISCONTINUED
      OPERATIONSLoss
      from discontinued operations, net of income taxes
                    
                    
                    -
                    
                    
                    
                    (8,387
                    )NET
      INCOME (LOSS)
                    
                    
                    892,094
                    
                    
                    
                    (388,726
                    )Less:
      Net income attributable to non-controlling interests
                    
                    
                    (28,205
                    )
                    
                    
                    (3,911
                    )NET
      INCOME (LOSS) ATTRIBUTABLE TO HFGB COMMON STOCKHOLDERS
                    
                    
                    863,889
                    
                    
                    
                    (392,637
                    )OTHER
      COMPREHENSIVE INCOMETotal
      other comprehensive income
                    
                    
                    2,569
                    
                    
                    
                    15,599Less:
      Foreign currency translation gain attributable to non-controlling
      interests
                    
                    
                    (89
                    )
                    
                    
                    (667
                    )Foreign
      currency translation gain attributable to HFGB common
      stockholders
                    
                    
                    2,480
                    
                    
                    
                    14,932COMPREHENSIVE
      INCOME (LOSS)
                    
                    $
                    866,369
                    
                    
                    $
                    (377,705
                    )Income
      (loss) per share - basicContinuing
      operations
                    
                    $
                    0.04
                    
                    
                    $
                    (0.02
                    )Discontinued
      operations
                    
                    
                    -
                    
                    
                    
                    -Net
      income (loss) per share - basic
                    
                    $
                    0.04
                    
                    
                    $
                    (0.02
                    )Income
      (loss) per share - dilutedContinuing
      operations
                    
                    $
                    0.03
                    
                    
                    $
                    (0.02
                    )Discontinued
      operations
                    
                    
                    -
                    
                    
                    
                    -Net
      income (loss) per share – diluted
                    
                    $
                    0.03
                    
                    
                    $
                    (0.02
                    )Weighted
      average number of shares outstanding during the period -
    basic
                    
                    
                    23,074,548
                    
                    
                    
                    18,466,169Weighted
      average number of shares outstanding during the period -
      diluted
                    
                    
                    25,324,548
                    
                    
                    
                    20,466,169





The
accompanying notes are an integral part of these consolidated financial
statements.




5




HUIFENG
BIO-PHARMACEUTICAL TECHNOLOGY INC.


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)




For the Three
                        Months Ended
                        March 31, 2010
                      
                      
                      For the Three
                        Months Ended
                        March 31, 2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss) from continuing operations
                      
                      $
                      863,889
                      
                      
                      $
                      (384,250
                      )Net
      loss from discontinued operations
                      
                      
                      -
                      
                      
                      
                      (8,387
                      )Net
      income (loss) from continuing operations
                      
                      
                      863,889
                      
                      
                      
                      (392,637
                      )Adjusted
      to reconcile net income (loss) to cash provided byoperating
      activities:Allowance
      for doubtful accounts - accounts receivable
                      
                      
                      76,266
                      
                      
                      
                      276,956Depreciation
      and amortization - cost of sales
                      
                      
                      148,367
                      
                      
                      
                      150,998Depreciation
      and amortization
                      
                      
                      5,227
                      
                      
                      
                      6,469Amortization
      of discount on convertible notes
                      
                      
                      250,915
                      
                      
                      
                      38,335Amortization
      of deferred financing costs
                      
                      
                      -
                      
                      
                      
                      42,438Stock
      compensation expense
                      
                      
                      8,433
                      
                      
                      
                      -Stock
      options issued to a legal counsel
                      
                      
                      -
                      
                      
                      
                      10,916Non-controlling
      interests
                      
                      
                      28,205
                      
                      
                      
                      3,911Changes
      in operating assets and liabilities(Increase)
      decrease in:Accounts
      receivable, net
                      
                      
                      (809,462
                      )
                      
                      
                      160,946Inventories,
      net
                      
                      
                      221,081
                      
                      
                      
                      (20,851
                      )Other
      assets
                      
                      
                      (393,157
                      )
                      
                      
                      (179,206
                      )Increase
      (decrease) in:Accounts
      payable
                      
                      
                      (59,019
                      )
                      
                      
                      (204,136
                      )Other
      payables and accrued expenses
                      
                      
                      (83,693
                      )
                      
                      
                      107,833Income
      tax and other taxes payable
                      
                      
                      (51,434
                      )
                      
                      
                      132,536Net
      cash provided by operating activities – continuing
      operations
                      
                      
                      205,618
                      
                      
                      
                      134,508Net
      cash provided by operating activities – discontinued
      operations
                      
                      
                      -
                      
                      
                      
                      8,372Net
      cash provided by operating activities
                      
                      
                      205,618
                      
                      
                      
                      142,880CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                      
                      
                      (131,528
                      )
                      
                      
                      (158,359
                      )Net
      cash used in investing activities – continuing operations
                      
                      
                      (131,528
                      )
                      
                      
                      (158,359
                      )Net
      cash provided by investing activities – discontinued
      operations
                      
                      
                      -
                      
                      
                      
                      -Net
      cash used in investing activities
                      
                      
                      (131,528
                      )
                      
                      
                      (158,359
                      )CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      cash provided by financing activities – continuing
      operations
                      
                      
                      -
                      
                      
                      
                      -Net
      cash provided by financing activities – discontinued
      operations
                      
                      
                      -
                      
                      
                      
                      -Net
      cash provided by financing activities
                      
                      
                      -
                      
                      
                      
                      -EFFECT
      OF EXCHANGE RATES ON CASH
                      
                      
                      100
                      
                      
                      
                      196NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                      
                      
                      74,190
                      
                      
                      
                      (15,283
                      )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                      
                      
                      556,763
                      
                      
                      
                      45,574CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                      
                      $
                      630,953
                      
                      
                      $
                      30,291SUPPLEMENTAL DISCLOSURE OF CASH FLOW
      INFORMATIONCash
      paid during the period for:Income
      taxes
                      
                      $
                      340,712
                      
                      
                      $
                      -Interest
      expenses
                      
                      $
                      28,534
                      
                      
                      $
                      11,329




SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:





In
January 2010, a legal counsel exercised its stock option to purchase 100,000
shares of Common stock at the exercise price $1.50 which was granted by the
Company in April 2008. The Company issued cashless 60,000 shares of Common stock
for this stock option.





On
February 25, 2010, the Company issued 85,833 shares of restricted common stock
having a fair value of $75,533 as annual compensation. The value of the common
stock issued was determined based the closing market price of
$0.88.




The
accompanying notes are an integral part of these consolidated financial
statements.


6


HUIFENG
BIO-PHARMACEUTICAL TECHNOLOGY INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AS OF MARCH 31,
2010
(UNAUDITED)





NOTE
1 ORGANIZATION AND BASIS OF PRESENTATION





Huifeng
Bio-Pharmaceutical Technology Inc. and all of its subsidiaries (collectively
“Huifeng Bio-Pharmaceutical”) or (the “Company”) are principally engaged in the
manufacture of plant extracts and bio-chemical products in the People’s Republic
of China (“PRC”), for sale in the PRC market, Japan and some European
countries.





Huifeng
Bio-Pharmaceutical was incorporated in Nevada on March 16, 2000 under the name
Enternet, Inc. with headquarters in Xi’an City, PRC.





Details
of the Company’s principal subsidiaries as of March 31, 2010 are described in
Note 4 – Subsidiaries.





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.





It the
opinion of management, the unaudited condensed consolidated financial statements
contain all adjustments consisting only of normal recurring accruals considered
necessary to present fairly the Company's consolidated financial position at
March 31, 2010 and December 31, 2009, the consolidated results of operations for
the three months ended March 31, 2010 and 2009, and consolidated cash flows for
the three months ended March 31, 2010 and 2009. The consolidated results for the
three months ended March 31, 2010 are not necessarily indicative of the results
to be expected for the entire fiscal year ending December 31, 2010. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes for the year ended December 31, 2009
appearing in the Company's annual report on Form 10-K as filed with the
Securities and Exchange Commission.





NOTE
2 USE OF ESTIMATES





In
preparing financial statements to conform with generally accepted accounting
principles, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reported period. Actual results could differ from those
estimates.





NOTE
3 PRINCIPLES OF CONSOLIDATION





The
accompanying unaudited condensed consolidated financial statements as of March
31, 2010 include the financial statements of Huifeng Bio-Pharmaceutical and its
100% owned subsidiary Northwest, 100% owned subsidiary Huifeng Bio-Technic and
80.2% owned subsidiary Huifeng Pharmaceutical.





The
accompanying unaudited condensed consolidated financial statements as of March
31, 2009 include the financial statements of Huifeng Bio-Pharmaceutical and its
100% owned subsidiary Northwest, 100% owned subsidiary Huifeng Bio-Technic, 70%
owned subsidiary Huifeng Engineering and 80.2% owned subsidiary Huifeng
Pharmaceutical.





The
results of discontinued operations have been reported separately in the
unaudited condensed consolidated financial statements and the previously
reported financial statements have been reclassified.





All
significant inter-company balances and transactions have been eliminated in
consolidation.





NOTE
4 SUBSIDIARIES





Details
of the Company’s principal consolidated subsidiaries as of March 31, 2010 were
as follows:





Name
                        
                        Place of Incorporation
                        
                        Ownership interest
                          attributable to the
                          Company
                        
                        Principal activitiesNorthwest
      Bio-Technic Inc.
                        
                        British
      Virgin Islands
                        
                        100%
                        
                        Investment
      holdingXi’an
      Huifeng Bio-Technic In.
                        
                        The
      PRC
                        
                        100%
                        
                        Manufacturing
      and sale of pharmaceutical raw materialsXi’an
      Huifeng Pharmaceutical Company Limited
                        
                        The
      PRC
                        
                        80.2%
                        
                        Manufacturing
      and sale of pharmaceutical raw
materials




7





The
Company disposed its 70% owned subsidiary – Xi’an Huifeng Biochemistry
Engineering Company Limited (“Huifeng Engineering” in June 2009.





NOTE
5 CASH AND CASH EQUIVALENTS





For
purposes of the cash flow statements, the Company considers all highly liquid
investments with original maturities of three months or less at the time of
purchase to be cash equivalents.





NOTE
6 STOCK-BASED COMPENSATION





In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based
Payment”, a revision to SFAS No. 123, “Accounting for Stock-Based Compensation”,
and superseding APB Opinion No. 25, “Accounting for Stock Issued to Employees”
and its related implementation guidance (now ASC Topic 718 “Compensation-Stock
Compensation”) (“ASC 718”). The Company adopted ASC 718, using a modified
prospective application transition method, which establishes accounting for
stock-based awards in exchange for consultancy services. Under this application,
the Company is required to record stock-based compensation expense for all
awards granted after the date of adoption and unvested awards that were
outstanding as of the date of adoption. ASC 718 requires that stock-based
compensation cost is measured at grant date, based on the fair value of the
award, and recognized in expense over the vesting period.





Common
stock, a stock option and warrants issued to other than employees or directors
in exchange for services are recorded on the basis of their fair value, as
required by ASC 718, which is measured as of the date required by ASC Topic
505-50 “Equity-Based Payment to Non-Employees” (“ASC 505-50”) (formerly EITF
Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. In
accordance with ASC 505-50, the non-employee stock options or warrants are
measured at their fair value by using the Black-Scholes option pricing model as
of the earlier of the date at which a commitment for performance to earn the
equity instruments is reached (“performance commitment date”) or the date at
which performance is complete (“performance completion date”).
Accounting for non-employee stock options or warrants which involve only
performance conditions when no performance commitment date or performance
completion date has occurred as of reporting date requires measurement a the
equity instruments then-current fair value. Any subsequent changes in the market
value of the underlying common stock are reflected in the expense recorded in
the subsequent period in which that change occurs.





NOTE
7 INCOME TAXES





The
Company accounts for income taxes under the ASC Topic 740 “Income Taxes” (“ASC
740”) (formerly SFAS No. 109, “Accounting for Income Taxes”). Under this ASC,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under this ASC, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.





The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”) (now FASB ASC Topic 740-10) (“ASC
740-10). ASC 740-10 prescribes a more-likely-than-not threshold for financial
statements recognition and measurement of a tax position taken (or expected to
be taken) in a tax return. This ASC also provides guidance on derecognition of
income tax assets and liabilities, classification of current and deferred income
tax assets and liabilities, accounting for interest and penalties associated
with tax positions, accounting for interest and penalties associated with tax
positions, accounting for income taxes in interim periods and income tax
disclosures. The adoption of ASC 740-10 has not resulted in any material impact
on the Company’s financial position or results.





Huifeng
Bio-Pharmaceutical was incorporated in the United States and has incurred net
operating loss as for income tax purposes for the three months ended March 31,
2010 and 2009.





Northwest,
a wholly owned subsidiary of the Company, was incorporated in the British Virgin
Islands and, under current laws of the British Virgin Islands, is not subject to
tax on income or on capital gains.





Huifeng
Bio-Technic, a wholly-owned subsidiary of Northwest, was incorporated in the PRC
being registered as a new and high technology enterprise is entitled to an
income tax reduction. According to the document of reductions approved by the
local tax bureau, the income tax rate was reduced from 33% to 15% on a permanent
basis. Provision for income tax expenses for the three months ended March 31,
2010 and 2009 were $192,509 and $15,199 respectively.





Huifeng
Engineering, 70% owned subsidiary of Huifeng Bio-Technic, was incorporated in
the PRC and subject to PRC income tax which is computed according to the
relevant laws and regulations in the PRC. No provision for income tax expenses
for the three months ended March 31, 2010 and 2009 as Huifeng Engineering has
incurred net operating loss and was disposed on June 28, 2009.


8





Huifeng
Pharmaceutical, 80.2% owned subsidiary of Huifeng Bio-Technic, was also
incorporated in the PRC and subject to PRC income tax which is computed
according to the relevant laws and regulations in the PRC. The applicable tax
rate for the three months ended March 31, 2009 and 2008 was 25%. The provision
for income tax expenses for the three months ended March 31 2010 and 2009 was
$56,430 and $29,798 respectively.





NOTE
8 INCOME (LOSS) PER SHARE





Basic
income (loss) per share is computed by dividing income (loss) available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted income (loss) per share is computed similar to basic
income (loss) per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. Including for the three months ended March 31, 2010 and 2009, the
Company’s 10% secured convertible notes (the “Notes”) in a face amount of
$1,800,000 as of March 31, 2010 and $2,000,000 as of March 31, 2009 which are
due and payable in full in 2 years from their issuance.





Warrants
to purchase 500,000 shares of common stock at $1.50 per share as of March 31,
2009 and amended to purchase 450,000 shares of common stock at $1 per share as
of March 31, 2010 and a stock option to purchase 100,000 shares of common stock
at price $1.50 per share as of March 31, 2009, but were excluded from the
calculation of diluted earnings per share because the effect of stock warrants
and a stock option is anti-dilutive.





NOTE
9 BUSINESS SEGMENTS





The
Company operates in only one segment, thereafter segment disclosure is not
presented.





NOTE
10 RECENT ACCOUNTING PRONOUNCEMENTS





In
January 2010, FASB issued ASU 2010-2, “Accounting and Reporting for Decreases in
Ownership of a Subsidiary- a Scope Clarification”. ASU 2010-2 addresses
implementation issues related to the changes in ownership provisions in the
Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB ASC, originally
issued as SFAS 160, “Noncontrolling Interests in Consolidated Financial
Statements”. Subtopic 810-10 establishes the accounting and reporting guidance
for noncontrolling interests and changes in ownership interests of a subsidiary.
An entity is required to deconsolidate a subsidiary when the entity ceases to
have a controlling financial interest in the subsidiary. Upon deconsolidation of
a subsidiary, an entity recognizes a gain or loss on the transaction and
measures any retained investment in the subsidiary at fair value. The gain or
loss includes any gain or loss associated with the difference between the fair
value of the retained investment in the subsidiary and its carrying amount at
the date the subsidiary is deconsolidated. In contrast, an entity is required to
account for a decrease in ownership interest of a subsidiary that does not
result in a change of control of the subsidiary as an equity transaction.
ASU 2010-2 is effective for the Company starting January 3, 2010. The
Company expects the adoption of ASU 2010-2 will not have a material impact on
the Company's results of operations or financial position.





In
January 2010, FASB issued ASU 2010-6, “Improving Disclosures about Fair
Measurements". ASU 2010-6 provides amendments to subtopic 820-10 that require
separate disclosure of significant transfers into and out of Level 1 and
Level 2 fair value measurements and the presentation of separate
information regarding purchases, sales, issuances and settlements on a gross
basis in the reconciliation of Level 3 fair value measurements.
Additionally, ASU 2010-6 provides amendments to subtopic 820-10 that clarify
existing disclosures about the level of disaggregation and inputs and valuation
techniques. ASU 2010-6 is effective for financial statements issued for annual
reporting periods beginning after December 15, 2009, except for Level 3
reconciliation disclosures which are effective for annual periods beginning
after December 15, 2010. The Company expects the adoption of ASU 2010-06
will not have a material impact on the Company’s results of operations or
financial position.





In
February 2010, FASB issued ASU 2010-9 “Subsequent Events (Topic 855) Amendments
to Certain Recognition and Disclosure Requirements”. ASU 2010-9 amends
disclosure requirements within Subtopic 855-10. An entity that is an SEC filer
is not required to disclose the date through which subsequent events have been
evaluated. This change alleviates potential conflicts between Subtopic 855-10
and the SEC's requirements. ASU 2010-9 is effective for interim and annual
periods ending after June 15, 2010. The Company expects the adoption of ASU
2010-06 will not have a material impact on the Company’s results of operations
or financial position.





In March
2010, FASB issued ASU 2010-11 “Derivatives and Hedging (Topic 815) Scope
Exception Related to Embedded Credit Derivatives”. ASU 2010-11 clarifies the
type of embedded credit derivative that is exempt from embedded derivative
bifurcation requirements. Only one form of embedded credit derivative qualifies
for the exemption—one that is related only to the subordination of one financial
instrument to another. As a result, entities that have contracts containing an
embedded credit derivative feature in a form other than such subordination may
need to separately account for the embedded credit derivative feature. The
amendments in this Update are effective for each reporting entity at the
beginning of its first fiscal quarter beginning after June 15, 2010. Early
adoption is permitted at the beginning of each entity’s first fiscal quarter
beginning after issuance of this Update. The Company expects the adoption of ASU
2010-11 will not have a material impact on the Company’s results of operations
or financial position.


9





In April
2010, FASB issued ASU 2010-13 “Compensation-Stock Compensation (Topic 718)
Effect of Denominating the Exercise Price of a Share-Based Payment Award in the
Currency of the Market in Which the Underlying Equity Security Trades”. ASU
2010-13 addresses the classification of a share-based payment award with an
exercise price denominated in the currency of a market in which the underlying
equity security trades. Topic 718 is amended to clarify that a share-based
payment award with an exercise price denominated in the currency of a market in
which a substantial portion of the entity’s equity securities trades shall not
be considered to contain a market, performance, or service condition. Therefore,
such an award is not to be classified as a liability if it otherwise qualifies
as equity classification. The amendments in this Update should be effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2010. The guidance should be applied by recording a
cumulative-effect adjustment to the opening balance of retained earnings for all
outstanding awards as of the beginning of the fiscal year in which the
amendments are initially applied. The Company expects the adoption of ASU
2010-13 will not have a material impact on the Company’s results of operations
or financial position.





NOTE
11 CONVERTIBLE NOTES PAYABLE





On
December 31, 2007, the Company consummated a private placement of $2,000,000
principal amount of 10% secured convertible notes (the “Notes”) with a
three-year common stock warrants to seven accredited investors. Financing cost
of $339,500 was paid out of the gross proceeds. Financing cost is amortized over
the life of the Notes to interest expense using the effective interest method.
For the three months ended March 31, 2010 and 2009, the Company amortized $0 and
$42,438 of financing costs in interest expenses. The Notes are due December 31,
2009 and are convertible into 2,000,000 shares of common stock of the Company at
a conversion price of $1.00 per share.





As of
December 31, 2009, a Note holder converted the principal amount of $200,000 of
its Note into 200,000 shares of common stock of the Company. On December 24,
2009, the Company and six other investors, who held Notes totaling $1,800,000 of
the Notes, entered into an agreement to amend the Notes as follows:





1.
            The
      maturity date of the Notes was extended from December 31, 2009 to June 30,
      2011;


2.
            The
      conversion rate of the Notes into common stock was amended from $1 to
      $0.8;


3.
            The
      exercise price of stock warrants to purchase 450,000 shares of common
      stock was reduced from $1.5 to $1;


4.
            The
      term of warrants was extended one year to December 31,
    2011;


5.
            The
      Company agreed to issue to the holders an aggregate of 450,000 shares of
      common stock in consideration for entering into the amendment;
      and


6.
            The
      principal shall be due and payable in accordance with the payment schedule
      by percentages from 2.5% to 14.5% starting from April 30, 2010 and
      consequently to June 30, 2011 which payable at monthly
  end.





The
holders of the Notes may convert the unpaid principal amount of the Notes into
common stock of the Company at any time prior to maturity, at the applicable
conversion price. The Company may prepay all or any part of the outstanding
principal amount of the Notes, together with interest accrued, if any, upon not
fewer than thirty days’ prior written notice to the holders.





In
accordance with ASC 470-20 (formerly EITF 98-5), a beneficial conversion feature
has been recorded on the extension of the maturity date of the Notes as the
conversion price of the Notes of $0.8 is lower than the fair market value per
share of $0.99 at December 24, 2009. The value of beneficial conversion feature
of $342,000 is recorded as a reduction in the carrying value of the Notes
against additional paid-in capital and is amortized over the term of the Notes
from the respective date of extension using the effective yield method. The
Company amortized $75,277 of beneficial conversion feature as interest expense
for the three months ended March 31, 2010.





The Notes
are secured by 300,000 shares of Northwest’s share capital pursuant to a pledge
agreement, the Company’s performance of the Notes and other obligations in
connection with the financing is also secured by a pledge of 5,272,860 shares of
common stock personally held by the current Chief Executive Officer and two
other stockholders pursuant to another pledge agreement. Upon any event of
default (as defined in the Notes and pledge agreements), the investors will be
entitled to exercise their respective rights under the pledge
agreements.





The
Company recorded a discount on the Notes in accordance with ASC 470-20 of
$306,686 for the fair value of the warrants issued. The fair value of warrants
was calculated using the Black-Scholes model with the following assumptions: (i)
risk-free interest rate of 3.07%; (ii) expected life (in years) of 3; (iii)
expected volatility of 172%; (iv) expected dividend yield of 0.00%; and (v)
stock market price of $0.75. The discount on Notes is amortized using effective
interest method over 2 years. For the three months ended March 31, 2009, the
Company recorded amortization of $38,335 as interest expenses in the statement
of operations. Pursuant to the amendment of the terms of the Notes the fair
value of the remaining warrants was re-calculated using the Black-Scholes model
using the following assumptions; (i) risk-free interest rate of 1%; (ii)
expected life of 2 years; (iii) expected volatility of 177%; (iv) expected
dividend yield of 0.00%; and (v) stock market price of $0.99. The Company
recorded a fair value of $352,463 as further discount on Notes and amortized
$77,580 as an interest expense in the statement of operations for the three
months ended March 31, 2010.





The
issuance of 450,000 shares of common stock to the Notes holders in consideration
for entering into the amendment is a cost associated with the extension of the
Notes. The Company recorded a fair value $445,500 as discount on Notes and
amortized $98,058 as an interest expense in the statement of operations for the
three months ended March 31, 2010.


10




The Notes
bear a 10% annual interest rate payable in arrears with a first payment due
March 1, 2008, and thereafter on each June 1, September 1 and December 1 while
the Notes are outstanding, with a final payment of interest due on the maturity
date. For the three months ended March 31, 2010 and 2009, $40,222 and $50,000
respectively were recorded as interest expenses.





NOTE
12 COMMITMENTS AND CONTINGENCIES





(A)
            Capital
      commitments





As of
March 31, 2010, the Company had capital commitments of $59,217 for factory
construction. The Company had no capital commitments as of March 31,
2009.





(B)
            Operating
      lease commitments





The
Company occupies an office and warehouses from a third party under operating
leases which expires on September 30, 2010 and July 23, 2011 at a quarterly
rental of $2,853 and at an annually rental of $4,389 respectively. Accordingly,
for the three months ended March 31, 2010 and 2009, the Company recognized
rental expenses for these spaces in the amount of $3,950 and $2,848
respectively.





As of
March 31, 2010, the Company has outstanding commitments with respect to the
non-cancelable operating leases of $11,556 which are due by July 23,
2011.





NOTE
13 STOCKHOLDERS’ EQUITY





Stock
options





On April
28, 2008, the Company issued options to its legal counsel to purchase up to
100,000 shares of common stock at an exercise price of $1.50 per share. The
options shall be exercisable in whole or in part, according to the vest
schedule, shall be fully vested upon execution of the agreement and shall be
exercisable at any time pursuant to the terms of the Agreement until April 28,
2010. The fair value of the options was estimated on the grant date using the
Black-Scholes option pricing model as required by ASC 718 with the following
assumptions and estimates: expected dividend 0%, volatility 189%, a risk-free
rate of 2.36% and an expected like of two years. The value of options recognized
during the three months ended March 31, 2010 and 2009 was $0 and $10,916
respectively. The stock options were fully exercised by issuance of 60,000
shares of cashless common stock in January 2010.





On
February 25, 2010, the Company appointed three new independent directors and
granted a total of 110,000 shares of the Company’s restricted common stock as
annual compensation to the new directors. On May 6, 2010, one of the new
independent directors resigned and the Company agreed to issue 5,833 shares of
restricted common stock for the two months’ service period. Consequently, the
Company issued 85,833 shares of restricted common stock having a fair value of
$75,533 as annual compensation. The value of the common stock issued was
determined based the closing market price of $0.88. The Company recognized
$8,433 as compensation expense for the three months ended March 31,
2010.





NOTE
14 RELATED PARTY TRANSACTIONS





The
current Chief Executive Officer and two other stockholders pledged a total of
5,272,860 shares of common stock held by them to secure the Company’s
performance of the $2,000,000 Convertible Notes issued on December 31, 2007,
which was due on December 31, 2009 and extended to June 30, 2011.





NOTE
15 CONCENTRATIONS AND RISKS





During
the three months ended March 31, 2010 and 2009, 100% of the Company’s assets
were located in China.





During
the three months ended March 31, 2010 and 2009, 29% and 38% of the Company's
revenues were derived from companies located in China respectively.





The
Company relied on two customers for approximately $357,293 and $213,683
representing in aggregate 43% of sales for the three months ended March 31,
2009. At March 31, 2009, accounts receivable from a customer was $322,207. The
Company did not rely on any one or a few major customers during the three months
ended March 31, 2010.





The
Company relied on two suppliers for approximately $108,448 and $131,452,
representing in aggregate 38% of purchases for the three months ended March 31,
2009. The accounts payable to those suppliers as of March 31, 2009 were $45,733.
The Company did not rely on any one or a few major suppliers during the three
months ended March 31, 2010.


11





NOTE
16 RECLASSIFICATION





The
Company disposed its 70% subsidiary – Huifeng Engineering in June 2009. As a
result of the disposal, the condensed consolidated financial statements of the
Company reflect the disposal of Huifeng Engineering as discontinued operations
for all periods presented. Accordingly, the net operating results of the
discontinued operations, net of income taxes have been reclassified as loss from
discontinued operations, net of income taxes in the condensed consolidated
statements of operations.





NOTE
17 SUBSEQUENT EVENTS





On April
10, 2010, the Company granted a total of 19,340 shares of the Company’s
restricted common stock to a legal counsel for settlement of outstanding service
fees.





On April
26, 2010, the Company granted 50,000 shares of the Company’s restricted common
stock to an investment related company as annual compensation.





On April
26, 2010, the Company granted 130,000 shares of the Company’s restricted common
stock to three consultants for consultancy services.


12





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





The
following discussion should be read in conjunction with the Huifeng
Bio-Pharmaceutical Techonology, Inc. consolidated financial statements and
accompanying notes included elsewhere in this report. The following discussion
contains forward-looking statements that reflect the plans, estimates and
beliefs of Huifeng Bio-Pharmaceutical Technology, Inc. The actual results could
differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to these differences include those
discussed below and elsewhere in this Report and the Annual Report 10-K,
particularly in “Risk Factors” section in the Annual Report on
10-K.   All references to years relate to the calendar year ended
December 31 of the particular year.





OVERVIEW





History





Our
company, Huifeng Bio-Pharmaceutical Technology, Inc. (“we,” “us,” “our,”
“HFGB,” the “Company” or “our Company”) was incorporated under the laws of the
State of Nevada and trades on the Over the Counter ("OTC") Bulletin Board under
the symbol “HFGB.”





The
Company was originally incorporated in Nevada on March 16, 2000 under the
name “Enternet, Inc.” On May 23, 2002, the Articles of Incorporation were
amended to change the name of the Company to “Secured Data, Inc.” On October 12,
2005, the Articles of Incorporation were amended to change the name of the
Company to “Huifeng Bio-Pharmaceutical Technology, Inc.”





Since
October 2002, management's business plan was to seek out a privately held
business with whom the Company can reorganize so as to take advantage of the
Company's status as a publicly held corporation.





On
December 20, 2004, pursuant to the terms of a Stock Purchase Agreement (“Malone
Agreement”), Art Malone, Jr. sold 7,229,601 shares of the common stock of the
Company (approximately 56% of the total outstanding stock of the Company) for
$300,000.00 (the “Sale”) to Zhi Lan Wang and Jun Lin, individuals. Immediately
thereafter, pursuant to the terms of an Agreement and Plan of Reorganization
dated December 20, 2004 (“Northwest Agreement”), the Company purchased 30%
of the common shares of Northwest BioTechnic Inc. (“NBTI”), a British Virgin
Islands corporation, in exchange for 80,735,590 shares of the Company's common
stock (“Acquisition”).  The 80,735,590 shares of the common stock sold
represented approximately 86.3% of the total outstanding stock of the
Company.  The purchase price for the remaining 70% of NBTI's
common shares was a $1,900,000 promissory note (“Promissory Note”) issued by the
Company on December 20, 2004. The Promissory Note was subsequently converted
into 10,465,725 (post a one for eighteen reverse split) shares of
the Company's common stock.





NBTI was
incorporated in the British Virgin Islands on June 25, 2004. NBTI operates
through its wholly owned subsidiary, Huifeng Biochemistry Joint Stock Company,
which is a joint venture company established under the laws of the PRC and is a
company engaged in the production and sales of plant extracts, biochemical
products and pharmaceutical raw products in the PRC. On February 22, 2006,
Huifeng Biochemistry Joint Stock Company changed its name to Xi’an Huifeng
Bio-Technic, Inc. (“Huifeng”).





Business
Overview





HFGB,
through its wholly owned subsidiary NBTI, owns 100% of Huifeng which produces
and sells plant extracts, biochemical products and pharmaceutical raw products
in the PRC and internationally. Huifeng was founded on January 18, 2000. With
its proprietary technology of “Producing Rutin by Eliminating Enzyme and Mucus”
together with abundant resources of high quality pagoda rice in the Northwest
region of China as raw material, Huifeng developed and specialized itself as one
of the major technology based Rutin company in Xian city within two years after
establishment. Huifeng possesses one of the most advanced and patented
Rutin-refining technologies in China and is a major Rutin supplier for the world
market. Huifeng emphasized technology and product innovation and its
strategic mission is to commercialize Chinese traditional medicine.





 ̈
            Produces
      pharmaceutical raw materials, active pharmaceutical ingredients, and plant
      extracts.


 ̈
            Focuses
      on expanding extract production and new market
  penetration.


 ̈
            Currently
      leading Chinese producer of Rutin and
Diosmin.


 ̈
            Serves
      a diverse domestic and international client
  base.


 ̈
            Maintains
      all Chinese qualifying certifications for domestic and international sales
      of plant extracts and related
products.


 ̈
            Includes
      ISO9000:2001 and multiple national Good Manufacturing Practices(GMP)
      qualifications.




Our
Products




The
Company’s products are primarily in the chemical category called flavonoids,
with medicinal benefits and multiple end markets, including pharmaceuticals used
for humans and animals, nutraceuticals, cosmetics, functional drink and
food. All the products can be reduced to the three categories as
follows:


13




Pharmaceutical
Raw Materials


 ̈
            Diosmin
      EP and other specification clients
required.


 ̈
            Rutin
      USP standard, Rutin DAB9, Rutin DAB10, Rutin EP5, Rutin
    BP2006


 ̈
            Troxerutin
      DAB1999, Troxerutin EP5, Troxerutin
EP6


 ̈
            Silymarin
      USP, Silymarin DAB, Silymarin
BP2006




Active
Pharmaceutical Ingredients


 ̈
            Quercetin
      , Rhamnose, Glucomannan, Glucuronolactone, Hesperidin,
      Synephrine, Resveratrol, etc. Soybean Isoflavones, Lutein, Lycopene,
      5-HTP, etc.




Plant
Extracts


 ̈
            Ginkgo
      Biloba Extract, Epimedium Extract, Bilberry Extract, Grape Seed
      Extract, Bitter Melon Extract, Mellisa Officinallis Extract,
      etc.





During
2006, we finished two new products lines, Diosmin and L-Rhamnose. Since January
2008, the Company began the process of applying for the Certificate of
Suitability (COS) certificate for Diosmin from the European Directorate for
the Quality of Medicines & HealthCare (EDQM). The Company introduced new
facilities and equipment for this certificate and fulfilled process managing
procedures and files according to the COS requirements. We introduced a
Hesperidin production line in 2008 which keeps the stable quality and
sufficiency of raw material for Diosmin.





The chemical name of
Diosmin is 7-[[6-o(6-Deoxy-2-L-mannopyranosyl)-β-D-gl
ucopyran-osyl]oxy]-5-hydroxy-2-(3-hydroxy-4-methoxyphenyl)-4H-l-ben-zopyran-4-one).
Diosmin is a pharmaceutical material, which has a comprehensive impact on the
blood vessel feedback system and is suitable for treatment of acute or chronic
hemorrhoids and chronic insufficiency of veins (lower limbs varicosity, dropsy
and chronic canker).





The
chemical name of L-Rhamnose is (thymidine-5'-diphosphate-L-rhamnose). Belonging
to the category of monosackcharide, it is generally applied in manufacturing
antivirus and anti-tumor raw medicines. In addition, this product can be an
ingredient for food. It has been used for testing permeation of intestines and
sweet additives. At present, L-Rhamnose is mostly applied in synthetic perfume
of fruit spice. It is the basic material for fruit spice composition. L-Rhamnose
has been widely applied in the industrial production and scientific research,
such as intermediate synthetic perfumes and heart-strength medicines made from
organic matters. Furthermore, as an ingredient for food, L-Rhamnose can be
directly added into top-grade coffee, beverage or meat.





The
chemical name of Rutin is rue glycoside (Molecular formula: C27H30O163H2O) and
it is a kind of plant extract. It can inhibit platelet aggregation and prevent
thrombosis. It can also improve the permeability of capillary vessels, and has
the properties of:





1.
            Anti-
      inflammatory;





2.
            Decreasing
      blood pressure and fat; and





3.
            Mitigating
      cerebral hemorrhage.





Additionally,
it has a positive effect in protecting heart and cerebral hemorrhage and
ischemia-reperfusion injury. It is widely used as a raw material for the heart
and cerebral blood vessel medicines as well as an additive for cosmetics and
functional food. The demand for Rutin increases at an annual rate of
approximately 30% due to the increased demand for heart and cerebral blood
vessel medicines as a result of the aging population. Furthermore, the
improvement in living standards in China also stimulates the growth in the
demand for functional food and natural cosmetics. Troxerutin, Quercetin,
Rhamnose is three kinds derivatives of Rutin.





Production
Facilities





On June
28, 2009, Huifeng Bio-Technic disposed its 70% owned interest in Huifeng
Engineering, located in Fenghui, Changan, Xian, for a consideration of
$21,919 in cash. At present, we have one major production facility that included
the following equipment resources:





Manufacturing
plant located at No. 1, Huifeng Rd, Changwu, Xianyang:





·
              This
      production site is for refining and manufacturing of new
      products.·
              Has
      a total of 10 buildings including:-
              A
      two-level office building-
              A
      four-level staff building-
              An
      one-level building for clean area under GMP standard-
              One
      raw materials storage building-
              Two
      buildings for storage of finished products-
              One
      building for dangerous products-
              Building
      for quality testing zone and researching
  center-
              Building
      for power and maintenance (including boiler, power distribution and
      maintenance)-
              One
      cafeteria and staff canteen




14




The
production facilities together occupy a total area of approximately 117,569
square feet. The Company has pledged part of its production facilities in
Changwu factory valued at approximately $978,851 to Xi'an Beilin District Credit
Cooperatives to secure loan in the amount of $253,028 due June
2010.





In 2006,
we introduced two new production lines: Diosmin production line for Diosmin,
L-Rhamnose production line. In 2008, we introduced a Hesperidin production line.
We constructed a new one-level building for storage of finished products and
rebuilt a building for quality testing zone and research center in 2009. All of
them were built according to COS standards.





We
currently obtain all of our raw materials from third parties and through various
farmers located in the Shaanxi province, Gansu province and Shanxi province
areas of China. Our principal suppliers include Cungui Zhang, Xiaohe Wang and
Yingwei Xu. All of them are the largest wholesalers in their own
area.





Target
Markets and Principal Customers





As of
March 31, 2010, we have developed three new customers. Two of them are European
customers and the other one is an international API distributor
based in China. These customers primarily purchase Diosmin from us due
to the high quality of our products, as reflected from the fact that we are
the only Chinese producer that is in the process of applying for a COS from
EDQM.





For the
present, our products are all raw materials intermediaries for medicines
production and the users of these products are industrial clients. As a result,
Huifeng's main target customers are pharmaceutical companies and manufacturers
in nutrient, cosmetics, functional food and drinks.





Dependence
on Major Customers





For the
fiscal year ended December 31, 2009, our top five customers accounted for
approximately 17% of our revenues. We are working towards developing a broad
base of customers to minimize our dependency on any major
customers.





Sales
and Marketing





For the
quarter ended March 31, 2010, the majority of products were raw materials and
intermediaries for production of medicines, nutraceuticals and
cosmetics. Our target customers were mostly industrial clients and we
continued to sell our products to pharmaceutical and nutrition and food
manufacturers. Most of our customers placed purchase orders directly with our
sales and marketing team. However, in order to diversify and expand our product
sales networks, we began using outside distribution channels for some of our
export sales in 2009. We accepted purchase orders from professional foreign
trade corporations in order to expand our international distribution channels
and increase sale revenues from exports.





The sales
department was divided into two teams, domestic sales team and export sales
team. During the period ended March 31, 2010, the Company did not add new
employees in the export sales department. The total number of employees in sales
departments is still 24 people. All the sales department staffs were
trained with certain professional lessons. Most of them attended the industrial
international exhibition and fairs which are held in U.S, European,
Shanghai and Beijing, such as CPHI Shows, API, Supplyside West,
etc.





We did
not establish any regional representative or sales office in the first quarter
of 2010 because our products were primarily sold through direct orders from our
clients who placed orders with our sales department. There was no need for any
retail distribution of our product.





Competition





Huifeng
engages in Rutin production in China. With its proprietary technology of
“Producing Rutin by Eliminating Enzyme and Mucus” and with abundant resources of
high quality pagoda rice in the Northwest region of China as a raw material,
Huifeng does not face significant competition within China.





Our major
competitor for Rutin continues to be Sichuan Xieli Pharmaceutical Company
Limited (“Xieli”). However, we believe that due to the lack of technology
patents and ready access to raw materials, Xieli is gradually fading out of the
Rutin refining business and is shifting its business from raw medicine
production to finished medicine production.





Our
competitor for Diosmin and L-Rhamnose is Chengdu Huakang Biology Company
(“Huakang”). However, Huakang has no licenses for drug production and cannot
sell its products for medicinal use.  The scope of its market is
therefore restricted. In addition, unlike us, they did not have the requisite
European Certification of Suitability (“COS”). Thus they do not pose any threat
to us in terms of market share and sales, particularly in the export
market.


15





In the
first quarter of 2010, there were some new domestic competitors for certain new
products that we have started selling, including Resveratrol. However, we do not
believe that these competitors have mature technologies for producing
Resveratrol at costs lower than ours. Therefore we do not believe that they pose
an immediate threat to our business.





Principal
Office





Our
principal office is located at 16B/F Ruixin Bldg., No. 25 Gaoxin Road, Xi’an,
Shaanxi Province, China 710075.





Employees
and Organization





As of
March 31, 2010, we had approximately 224 full-time employees. During the three
months period ended March 31, 2010, we employed 3 new employees. Of the 3
new employees, 2 were assigned to the certification department; and 1
was assigned to the production department. None of our employees are
covered by a collective bargaining agreement and we have never experienced a
work stoppage, and we consider our labor relations to be good.





As of
March 31, 2010, our Company organization was as follow:





Department
                                    
                                    Employee as
                                      of end of March
                                      31, 2010
                                    
                                    
                                    Employee as
                                      of end of March
                                      31, 2009Sales
      department:Domestic
      sales department
                                    
                                    8
                                    
                                    
                                    8Export
      sales department:Export
      section I
                                    
                                    8
                                    
                                    
                                    8Export
      section II
                                    
                                    8
                                    
                                    
                                    8Production
      department
                                    
                                    155
                                    
                                    
                                    154Technical
      department
                                    
                                    5
                                    
                                    
                                    5Inspection
      department
                                    
                                    8
                                    
                                    
                                    8Provision
      department
                                    
                                    5
                                    
                                    
                                    5Personnel
      department
                                    
                                    5
                                    
                                    
                                    5Finance
      department
                                    
                                    7
                                    
                                    
                                    7Security
      department
                                    
                                    8
                                    
                                    
                                    8Certification
      department
                                    
                                    7
                                    
                                    
                                    5TOTAL
                                    
                                    224
                                    
                                    
                                    221





Research
and Development





As of
March 31, 2010, we continued on research and development of new products and new
technologies. We kept the structure of our research and development
team.





The
amounts we spent on research and development for the three months periods ended
March 31, 2010 and 2009 were $13,581 and $10,801, respectively. The increase is
mainly due to the cost of research materials, related external testing and
employees’ wages.





Patents
and Intellectual Properties





Huifeng's
proprietary technology “Producing Rutin by Eliminating Enzyme and Mucus”
received Chinese national technology patent.





Government
Regulations





The
Chinese government requires all medicine and medicinal products related
manufacturers to obtain GMP certification for their pharmaceutical manufacturing
facilities. Huifeng obtained GMP certification from relevant government
regulatory bodies. Other than GMP certification requirements, there was no
significant change in the regulatory environment in China.





Compliance
with Environmental Laws





We
believe that we are in compliance with environmental laws in the PRC which are
applicable to us. The costs of such compliance do not have a material effect on
our financial condition.





Regulation
of Enterprise Income Law





The
Enterprise Income Law (“EIT Law’) was promulgated by the National People’s
Congress on March 16, 2007 to introduce a new uniform taxation regime in the
PRC. Both resident and non-resident enterprises deriving income from the PRC
will be subject to this EIT Law from January 1, 2008. It replaced the
previous two different tax rates applied to foreign-invested enterprises and
domestic enterprises by only one single income tax rate applied for all
enterprises in the PRC. Under this EIT Law, except for some hi-tech enterprises
which are subject to EIT rates of 15% and other very limited situation that
allows EIT rates at 20%, the general applicable EIT rate in the PRC is 25%.
Although we still enjoy certain tax incentives applicable to foreign-invested
enterprises prior to the introduction of the EIT Law, the current lower EIT rate
will be phased up to 25% within a five-year period. Moreover, we may not enjoy
further tax incentives for our further established companies in the PRC and
therefore our tax advantages over domestic enterprises may be
diminished.


16





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





We have
identified one policy area as critical to the understanding of our consolidated
financial statements. The preparation of our consolidated financial statements
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 consolidated financial statements and the
reported amounts of sales and expenses during the reporting periods. With
respect to net realizable value of the Company's accounts receivable and
inventories, significant estimation judgments are made and actual results could
differ materially from these estimates.





The
Company does not have any reserves against its accounts receivable or
inventories at March 31, 2010 and 2009. Management's estimation that there are
no reserves is based on the current facts that there is no significant aged
accounts receivable and the current inventory turnover is sufficient to realize
the current carrying value of the inventories. In making their judgment,
management has assumed that there will be continued demand for their products in
the future, thereby maintaining adequate turnover of the inventories.
Additionally, management has assumed that customers will continue to pay their
outstanding invoices in a timely manner, and that their customers' financial
position will not deteriorate significantly in the future, which would result in
their inability to pay their debts to the Company. While the Company's
management currently believes that there is little likelihood that the actual
results of their current estimates will differ materially from its current
estimates, if customer demand for its products decreases significantly in the
near future, or if the financial position of its customers deteriorates in the
near future, the Company could realize significant write downs for slow moving
inventories or uncollectible accounts receivable.





We
believe the following is among the most critical accounting policies that impact
our consolidated financial statements. We suggest that our significant
accounting policies, as described in our consolidated financial statements in
the Summary of Significant Accounting Policies, be read in conjunction with this
Management's discussion and Analysis of Financial Condition and Results of
Operations.





We
recognize revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104.
All of the following criteria must exist in order for us to recognize
revenue:





1.
            Persuasive
      evidence of an arrangement exists;


2.
            Delivery
      has occurred or services have been
rendered;


3.
            The
      seller's price to the buyer is fixed or determinable
  and


4.
            Collectibility
      is reasonably assured.





The
majority of the Company's revenue results from sales contracts with distributors
and revenue is generated upon the shipment of goods. The Company's pricing
structure is fixed and there are no rebate or discount programs. Management
conducts credit background checks for new customers as a means to reduce the
subjectivity of assuring collectability. Based on these factors, the Company
believes that it can apply the provisions of SAB 104 with minimal
subjectivity.





RESULTS OF
OPERATIONS





THREE MONTHS ENDEDMARCH 31,
2010COMPARED
TO THREE MONTHS ENDEDMARCH 31,
2009





Revenues, Cost of Revenues
and Gross Margin





Revenues
for the quarter ended March 31, 2010 were $4,151,886, an increase of $2,825,991
from $1,325,895 for same quarter in 2009. Our increases in sales revenues in
2010 were mainly due to the increase of pharmaceutical raw materials and
pharmaceutical intermediates. The sales increasing products were Troxerutin,
Diosmin, Quercetin and L-Rhamnose during the period. An analysis of the increase
in sales of our products is as follows:




For the quarter ended
                          March 31,
                        
                        
                        Increase/Product
                        
                        2010
                        
                        
                        2009
                        
                        
                        (Decrease)Pharmaceutical intermediates
                        
                        $
                        829,468
                        
                        
                        $
                        132,035
                        
                        
                        $
                        697,433Pharmaceutical
      raw material
                        
                        
                        2,995,883
                        
                        
                        
                        841,416
                        
                        
                        
                        2,154,467Plant
      Extracts
                        
                        
                        326,535
                        
                        
                        
                        352,444
                        
                        
                        
                        (25,909
                        )TOTAL
                        
                        $
                        4,151,886
                        
                        
                        $
                        1,325,895
                        
                        
                        $
                        2,825,991




17




Cost of
revenues for the quarter ended March 31, 2010 were $2,529,154, an increase of
$1,477,314 from $1,051,840 for the quarter ended March 31, 2009. Compared to the
quarter ended March 31, 2009, the increase in cost of sales of our products was
because of increase 213% increase in our products sold during the period. An
analysis of our decrease in cost of revenues of our products is as
follows:





For the quarter ended
                            March 31,
                          
                          
                          Increase /Product
                          
                          2010
                          
                          
                          2009
                          
                          
                          (Decrease)Pharmaceutical intermediates
                          
                          $
                          544,800
                          
                          
                          $
                          92,746
                          
                          
                          $
                          452,054Pharmaceutical
      raw-material
                          
                          
                          1,882,466
                          
                          
                          
                          660,981
                          
                          
                          
                          1,221,485Plant
      Extractive and others
                          
                          
                          101,888
                          
                          
                          
                          298,113
                          
                          
                          
                          (196,225
                          )TOTAL
                          
                          $
                          2,529,154
                          
                          
                          $
                          1,051,840
                          
                          
                          $
                          1,477,314




The gross
profit margin for the quarter ended March 31, 2010 increased to 39% from 21% in
the same period of 2009. The increase in gross profit margin was mainly due to
the decrease in cost of goods sold and the increase in selling price. Because of
the economics returned to normal, market had increasing demands to our products
during the period.





Gross
profit for the quarter ended March 31, 2010 was $1,622,732, an increase of
$1,348,677 or 492% from $274,055for the period ended March 31, 2009. The
increase was mainly attributable to the decrease in the cost of raw materials
and the increase in selling price. In addition, our sales volume also increased
during the period due to the market strong demands.





General and Administrative
Expenses


General
and Administrative expenses totaled $244,340 for the three months ended March
31, 2010, a decrease of $164,374 from $408,714 for the three months ended March
31, 2009. The decrease in general and administrative expenses was mainly due to
the decrease of allowance for doubtful accounts, the net decrease in allowance
for doubtful accounts of $200,690 compared with March 31,2009 during the same
period.





Selling and Distribution
Expenses





Selling
and distribution expenses totaled $18,792 for the three months ended March 31,
2010, a decrease of $33,566 from $52,358 for the three months ended March 31,
2009. The Company has decreased its transportation expenses of totaling $20,959
and COS certification fees of totaling $10,392 in the current quarter as
compared to the same quarter last year.




Liquidity and Capital
Resources





Cash





Our cash
balance amounted to $630,953 at March 31, 2010.





In the
three months ended March 31, 2010, our cash provided by operating activities
totaled $205,618, mainly due to increase in accounts receivable of $809,462. In
the three months ended March 31, 2010, our cash used in investing activities
totaled $131,528 mainly for the purchase of new production machinery and
equipment.





Working
Capital




Our
working capital amounted to $11,186,951 at March 31, 2010.





INFLATION




Inflation
has had a small impact on our business. It increased the purchase cost of our
raw materials resulting in an increase in our production cost.




CURRENCY
EXCHANGE FLUCTUATIONS




All of
our revenues and majority of the expenses for the three months ended March 31,
2010 were denominated primarily in Renminbi ("RMB"), the currency of China, and
were converted into US Dollars at the exchange rate of 6.83603 to 1. Since July
22, 2005, the Renminbi has strengthened against the US dollars. As a result of
the appreciation of RMB we recognized a foreign currency translation gain of
$90,145 during the first quarter of 2010. There could be no assurance that
RMB-to-U.S. dollar exchange rates will remain stable. A devaluation of RMB
relative to the U.S. dollar would adversely affect our business, financial
condition and results of operations. We do not engage in currency
hedging.





Item
3. Quantitative and Qualitative Disclosures About Market Risk





Not
required


18





Item
4T. Controls and Procedures





Evaluation
of Disclosure Controls and Procedures.





Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, as of the end of the period covered
by this Quarterly Report on Form 10-Q (the “Evaluation Date”). The purpose of
this evaluation is to determine if, as of the Evaluation Date, our
disclosure controls and procedures were operating effectively such that the
information, required to be disclosed in our Securities and Exchange Commission
(“SEC”) reports (i) was recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms, and (ii) was accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.





Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of the Evaluation Date, our disclosure controls and
procedures were operating effectively.





Changes
in Internal Control over Financial Reporting.





There
have been no significant changes in our internal controls over financial
reporting that occurred during the three months ended March 31, 2010 that have
materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.





Limitations
on the Effectiveness of Disclosure Controls and Procedures.





Disclosure
controls and procedures and other procedures that are designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act are recorded, processed, summarized and reported, within the time
period specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer as
appropriate, to allow timely decisions regarding required
disclosure.





PART
II. OTHER INFORMATION





Item
1. Legal Proceedings





We are
currently not involved in any litigation that we believe could have a material
adverse effect on our financial condition or results of operations. There is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our Company or any of our
subsidiaries, threatened against or affecting the Company, our common stock, any
of our subsidiaries or of our Company's or our Company's subsidiaries' officers
or directors in their capacities as such, in which an adverse decision could
have a material adverse effect.





Item
1A. Risk Factors





Not
required.





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





None





Item
3. Defaults Upon Senior Securities





None.





Item
4. Reserved





None.





Item
5. Other Information





None.


19





Item
6. Exhibits





(a)
Exhibits





31.1
                    Certification
      of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934, as amended.31.2
                    Certification
      of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934, as amended32.1
                    Certification
      of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule
      15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18
      U.S.C. Section 1350.32.2
                    Certification
      of the Chief Financial Officer pursuant to Rule 13a-14(b) or Rule
      15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18
      U.S.C. Section
1350.




20





SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized this 17th day
of May, 2010.





HUIFENG BIO-PHARMACEUTICAL TECHNOLOGY, INCBy:
                                      /s/
      Jing’an Wang
                                      
                                      May
      17, 2010Jing’an
      Wang
                                        Chief Executive Officer (Principal
                                        Executive Officer)/s/
      Sanding Tao
                                      
                                      May
      17, 2010Sanding
      TaoChief Financial Officer (Principal
                                        Accounting and Financial Officer)




21