**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





**x**
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**





For
      the
      quarterly period ended December 31, 2006





or





** ̈**
            **Transition
                Report Pursuant to Section 13 of 15(d) of the Securities Exchange
                Act of
                1934**





For
      the
      Transition Period From  to





Commission
      File number: 000-50601





**SYNUTRA
      INTERNATIONAL, INC.**





DELAWARE
            
            13-4306188**(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            **(IRS
                Employer Identification No.)**





2275
      Research Blvd., Suite 500


Rockville,
      Maryland 20850





(301)
      840-3888





Former
      Address:


15200
      Shady Grove Road, Suite 350


Rockville,
      Maryland 20850


**Former
      Name, Former Address and Former Fiscal Year, if Changed Since Last Report**





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





Yes x No  ̈





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





Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated filer x





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





Yes  ̈ No x





As
      of
      February 9, 2007, there were 50,000,713 shares of Common Stock outstanding.








**SYNUTRA
      INTERNATIONAL, INC.**




**FORM
      10-Q**


For
      the
      Quarter Ended December 31, 2006





**INDEX**




PART
                I. FINANCIAL INFORMATIONItem
                1. Consolidated Financial Statements:Consolidated
                Balance Sheets as of December 31, 2006 (unaudited) and March 31,
                2006
                (audited)
            
            3Consolidated
                Statements of Income for the three and nine months ended December 31,
                2006 (unaudited) and 2005 (unaudited)
            
            5Consolidated
                Statements of Shareholders' Equity for the nine months ended December
                31,
                2006 (unaudited)
            
            6Consolidated
                Statements of Cash Flows for the nine months ended December 31, 2006
                (unaudited) and 2005 (unaudited)
            
            7Notes
                to the Consolidated Financial Statements
            
            9Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            
            27Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            
            40Item
                4. Controls and Procedures
            
            40PART
                II. OTHER INFORMATIONItem
                1. Legal Proceedings
            
            41Item
                1A. Risk Factors
            
            41Item
                2. Unregistered Sales of Equity Securities and Use of Proceeds
            
            41Item
                3. Defaults Upon Senior Securities
            
            41Item
                4. Submission of Matters to a Vote of Security Holders
            
            41Item
                5. Other Information
            
            41Item
                6. Exhibits
            
            42Signatures
            
            43









**PART
      I**


**FINANCIAL
      INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**





**SYNUTRA
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**(INCORPORATED
      IN THE STATE OF DELAWARE**


**WITH
      LIMITED LIABILITY)**


**CONSOLIDATED
      BALANCE SHEETS**





**December
                31,**
            
            **March
                31,****2006**
            
            **2006****(unaudited)**
            
            **(audited)****ASSETS****Current
                Assets**Cash
                and cash equivalents
            
            $
            24,491,798
            
            $
            22,133,869Short
                term investment - at market
            
            
            -
            
            
            42,557Notes
                receivables
            
            
            253,944
            
            
            -Trade
                receivables, net of provisions
            
            
            5,538,785
            
            
            2,539,717Inventories
            
            
            14,949,617
            
            
            11,789,433Advances
                to suppliers
            
            
            3,933,991
            
            
            354,052Other
                receivables, net of provisions
            
            
            4,191,857
            
            
            2,229,869Due
                from related parties
            
            
            22,578,474
            
            
            8,602,363Including
                Trade receivables
            
            
            3,388,029
            
            
            2,018,344Other
                receivables
            
            
            17,429,751
            
            
            2,058,250Prepayment
            
            
            1,760,694
            
            
            4,525,769Deferred
                expenses
            
            
            15,316
            
            
            125,931**Total
                current assets**
            
            
            **75,953,782**
            
            
            **47,817,791****Property,
                plant and equipment, net**
            
            
            **37,623,374**
            
            
            **13,727,873****Other
                Assets**Intangible
                assets ,net
            
            
            216,837
            
            
            264,562Construction
                in progress
            
            
            7,104,620
            
            
            21,198,431**TOTAL
                ASSETS**
            
            **$**
            **120,898,613**
            
            **$**
            **83,008,658**




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


3


**SYNUTRA
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS (Continued)**




**December
                31,**
            
            **March
                31,****2006**
            
            **2006****(unaudited)**
            
            **(audited)****LIABILITIES
                & SHAREHOLDERS' EQUITY****Current
                Liabilities**Bank
                loans
            
            **$**
            33,364,240
            
            $
            13,133,534Notes
                payable
            
            
            20,233,842
            
            
            19,112,823Trade
                payables
            
            
            12,622,322
            
            
            12,579,942Advance
                from customers
            
            
            1,405,345
            
            
            932,843Other
                payables
            
            
            6,141,280
            
            
            4,569,873Accrued
                expenses
            
            
            3,540,611
            
            
            498,786Tax
                payables
            
            
            907,692
            
            
            1,996,789Due
                to related parties
            
            
            344,932
            
            
            4,301,137Including
                Trade payables
            
            
            278,134
            
            
            4,301,137Advance
                from customers
            
            
            16,738
            
            
            -other
                payables
            
            
            50,060
            
            
            -**Total
                current liabilities**
            
            **$**
            **78,560,264**
            
            **$**
            **57,125,726****Long
                term debt**
            
            
            **-**
            
            
            **4,932,182****Total
                liabilities**
            
            **$**
            **78,560,264**
            
            **$**
            **62,057,909****Shareholders'
                equity**Preferred
                stock-$.0001 par value; 20,000,000 Authorized; 0 issued and outstanding
            
            
            -
            
            
            -Common
                Stock-$.0001 par value; 250,000,000 authorized; 50,000,713 issued
                and
                outstanding
            
            
            5,000
            
            
            5,000Additional
                paid-in capital
            
            
            8,226,033
            
            
            8,226,033Reserves
            
            
            45,804
            
            
            45,804Retained
                earnings
            
            
            31,460,351
            
            
            11,618,515Accumulated
                other comprehensive income
            
            
            2,601,161
            
            
            1,055,397**Total
                shareholders' equity**
            
            **$**
            **42,338,349**
            
            **$**
            **20,950,749****TOTAL
                LIABILITIES AND SHAREHOLDERS' EQUITY**
            
            **$**
            **120,898,613**
            
            **$**
            **83,008,658**




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




4




**SYNUTRA
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**(unaudited)**





**Three
                Months ended**
              **December
                31,**
            
            **Nine
                Months ended**
              **December
                31,****2006**
            
            **2005**
            
            **2006**
            
            **2005****Sales**
            
            **$**
            **56,649,606**
            ****
            **$**
            **43,805,294**
            ****
            **$**
            **151,900,818**
            
            **$**
            **95,141,136**Including
                sales to related parties
            
            
            4,148,371
            
            
            12,486,824
            
            
            10,554,285
            
            
            ****18,148,261Cost
                of sales
            
            
            27,721,449
            
            
            27,930,627
            
            
            77,069,117
            
            
            55,210,185Including
                cost of sales to related parties
            
            
            3,916,816
            
            
            12,615,018
            
            
            10,465,468
            
            
            17,767,529**Gross
                profit**
            
            
            **28,928,157**
            
            
            **15,874,667**
            
            
            **74,831,701**
            
            
            **39,930,950**Selling
                & distribution expenses
            
            
            10,093,222
            
            
            5,440,177
            
            
            20,329,597
            
            
            11,165,177Advertising
                and promotion expenses
            
            
            13,216,811
            
            
            4,809,094
            
            
            31,785,677
            
            
            16,264,655General
                & administrative expenses
            
            
            1,965,139
            
            
            1,281,265
            
            
            4,282,151
            
            
            4,206,155**Income
                from operations**
            
            
            **3,652,985**
            
            
            **4,344,131**
            
            
            **18,434,276**
            
            
            **8,294,964**Finance
                costs
            
            
            (704,107
            )
            
            (299,429
            )
            
            (1,590,602
            )
            
            (1,585,976
            )Subsidy
                income
            
            
            1,408,630
            
            
            65,677
            
            
            4,498,493
            
            
            712,953Interest
                income
            
            
            109,357
            
            
            1,596
            
            
            230,657
            
            
            105,656Other
                income (expenses), net
            
            
            11,921
            
            
            (125,805
            )
            
            1,823
            
            
            (174,929
            )**Income
                before tax**
            
            
            **4,478,786**
            
            
            **3,986,169**
            
            
            **21,574,647**
            
            
            **7,352,667**Corporation
                income tax - current
            
            
            286,944
            
            
            208,552
            
            
            1,732,811
            
            
            513,551**Net
                income before minority interests**
            
            
            **4,191,842**
            
            
            **3,777,618**
            
            
            **19,841,836**
            
            
            **6,839,116**Minority
                interests
            
            
            -
            
            
            -
            
            
            -
            
            
            (576
            )**Net
                income attributable to shareholders**
            
            
            **4,191,842**
            
            
            **3,777,618**
            
            
            **19,841,836**
            
            
            **6,838,540**Other
                comprehensive income
              --
                foreign currency translation
            
            
            892,788
            
            
            172,596
            
            
            1,545,764
            
            
            816,601**Comprehensive
                income**
            
            
            **5,084,630**
            
            
            **3,950,214**
            
            
            **21,387,600**
            
            
            **7,655,141****Earning
                per share**Basic
                and diluted
            
            **$**
            **0.08**
            ****
            **$**
            **0.08**
            ****
            **$**
            **0.40**
            
            **$**
            **0.14****Weighted
                average common share outstanding**Basic
                and diluted
            
            
            50,000,713
            
            
            50,000,713
            
            
            50,000,713
            
            
            48,444,880





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




5


**SYNUTRA
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**


**(unaudited)**





**Common
                  Stock outstanding**
            
            **Registered
                Capital**
            
            **Additional**
              **Paid-In****Capital**
            
            **Reserve**
            
            **Retained
                Earnings**
            
            **Accumulated
                Comprehensive Income**
            
            **Total
                Shareholders’ Equity****Balance
                at March 31, 2006**
            
            
            **50,000,713**
            
            **$**
            **5,000**
            ****
            **$**
            **8,226,033**
            ****
            **$**
            **45,804**
            ****
            **$**
            **11,618,515**
            ****
            **$**
            **1,055,397**
            ****
            **$**
            **20,950,749**Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            19,841,836
            
            
            -
            
            
            19,841,836Other
                comprehensive income
              --
                foreign currency translation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,547,764
            
            
            1,547,764**Balance
                at December 31, 2006**
            
            
            **50,000,713**
            
            **$**
            **5,000**
            ****
            **$**
            **8,226,033**
            ****
            **$**
            **45,804**
            ****
            **$**
            **31,460,351**
            ****
            **$**
            **2,601,161**
            ****
            **$**
            **42,338,349**





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





6




**SYNUTRA
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(unaudited)**




**Nine
                Months ended**
              **December
                31,****2006**
            
            **2005****Cash
                Flows from Operating Activities:**Net
                income
            
            $
            19,841,836
            
            $
            6,838,540Adjustments
                to reconcile net income tonet
                cash provided by (used in) operating activities:Depreciation
                and amortization
            
            
            1,176,902
            
            
            1,082,140Bad
                debt expenses
            
            
            (158,115
            )
            
            4,214Gain
                on sales of short- term investment
            
            
            (44,428
            )
            
            -Minority
                interest
            
            
            -
            
            
            576Stock
                issued for financial consultants and finders fee
            
            
            -
            
            
            567,000Changes
                in operating assets and liabilities:Notes
                receivable
            
            
            (253,944
            )
            
            (66,436
            )Trade
                receivable
            
            
            (2,840,954
            )
            
            549,690Inventories
            
            
            (3,160,183
            )
            
            (4,722,607
            )Advances
                to suppliers
            
            
            (3,579,939
            )
            
            544,974Other
                receivable, net
            
            
            (1,961,988
            )
            
            (779,377
            )Intangible
                Assets
            
            
            -
            
            
            35,235Deferred
                expenses
            
            
            81,440
            
            
            376,743Due
                from related parties
            
            
            (13,976,111
            )
            
            385,639Due
                to related parties
            
            
            (3,939,793
            )
            
            457,372Notes
                payable
            
            
            1,121,019
            
            
            (2,025,556
            )Trade
                payable
            
            
            25,967
            
            
            5,155,309Advances
                from customers
            
            
            472,502
            
            
            941,688Other
                payable & accrued expenses
            
            
            4,613,233
            
            
            (298,607
            )Tax
                payable
            
            
            (1,089,097
            )
            
            -**Net
                Cash Provided by (Used In) Operating Activities**
            
            
            **(3,671,653**
            **)**
            
            **9,046,536****Cash
                Flows from Investing Activities:**Acquisition
                of property, plant and equipment
            
            
            (1,984,109
            )
            
            (993,492
            )Cash
                used for construction in progress
            
            
            (8,889,271
            )
            
            (5,814,694
            )Purchases
                of intangible assets
            
            
            (28,311
            )
            
            (4,213
            )Proceeds
                from the sales of Short Term Investments
            
            
            86,985
            
            
            7,431**Net
                Cash Used in Investing Activities**
            
            
            **(10,814,706**
            **)**
            
            **(6,804,968**
            **)**




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


7


**SYNUTRA
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOW (CONTINUED)**




**Nine
                Months ended**
              **December
                31,****2006**
            
            **2005****Cash
                Flows from Financing Activities:**Inception
                of bank loans, net
            
            
            15,298,524
            
            
            165,821Capital
                contribution
            
            
            -
            
            
            417,880**Net
                Cash Provided by Activities**
            
            
            **15,298,524**
            
            
            **583,701****Net
                Change in Cash and Cash Equivalents**
            
            
            **812,165**
            
            
            **2,825,269**Effect
                of Exchange Rate Changes on Cash and Cash Equivalents
            
            
            1,545,764
            
            
            816,602Cash
                and cash equivalents, beginning of period
            
            
            22,133,869
            
            
            16,085,403**Cash
                and cash equivalents, end of period**
            
            **$**
            **24,491,798**
            ****
            **$**
            **19,727,274****Supplementary
                Cash Flows Disclosures**Interest
                paid
            
            $
            1,590,601
            
            $
            1,018,976Income
                taxes paid
            
            $
            1,445,867
            
            $
            513,551





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





8




**SYNUTRA
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**1.
      DESCRIPTION OF BUSINESS**





Synutra
      International, Inc. (the “Company”) is a Delaware corporation that at December
      31, 2006 owned 100% of five subsidiary companies in the People’s Republic of
      China (“PRC” or “China”). These five subsidiaries are all principally engaged in
      different stages of the production, distribution, and sales of dairy based
      pediatric and adult nutrition products. The Company’s extensive sales network
      covers 24 provinces, 227 cities, and more than 800 counties throughout China.
      The Company’s fiscal year end is March 31.




On
      November 6, 2006, the Company consummated a transaction with the Department
      of
      Finance of Zheng Lan Qi (County) of Inner Mongolia in which the Company acquired
      certain assets owned by them including approximately $256,000 in land use rights
      and $5,635,000 in plant and buildings under construction. The transaction was
      consummated in order to establish a wholly foreign-owned company to produce
      milk
      fat and other diary-based food ingredients. The agreement provided that the
      effective date of the transaction was when the Company received 60% of the
      non
      refundable subsidy of RMB 30,000,000 (approximately $3,800,000). This occurred
      during September 2006 and thus the assets were recorded during that period,
      notwithstanding that the official ownership certificates have not yet been
      obtained. The non refundable subsidy was received in two installments and was
      recorded in the periods received.  The acquisition was considered
      immaterial since the acquired assets only comprise approximately 5% of the
      Company’s total assets. No additional disclosures are deemed necessary in this
      filing.





In
      November, 2006 Zhangjiakou Sheng Yuan Co., Ltd., (“Zhangjiakou ”) one of the
      Company’s operating subsidiaries, entered into an agreement with the
      shareholders of Inner Mongolia Meng Yuan Food Co., Ltd. (“Meng Yuan”) to acquire
      100% of the equity interest in Meng Yuan for a consideration of about $900,000.
      At the close of the transaction Meng Yuan transferred assets under its control
      to Zhangjiakou which included land use rights, plant equipment and plant
      buildings under construction. The Meng Yuan project is anticipated to be put
      in
      service in mid 2007 and it is designed to produce 7,200 tons per year infant
      formula products. The transfer of the above assets and the payment of the
      considerations have been accounted for in this quarterly report and no
      additional disclosure is deemed necessary.





**2.
      CRITICAL ACCOUNTING POLICIES AND ESTIMATES**





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with generally accepted accounting principles in the United States
      (“GAAP”) for interim financial information and with the instructions to Form
      10-Q. Accordingly, they do not include all information and footnote disclosures
      normally included in the financial statements prepared in accordance with GAAP,
      and should be read in conjunction with the Company’s fiscal 2006 Annual Report
      on Form 10-KSB/A.




9





In
      the
      opinion of management, the accompanying unaudited consolidated financial
      statements contain all adjustments necessary to present fairly the balance
      sheet
      of Synutra International, Inc. and subsidiaries as of December 31, 2006, the
      results of their operations for the three and nine month periods ended December
      31, 2006 and 2005, and their cash flows for the nine month periods ended
      December 31, 2006 and 2005. All adjustments are of normal recurring nature.
      The
      results of operations for the three and nine month periods ended December 31,
      2006 and 2005 are not necessarily indicative of future results. The consolidated
      balance sheet information as of March 31, 2006 was derived from the Company’s
      audited consolidated financial statements and notes for the fiscal year ended
      March 31, 2006 included in the Company’s fiscal 2006 Annual Report on Form
      10-KSB/A.





The
      following critical accounting policies affect the significant judgments and
      estimates used in the preparation of the Company’s consolidated financial
      statements.





For
      certain of the Company's consolidated financial instruments, including cash
      and
      cash equivalents, trade receivables and payables, prepaid expenses, deposits
      and
      other current assets, short-term bank borrowings, and other payables and
      accruals, the carrying amounts approximate fair values due to their short
      maturities.





A
      related
      party is generally defined as (i) any person that holds 10% or more of the
      Company's securities and their immediate families, (ii) the Company's
      management, (iii) someone that directly or indirectly controls, is controlled
      by
      or is under common control with the Company, or (iv) anyone who can
      significantly influence the financial and operating decisions of the Company.
      A
      transaction is considered to be a related party transaction when there is a
      transfer of resources or obligations between related parties.





**Accounting
      method**





The
      Company uses the accrual method of accounting which recognizes revenues when
      earned and expenses when incurred.





**Principles
      of consolidation**





The
      consolidated balance sheet as of December 31, 2006, the consolidated statements
      of income for the three and nine months ended December 31, 2006 and 2005, the
      consolidated statements of cash flows for the nine months ended December 31,
      2006 and 2005, and the shareholders’ equity statement for the nine months ended
      December 31, 2006 are unaudited. All significant inter-company balances and
      transactions have been eliminated in the consolidation.





The
      following companies are consolidated for financial statement presentation:





**Name
                of subsidiaries**
            
            December
                31, 2006
            
            **Incorporation
                date**Qingdao
                St. George Dairy Co. Ltd
            
            
            100
            %
            
            Sep-01Qingdao
                Sheng Yuan Dairy Co. Ltd
            
            
            100
            %
            
            Jan-98Heilongjiang
                Loubei Sheng Yuan Food Co. Ltd
            
            
            100
            %
            
            Apr-01Bei’an
                Yipin Dairy Co. Ltd
            
            
            100
            %
            
            Jun-04Qingdao
                Women and Children Nutrition Research Co. Ltd *
            
            
            100
            %
            
            Apr-04Zhangjiakou
                Shen Yuan Co. Ltd **
            
            
            100
            %
            
            Mar-04





*
      Qingdao
      Women and Children Nutrition Research Co, Ltd was dissolved and disposed of
      in
      July 2006. Its operational results were not classified separately as
      discontinued operations in the Consolidated Statement of Income due to their
      immateriality.




10




**
      Zhangjiakou completed a merger with Chaibei Sheng Yuan as of August 2005 and
      Zhangjiakou emerged as the surviving entity from the merger.





**Cash
      and cash equivalents**





The
      Company considers cash and cash equivalents to include cash on hand and demand
      deposits with banks with an original maturity of three months or less.




**31-Dec-06**
            
            **31-Mar-06**Cash
                and cash equivalents
            
            $
            6,665,842
            
            $
            5,676,616Cash
                restricted
            
            
            17,825,956
            
            
            16,457,253Total
            
            $
            24,491,798
            
            $
            22,133,869





Cash
      restricted is 30%, 50%, or 100% of bank demand deposits used as security against
      notes payables of 3 to 6 months terms. This is used by the Company as a short
      term instrument to reduce short-term interest expenses.





**Trade
      receivables**





The
      Company presents trade receivables, net of allowance for doubtful accounts.
      The
      allowance is calculated based on review of individual customer
      accounts.





Trade
      receivables are recognized and carried at the original invoice amount less
      allowance for any uncollectible amounts. An estimate for doubtful accounts
      is
      made when collection of the full amount is no longer probable. Bad debts are
      written off as incurred. The allowance on the doubtful accounts was $575,258
      and
      $417,143 as at December 31, 2006 and March 31, 2006, respectively.





**Inventories**





Inventories
      are stated at the lower of cost or net realizable value. Cost is calculated
      on
      the moving-average basis and includes all costs to acquire and other costs
      incurred in bringing the inventories to their present location and condition.
      The Company evaluates the net realizable value of its inventories on a regular
      basis and records a provision for loss to reduce the computed weighted-average
      cost if it exceeds the net realizable value. Net realizable value is the
      estimated selling price in the ordinary course of business less the estimated
      costs of completion and the estimated costs necessary to make the sale.




11





**Property,
      plant and equipment**





Property,
      plant and equipment are stated at cost less accumulated depreciation and
      impairment losses. The initial cost of the asset comprises its purchase price
      and any directly attributable costs of bringing the asset to its working
      condition and location for its intended use. Depreciation is provided using
      the
      straight-line method over the assets estimated useful life for periods ranging
      from five to fifty years. Significant improvements and betterments are
      capitalized where it is probable that the expenditure resulted in an increase
      in
      the future economic benefits expected to be obtained form the use of the asset
      beyond its originally assessed standard of performance. Routine repairs and
      maintenance are expensed when incurred. Gains and losses on disposal of fixed
      assets are recognized in the statement of income based on the net disposal
      proceeds less the carrying amount of the assets.





Depreciation
      is calculated on a straight-line basis over the estimated useful lives of the
      assets. The useful lives for property, plant and equipment are as follows:





Buildings
                and leasehold improvement
            20
                - 50 yearsPlant
                and machinery
            5
                -
                10 yearsOffice
                equipment and furnishings
            5
                yearsMotor
                vehicles
            5
                years





**Income
      taxes**





Income
      taxes of the Company’s subsidiaries are calculated in accordance with taxation
      principles currently effective in the PRC. For Synutra Illinois, applicable
      U.S.
      tax laws are followed. 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. The effect
      on deferred tax assets and liabilities of a change in tax rates is recognized
      as
      income in the period that includes the enactment date. A valuation allowance,
      when necessary, is provided for the amount of deferred tax assets and
      liabilities that, based on available evidence, are not expected to be realized.





Qingdao
      St. George Dairy Co., Ltd, Heilongjiang Loubei Shengyuan Dairy Co. Ltd, Bei’an
      Yipin Dairy Co. Ltd and Zhangjiakou Sheng Yuan Co. Ltd qualify as a foreign
      investment production enterprise and were established in a special economic
      zone. As approved by the tax authorities, such subsidiaries are entitled to
      a
      two year exemption from income taxes followed by three years of a 50% tax
      reduction, commencing from the first cumulative profit-making year net of losses
      carried forward.





Qingdao
      St. George Dairy Co., Ltd. is under such preferential tax treatment until
      December 31, 2008. Accordingly, the applicable enterprise income tax rate is
      24%
      and the local tax rate is 0%, resulting in an aggregate tax rate of 24%. The
      subsidiary was not be subject to local income tax prior to 2003.The subsidiary’s
      first cumulative profit-making year was 2004.




12





Heilongjiang
      Luobei Sheng Yuan Dairy Co., Ltd. is under such preferential tax treatment
      until
      December 31, 2010. Accordingly, the applicable enterprise income tax rate is
      30%
      and the local tax rate is 3%, resulting in an aggregate tax rate of 33%. The
      subsidiary was not subject to local income tax prior to 2005, The subsidiary’s
      first cumulative profit-making year was 2006.





Bei’an
      Yipin Dairy Co., Ltd. is under such preferential tax treatment until December
      31, 2009. Accordingly, the applicable enterprise income tax rate is 30% and
      the
      local tax rate is 3%, resulting in an aggregate tax rate of 33%. The subsidiary
      was not subject to local income tax prior to 2004. The subsidiary’s first
      cumulative profit-making year was 2005.





Zhangjiakou
      Sheng Yuan Dairy Co., Ltd. is under such preferential tax treatment until
      December 31, 2010. Accordingly, the applicable enterprise income tax rate is
      30%
      and the local tax rate is 3%, resulting in an aggregate tax rate of 33%. The
      subsidiary was not subject to local income tax prior to 2005. The subsidiary’s
      first cumulative profit-making year was 2006.





Qingdao
      Women and Children Nutrition Research Co. Ltd. was subject to 33% income tax.
      This entity was dissolved in July 2006.




Tax
      Rates
      Schedule for various operating subsidiaries of the Company in China is as
      follows:


**Name
                  of subsidiaries**
              **Period--Tax
                  rate**
              **Incorporation
                  date**Qingdao
                  St. George
              2004-2005
              2006-2008
              After
                  2008Dairy
                  Co. Ltd
              0%
              12%
              24%
              
              Sep-01Qingdao
                  Sheng Yuan
              all
                  termDairy
                  Co. Ltd
              30%
              Jan-98Heilongjiang
                  Loubei Sheng
              Before
                  2005
              2006-2007
              2008-2010
              After
                  2010Yuan
                  Food Co. Ltd
              33%
              0%
              16.50%
              33%
              Apr-01Bei’an
                  Yipin Dairy Co.
              Before
                  2004
              2005-2006
              2007-2009
              After
                  2009
              Jun-04Ltd
              33%
              0%
              16.50%
              33%Qingdao
                  Women and Children Nutrition
              all
                  term
              Apr-04Research
                  Co. Ltd*
              33%Zhangjiakou
                  Shen
              Before
                  2005
              2006-2007
              2008-2010
              After
                  2010
              Mar-04Yuan
                  Co. Ltd
              33%
              0%
              16.50%
              33%




*
      Qingdao
      Women and Children Nutrition Research Co, Ltd was dissolved and disposed of
      in
      July 2006.




13




**Revenue
      recognition**





The
      Company recognizes revenue from product sales when goods are shipped or
      delivered and rewards and risk of ownership and title pass to the customer.
      Revenues consist of the invoice value of the sale of goods and services net
      of
      value added tax, rebates and discounts, certain sales incentives, trade
      promotions, and product returns. Revenue reduction is accounted for in the
      same
      period the related sales are recorded.





Most
      of
      the Company’s mainline product sales are through distributors. The Company’s
      revenue arrangement with all its distributors requires distributor advance
      payment before shipment and delivery of goods to distributors. Under this
      distributor arrangement, evidenced by purchase order together with advance
      payment, sales revenue is realized and earned upon shipment and acceptance
      of
      delivery of products to and by distributors. The Company applies this revenue
      recognition policy uniformly to all its mainline products, including all
      dairy-based pediatric and adult nutritional products. Revenue recognition
      criteria outlined in the provisions of SAB 104, namely, persuasive evidence
      of
      arrangement, product delivery, fixed and determinable product prices, and
      reasonable assurance of collectibility are met.





A
      nominal
      amount of the Company’s mainline product sales are through supermarket retailers
      directly. Revenue arrangement with these retailers requires receipt of purchase
      orders before product shipment and delivery. Similarly, the revenues from
      retailers are recognized upon shipment or delivery of the goods to the retailers
      under payment terms of the sales contracts which are negotiated with select
      long
      term retailers, to assure reasonable collectibility.





The
      Company provides its distributors and retailers the right to return products
      due
      to package damage and shelf-life expiration. The majority of the Company’s
      products carry shelf lives of 18 to 24 months and most of them are sold during
      the shelf lives. Product returns due to damage and expiration, if any, are
      charged against current sales revenues. The arrangement meets the revenue
      recognition criteria under FASB Statement of Financial Accounting Standards
      No.48 “Revenue Recognition When Right of Return Exists





For
      new
      product offerings, the Company grants its distributors and retailers the same
      rights to return products due to package damage and shelf-life expiration,
      and
      these returns are deducted from revenue for the reporting period. The Company
      monitors over time each product line, including new product offerings, to track
      the pattern of sales returns and considers if sales return reserves are
      necessary.





On
      top of
      standard distributor pricing arrangements, the Company provides its larger
      distributors with a growth-based incentive mechanism that ties incremental
      discounts to the levels of incremental sales growth attained in the
      corresponding periods. Qualified discounts are accrued in the corresponding
      periods during which the sales growth materialized. The cost of this policy
      is
      treated as discount and is charged against sales revenue of the corresponding
      period.





Most
      of
      the Company’s products are shipped to the distributors upon receipt of payment
      directly from them, and thus assume title of the products immediately. No single
      customer constitutes a significant distributor to the Company by commanding
      more
      than 3% of its total sales.




14





The
      Company does not employ any sales incentive programs aimed at inducing sales
      to
      customers that result in excess inventory levels. The practice of the Company’s
      standard cash in advance revenue arrangement with distributors also discourages
      customers from accumulating excessive inventory beyond their normal business
      needs.





**Construction
      in progress**





Construction
      in progress represents direct costs of construction or acquisition and design
      fees incurred. Capitalization of these costs ceases and the construction in
      progress is transferred to plant and equipment when substantially all the
      activities necessary to prepare the assets for their intended use are completed.
      No depreciation is provided until it is completed and ready for intended use.





The
      capitalized interest accrued up to the three and nine months ended December
      31,
      2006 was $74,109 and $222,210, respectively, associated with construction in
      progress





**Intangible
      assets**





Intangible
      assets represent computer software and applications. Intangible assets are
      measured initially at cost. Intangible assets are recognized if it is probable
      that the future economic benefits that are attributable to the asset will flow
      to the enterprise and the cost of the asset can be measured reliably.





The
      intangible assets were $448,486 and $426,430, less accumulated amortization
      of
      $231,649 and $161,888 at December 31, 2006 and March 31, 2006, respectively.





**Government
      subsidies**





Subsidies
      from the government are recognized at their fair values when received or there
      is reasonable assurance that they will be received, and all attached conditions
      are complied with. The Subsidies from the government were $1,408,630 and $65,677
      during the three months ended December 31, 2006 and 2005, respectively, and
      were
      $4,498,493 and $712,953 during the nine months ended December 31, 2006 and
      2005,
      respectively.





**Related
      parties**





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





**Foreign
      currency translation**





The
      Company maintains its books and accounting records in Renminbi ("RMB"), the
      PRC's currency, being the functional currency. Transactions denominated in
      foreign currencies are translated into the reporting currency at the exchange
      rates prevailing on the transaction dates. Assets and liabilities denominated
      in
      foreign currencies are translated into the reporting currency at the exchange
      rates prevailing at the balance sheet date. Income and expenditures are
      translated at the average exchange rate of this term.




15





In
      July
      2005, the PRC began to value the RMB against a basket of currencies of its
      major
      trading partners, including the U.S. This measure has allowed the RMB to
      fluctuate within a narrow band vis á vis the U.S. dollars. Since the adoption of
      this managed flexible exchange rate policy, the RMB has been under pressure
      to
      appreciate against the U.S. dollar. This has affected changes in the foreign
      currency translation over the reporting period and is reflected in the
      other comprehensive income of $892,788 and $172,596 for the three months ended
      December 31, 2006 and 2005, respectively, and of $1,545,764 and $816,601 for
      the
      nine months ended December 31, 2006 and 2005, respectively.





**Use
      of estimates**





The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements, and the reported amounts of revenue and expenses
      during the reporting period. Actual results when ultimately realized could
      differ from those estimates.




**Fair
      value of financial instruments**





The
      carrying value of financial instruments including cash, receivables, accounts
      payable and accrued expenses and debt, approximates their fair value at December
      31, 2006 and 2005 due to the relatively short-term nature of these instruments.





**Shipping
      and handing**





All
      shipping and handling are expensed as incurred and outbound freight is not
      billed to customers. Shipping and handling expenses are included in selling
      and
      distribution expenses. The expenses were $1,298,195 and $461,928 during the
      three months ended December 31, 2006 and 2005, respectively, and were $2,903,530
      and $1,578,107 during the nine months ended December 31, 2006 and 2005,
      respectively.





**Advertising
      costs and promotion expenses**





Advertising
      costs and promotion include salaries for all salesmen and are expensed as
      incurred. The advertising costs and promotion expenses were $13,216,811 and
      $4,809,094 for the three months ended December 31, 2006 and 2005, respectively,
      and were $31,785,677 and $16,264,655 during the nine months ended December
      31,
      2006 and 2005, respectively.




16




**Employees’
      benefits**





Mandatory
      contributions are made to the Government's health, retirement benefit and
      unemployment schemes at the statutory rates in force during the period, based
      on
      gross salary payments. The cost of these payments is charged to the statement
      of
      income in the same period as the related salary cost.





**Comprehensive
      income**





The
      Company has adopted the provisions of Statement of Financial Accounting
      Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS
      No.
      130 establishes standards for the reporting and display of comprehensive income,
      its components and accumulated balances in a full set of general-purpose
      financial statements. SFAS No. 130 defines comprehensive income to include
      all
      changes in equity except those resulting from investments by owners and
      distributions to owners, including adjustments to minimum pension liabilities,
      accumulated foreign currency translation, and unrealized gains or losses on
      marketable securities. The comprehensive income was $5,084,630 and $3,950,214
      for the three months ended December31, 2006 and 2005, respectively, and was
      $21,387,600 and $7,655,141 during the nine months ended December 31, 2006 and
      2005, respectively.





**Reclassifications**


Certain
          notes payables classified as financing activities in cash flow statements
          for
          the nine months period ended December 31, 2005 have been reclassified as
          operating activities to conform with the fiscal 2006 presentation. In addition,
          certain sales (including sales to related parties) and related costs (including
          costs to related parties) classified as other income or expenses in income
          statements and related footnotes for the three and nine months periods
          ended
          December 31, 2005 have been reclassified as sales, sales to related parties,
          and
          cost of sales, cost of sales to related parties to conform with the fiscal
          2006
          presentation.
 
 **Amendments**
 
 Presentation
        of this current Quarterly Report on Form 10-Q reflects those of the preceding
        amended annual report on Form 10-KSB/A filed on February 5 th ,
        2007
        and quarterly reports on Form 10-Q/A filed on February 13 th ,
        2007
        with the United States Securities and Exchange Commission.





**3.
      CONCENTRATION OF CREDIT RISK**





Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist primarily of trade receivable. The Company performs
      ongoing credit evaluations with respect to the financial condition of its
      creditors, but does not require collateral. In order to determine the value
      of
      the Company’s accounts receivable, the Company records a provision for doubtful
      accounts to cover probable credit losses. Management reviews and adjusts this
      allowance periodically based on historical experience and its evaluation of
      the
      collectibility of outstanding accounts receivable. The Company is exposed to
      the
      following risk factors:





(i)
      Credit risks - The Company has policies in place to ensure that sales of
      products are made to customers with an appropriate credit history. The Company
      also has a concentration of credit risk due to geographic sales as a majority
      of
      its products are marketed and sold in the PRC.




(ii)
      Liquidity risks - Prudent liquidity risk management implies maintaining
      sufficient cash, the availability of funding through an adequate amount of
      committed credit facilities and ability to close out market positions.





(iii)
      Interest rate risk - The interest rate and terms of repayments of short-term
      and
      long-term bank borrowings are approximately 5% per annum. The Company's income
      and cash flows are substantially independent of changes in market interest
      rates. The Company has no significant interest-bearing assets. The Company's
      policy is to maintain all of its borrowings in fixed rate instruments.




17





**4.
      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**





**FIN
      48**




In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which
      clarifies the accounting for uncertainty in tax positions. This interpretation
      requires that the Company recognize in its financial statements the impact
      of a
      tax position if that position is more likely than not of being sustained on
      audit, based on the technical merits of the position. FIN 48 is effective for
      fiscal years beginning after December 15, 2006 which is the beginning of the
      Company’s fiscal 2008. The Company is currently evaluating the impact of
      adopting FIN 48 on its financial statements.





**SAB
      108**




In
      September, 2006, the Securities and Exchange Commission (“SEC”) issued Staff
      Accounting Bulletin No. 108 (“SAB 108”) which provides interpretive guidance on
      how the effects of the carryover or reversal of prior year misstatements should
      be considered in quantifying a current year misstatement. SAB 108 is effective
      for fiscal years ending after November 15, 2006 and early application is
      encouraged for any interim period of the first fiscal year ending after that
      date. The Company will adopt SAB 108 in the 4 th quarter
      of its fiscal 2007 and is currently evaluating the impact of adopting SAB 108
      on
      its financial statements.





**FAS
      157**




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157 “Defining Fair Value Measurement” (“FAS 157”) which defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles and expands disclosures about fair value measurements.
      FAS
      157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007, which is the Company’s fiscal 2009. The Company is
      currently evaluating the impact of adopting FAS 157 on its financial statements.





**FAS
      158**




In
      September 2006, the FASB also issued Statement of Financial Accounting Standards
      No. 158 “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans, an amendment of FAS Statements No. 87, 88, 106, and
      132(R)” (“FAS 158”). FAS 158 requires an employer to recognize the over-funded
      or under-funded status of a defined benefit postretirement plan as an asset
      or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income of a business entity. This statement also requires an employer to measure
      the funded status of a plan as of the date of its year-end statement of
      financial position, with limited exceptions. The Company will be required to
      initially recognize the funded status of a defined benefit postretirement plan
      and to provide the required disclosures as of the end of the fiscal year ending
      after December 15, 2006, which for the Company will be the end of fiscal
      2007. The requirement to measure plan assets and benefit obligations as of
      the
      date of the employer's fiscal year-end statement of financial position is
      effective for fiscal years ending after December 15, 2008, or fiscal 2009
      for the Company. The Company does not currently have a defined benefit pension
      plan but is currently evaluating the possible impact of adopting FAS 158 on
      its
      financial statements.




18





**SEC
      Staff’s letter regarding accounting for stock options under APB
      25**




In
      September 2006, SEC issued a Staff letter regarding several common errors in
      the
      past practices related to the granting of stock options under APB 25 “Accounting
      to Stock Issued to Employees”. This letter provided guidance on what constitutes
      an error and how to correct them. The Company has not granted stock options
      and
      therefore this new pronouncement is not applicable.





**5.
      TRADE RECEIVABLES, NET**





The
      Company's trade receivables, net as at December 31, 2006 and March 13, 2006
      are
      summarized as follows:




**31-Dec-06**
            
            **31-Mar-06**Trade
                receivables
            
            $
            6,114,043
            
            $
            2,956,860Less:
                Allowance for doubtful accounts
            
            
            575,258
            
            
            417,143Trade
                receivables, net
            
            $
            5,538,785
            
            $
            2,539,717





**6.
      PROPERTY, PLANT AND EQUIPMENT, NET**





**31-Dec-06**
            
            **31-Mar-06****Cost:**Buildings
                and leasehold improvement
            
            $
            16,280,660
            
            $
            7,313,860Land
                use rights
            
            
            1,707,974
            
            
            1,659,542Plant
                and machinery
            
            
            21,294,488
            
            
            7,206,411Office
                equipment and furnishings
            
            
            2,877,709
            
            
            988,330Motor
                vehicles
            
            
            1,055,563
            
            
            1,210,97443,216,394
            
            
            18,379,117**Less:
                Accumulated depreciation:**Buildings
                and leasehold improvement
            
            
            1,592,737
            
            
            1,264,683Land
                use rights
            
            
            142,246
            
            
            113,585Plant
                and machinery
            
            
            2,570,273
            
            
            2,306,131Office
                equipment and furnishings
            
            
            734,907
            
            
            336,235Motor
                vehicles
            
            
            552,857
            
            
            630,6105,593,020
            
            
            4,651,244Property,
                plant and equipment, net
            
            $
            37,623,374
            
            $
            13,727,873




19




Depreciation
      expenses relating to property, land, plant and equipment was $350,183 and
      $314,614 for the three months ended December 31, 2006 and 2005, respectively,
      and was $1,111,218 and $1,018,649 for the nine months ended December 31, 2006
      and 2005, respectively.




**7.
      INVENTORIES**





The
      Company's inventories at December 31, 2006 and March 31, 2006 are summarized
      as
      follows:




**December
                31,2006**
            
            **31-Mar-06**Raw
                Materials
            
            $
            1,920,313
            
            $
            1,984,520Work
                in Process
            
            
            8,741,749
            
            
            7,586,465Finished
                Goods
            
            
            3,471,602
            
            
            2,131,552Packing
                Materials & Other Consumables
            
            
            815,953
            
            
            86,896Total
            
            $
            14,949,617
            
            $
            11,789,433





**8.
      DUE FROM/(TO) RELATED PARTIES**





The
      amounts are unsecured, interest-free and have no fixed repayment terms.




**A.
      Classification by name of related parties**





**a.
      Due from related parties**




**31-Dec-06**
            
            **31-Mar-06**Heilongjiang
                Baoquanling Shen Yuan Dairy Co. Ltd
            
            $
            1,185,982
            
            $
            226,383Sheng
                Zhi Da Dairy Group Corporation
            
            
            674,817
            
            
            (268,349
            )Beijing
                Kelqin Dairy Co. Ltd
            
            
            3,168,914
            
            
            1,708,230St.
                Angel (Beijing Business Service)
            
            
            -
            
            
            1,761,265Beijing
                Honnete Dairy Corporation Ltd
            
            
            16,948,423
            
            
            4,185,149Beijing
                Ao Naier Feed Stuff LLC
            
            
            381,223
            
            
            297,892Beijing
                Ludin Xueyuan Trading Co. Ltd
            
            
            219,115
            
            
            691,793Total
                Due from Related Companies
            
            $
            22,578,474
            
            $
            8,602,363





**b.** **Due
        to related parties**




**31-Dec-06**
            
            **31-Mar-06**Heilongjiang
                Baoquanling Shen Yuan Dairy Co. Ltd
            
            $
            -
            
            $
            705,602Sheng
                Zhi Da Dairy Group Corporation
            
            
            50,060
            
            
            2,192,892Beijing
                Kelqin Dairy Co. Ltd
            
            
            278,134
            
            
            63,909Beijing
                Honnete Dairy Corporation Ltd
            
            
            16,738
            
            
            1,338,734Total
                Due to Related Companies
            
            $
            344,932
            
            $
            4,301,137




20




**B.
      Classification of Related Party Transactions by Nature**





**a.**
            **Due
                from related parties**





**31-Dec-06**
            
            **31-Mar-06**Trade
                receivables
            
            $
            3,388,029
            
            $
            2,018,344Prepayments
                for goods
            
            
            1,760,694
            
            
            4,525,769Other
                receivables
            
            
            17,429,751
            
            
            2,058,250**Total**
            
            **$**
            22,578,474
            
            $
            8,602,363





**b.**
            **Due
                to related parties**





**31-Dec-06**
            
            **31-Mar-06**Trade
                payables
            
            $
            278,134
            
            $
            4,301,137Advance
                from cust0mers
            
            
            16,738
            
            
            -Other
                payables
            
            
            50,060
            
            
            -**Total**
            
            **$**
            344,932
            
            $
            4,301,137





Above-mentioned
      entities are considered related parties to the Company because they are
      affiliates of the Company under the common control of the Company’s major
      shareholder. These related parties act only as the Company’s suppliers or
      distributors and there are no other relationships wherein the Company has the
      ability to exercise significant influence over the operating and financial
      policies of these parties.





**9.
      RELATED PARTY TRANSACTIONS**




The
      following related party transactions occurred during the three and nine months
      ended December 31, 2006 and 2005:




In
      the
      three and nine months ended December 31, 2006 and 2005, the Company’s sales to
      the related parties included anhydrous
      milk fat and Non-Fat Dry Milk to Beijing Kelgin Dairy Co., Ltd. and Beijing
      Honnete Dairy Corporation, Ltd.; formulation ingredients to Sheng Zhi Da Dairy
      Group Corporation, Beijing Ao Naier Feed Stuff LLC, and Heilongjiang Baoquanling
      Sheng Yuan Dairy Co., Ltd.; and the Company’s name brand products to St Angel
      (Beijing Business Service) and Luding Xueyuan for direct sales, catalogue sales,
      and regional retail outlets distribution. Terms of all the sales are at market
      prices.




21





**Sales
      to related parties**





**Three
                Months ended**
              **December
                31**
            
            **Nine
                Months ended**
              **December
                31****2006**
            
            **2005**
            
            **2006**
            
            **2005**Heilongjiang
                Baoquanling Sheng Yuan Dairy Co.
            
            $
            1,786,517
            
            $
            1,143,581
            
            $
            3,546,640
            
            $
            3,094,517Sheng
                Zhi Da Dairy Group Corporation
            
            
            -
            
            
            90,168
            
            
            -
            
            
            547,683Beijing
                Kelqin Dairy Co. Ltd
            
            
            2,338,111
            
            
            -
            
            
            2,765,890
            
            
            2,111,162St.
                Angel (Beijing Business Service)
            
            
            -
            
            
            410,054
            
            
            31,776
            
            
            1,035,695Beijing
                Honnete Dairy Corporation Ltd
            
            
            -
            
            
            10,843,021
            
            
            4,157,688
            
            
            11,114,228Beijing
                Ludin Xueyuan Trading Co. Ltd
            
            
            23,743
            
            
            -
            
            
            52,291
            
            
            244,975Total
            
            $
            4,148,371
            
            $
            12,486,824
            
            $
            10,554,285
            
            $
            18,148,260




In
      the
      three and nine months ended December 31, 2006 and 2005, the Company’s purchases
      from related parties included
      whey protein powders from Beijing Kelgin Dairy Co. Ltd. and Beijing Honnete
      Dairy Corporation Ltd; various ingredients and materials (packaging, etc.)
      from
      Sheng Zhi Da Dairy Group Corporation; spray-dried milk powder from Heilongjiang
      Baoquanling Sheng Yuan Dairy Co. Ltd.; and catalogues, brochures, and marketing
      materials from Beijing Sheng Long Media Co., Ltd. Terms of these transactions
      are all done at market prices.





**Purchases
      from related parties**




**Three
                months ended**
            
            
            **Nine
                months ended****31-Dec-06**
            
            
            **31-Dec-05**
            
            
            **31-Dec-06**
            
            
            **31-Dec-05**Beijing
                Kelqin Dairy Co. Ltd
            
            $
            614,229
            
            $
            510,971
            
            $
            1,686,243
            
            $
            1,557,784Sheng
                Zhi Da Dairy Group Corporation
            
            
            -
            
            
            1,141,249
            
            
            -
            
            
            2,890,285Heilongjiang
                Baoquanling Sheng Yuan Dairy Co.
            
            
            4,065,702
            
            
            3,480,097
            
            
            10,840,223
            
            
            7,221,231Beijing
                Honnete Dairy Corporation Ltd
            
            
            1,357,115
            
            
            3,061,772
            
            
            4,700,263
            
            
            4,522,564Beijing
                Ao Naier Feed Stuff LLC
            
            
            -
            
            
            -
            
            
            45,923
            
            
            -Beijing
                Sheng Long Media Co. Ltd
            
            
            -
            
            
            -
            
            
            -
            
            
            22,685Total
            
            $
            6,037,047
            
            $
            8,194,089
            
            $
            17,272,652
            
            $
            16,214,549




22




**10.
      INTANGIBLES**





Intangible
      assets represent computer software and applications. Intangible assets are
      measured initially at cost. Intangible assets are recognized if it is probable
      that the future economic benefits that are attributable to the asset will flow
      to the enterprise and the cost of the asset can be measured reliably. After
      initial recognition, intangible assets are measured at cost less any impairment
      losses. Intangible assets with definite useful lives are amortized on a
      straight-line basis over their useful lives.





Intangible
      assets consist of the follow:




**31-Dec-06**
            
            **31-Mar-06**Gross
                    Carrying
                    Amount
            
            Accumulated
                  Amortization
            
            Gross
                  Carrying Amount
            
            Accumulated
                  AmortizationComputer
                software and applications
            
            $
            448,486
            
            $
            231,649
            
            $
            426,430
            
            $
            161,868**Total
                intangible assets**
            
            
            448,486
            
            
            231,649
            
            
            426,430
            
            
            161,868





Amortization
      expenses for the three months ended December 31, 2006 and 2005 were $22,512
      and
      $21,710 respectively, and were $65,684 and $63,491 for the nine months ended
      December 31, 2006 and 2005, respectively.





**11.
      BANK LOANS**





As
      at
      December 31, 2006 and March 31, 2006, the Company had short-term loans from
      banks in the amount of $33,364,240 and $13,113,534 bearing interest ranging
      from
      5.58% to 6.48% per annum. Such loans are extendable for terms of no less than
      one year to December 2007. The loans were secured by the pledge of certain
      fixed
      assets held by the Company and its subsidiaries. The value of the fixed assets
      pledged was $24 million and $11.56 million as of December 31, 2006 and March
      31,
      2006, respectively.





There
      are
      no other long term borrowings by the Company at December 31, 2006.





23


**12.
        INCOME TAXES**


The
      Company’s income before income taxes was comprised of the following for the
      three and nine months ended December 31, 2006 and 2005,
      respectively.


**Three
                    months ended**
                  **December
                    31,**
                
                **Nine
                    months ended**
                  **December
                    31,****2006**
                
                **2005**
                
                **2006**
                
                **2005**United
                    States
                
                $
                (182,467
                )
                $
                (74,600
                )
                $
                (332,296
                )
                $
                (59,080
                )PRC
                
                
                4,661,253
                
                
                4,060,769
                
                
                21,906,943
                
                
                7,411,747Total
                
                $
                4,478,786
                
                $
                3,986,169
                
                $
                21,574,647
                
                $
                7,352,667




Income
      taxes are calculated on a separate entity basis. There currently is no tax
      benefit or burden recorded in the United States.





The
      provisions for income taxes for the three and nine months ended December 31,
      2006 and 2005, respectively, are summarized as follows:




**Three
                months ended**
              **December
                31,**
            
            **Nine
                months ended**
              **December
                31,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Current
            
            $
            286,944
            
            $
            208,552
            
            $
            1,732,811
            
            $
            513,551Deferred
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            286,944
            
            $
            208,552
            
            $
            1,732,811
            
            $
            513,551





**13.
      NET INCOME PER SHARE (EPS)**





SFAS
      128
“Earnings Per Share” requires the Company to calculate its net income per share
      based on basic and diluted net income per share, as defined. Basic EPS excludes
      dilution and is computed by dividing net income by the weighted average number
      of shares outstanding for the period. Diluted EPS reflects the potential
      dilution that could occur if securities or other contracts to issue common
      stock
      were exercised or converted into common stock. The dilutive effect of
      outstanding options and warrants, if exists, will be reflected in diluted EPS
      using the treasury stock method. Under the treasury stock method, options and
      warrants will generally have a dilutive effect when the average market price
      of
      common stock during the period exceeds the exercise price of the options.


24




**For
                  the three Months Ended December 31,****2006**
              
              **2005****Income
                  (Numerator)**
              
              **Shares
                  (Denominator)**
              
              **Per-Share
                  Amount**
              
              **Income
                  (Numerator)**
              
              **Shares
                  (Denominator)**
              
              **Per-Share
                  Amount****Basic
                  EPS**Net
                  income available to common stockholders
              
              $
              4,191,842
              
              
              50,000,713
              
              $
              0.08
              
              $
              3,777,618
              
              
              50,000,713
              
              $
              0.08**Diluted
                  EPS**Net
                  income available to common stockholders plus assumed conversions
              
              $
              4,191,842
              
              
              50,000,713
              
              $
              0.08
              
              $
              3,777,618
              
              
              50,000,713
              
              $
              0.08





25




**For
                the nine Months Ended December 31,****2006**
            
            **2005****Income
                (Numerator)**
            
            **Shares
                (Denominator)**
            
            **Per-Share
                Amount**
            
            **Income
                (Numerator)**
            
            **Shares
                (Denominator)**
            
            **Per-Share
                Amount****Basic
                EPS**Net
                income available to common stockholders
            
            $
            19,841,836
            
            
            50,000,713
            
            $
            0.40
            
            $
            
            
            
            48,444,880
            
            $
            0.14**Diluted
                EPS**Net
                income available to common stockholders plus assumed conversions
            
            $
            19,841,836
            
            
            50,000,713
            
            $
            0.40
            
            $
            
            
            
            48,444,880
            
            $
            0.14





**14.
      COMMITMENTS AND CONTINGENCIES**





**A.
      CAPITAL COMMITMENTS**





As
      of
      December 31, 2006, the Company had no significant capital commitments required
      for disclosure. **





**B.
      LEASE COMMITMENTS**





The
      lease
      commitments of the Company as of December 31, 2006 were as follows:





**Lease
                terms**
            
            **Monthly
                payment**
            
            **Mar-07**
            
            **Mar-08**
            
            **Mar-09**Office
                facilities in Beijing(SOHO903)
            
            
            20-Apr-05 __14-Dec-07
            
            $
            7,239
            
            $
            21,716
            
            $
            61,528
            
            
            -Office
                facilities in Beijing(SOHO2903-2905)
            
            
            15-Dec-04
                __14-Dec-07
            
            
            10,975
            
            
            32,925
            
            
            93,287
            
            
            -Office
                facilities in Beijing
            
            
            1-Jan-06 __
                31-Dec-07
            
            
            3,950
            
            
            11,850
            
            
            35,550
            
            
            -**Total
                rent expenses**
            
            
            
            
            
            
            
            
            
            **$**
            **66,491**
            
            **$**
            **190,365**
            
            
            -




**C.
      LEGAL PROCEEDINGS**





None.


26


**ITEM
      2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS**





**Organizational
      structure**





Through
      its wholly owned subsidiary, Synutra Inc., an Illinois corporation (“Synutra
      Illinois”), Synutra International, Inc. (the “Company” or “Synutra”) owns all of
      the equity interests of five companies in the People’s Republic of China,
      (“China” or the “PRC”), each engaged in different stages of the production,
      marketing, packaging and development of dairy based nutritional products in
      China for infants, children, pregnant women and nursing mothers, and other
      adults under the brand names of Super, U-Smart, U-Strong, and National
      Standards. Approximately 90% of the revenue for the fiscal year ended March
      31,
      2006 was from pediatric nutrition products and the rest from adult and other
      products. In September 2005, Synutra launched a new rice cereal product line,
      and in March 2006 the Company launched new premium infant formula products
      and
      line extensions. As supplemental foods to infant and children formula products,
      management believes that rice cereal products possess significant market
      potential. The new premium products and line extensions were designed to capture
      the fastest growing segment of the infant formula market in China. At the same
      time, Synutra also began to make and sell non-fat dry milk, anhydrous milk-fat,
      as well as certain ingredients of nutritional supplements.





Qingdao
      Sheng Yuan Dairy Co., Ltd. is engaged in the sales and marketing of dairy based
      nutritional products for infants, children and adults under its brand names
      of
      Super, U-Smart, U-Strong, and National Standards. Qingdao Sheng Yuan Dairy
      Co.,
      Ltd. was formed in January 1998 by Sodiaal Industrial Co. Ltd (55%) and Beijing
      Honnete Dairy Co., Ltd., (45%) an affiliate of Mr. Liang Zhang, the Company’s
      Chief Executive Officer. In December 2003, Sodiaal Industrial Co. Ltd
      transferred 15% of its ownership to Beijing Honnete Dairy Co., Ltd., and
      transferred 40% of its ownership to Synutra Illinois, In February 2004, Beijing
      Honnete Dairy Co., Ltd, transferred 60% of his ownership to Sheng Zhi Da Dairy
      Corporation. In February 2005, Sheng Zhi Da Dairy Corporation transferred 60%of
      its ownership to Synutra Illinois, resulting in a 100% of ownership of Qingdao
      Sheng Yuan Dairy Co., Ltd. by Synutra Illinois.





Qingdao
      ST George Dairy Co., Ltd. is engaged in the production, packaging, shipping
      and
      distribution of all of Synutra’s products. Qingdao ST George Dairy Co., Ltd. was
      formed in September 2001 by Synutra Illinois. In March 2004 Synutra Illinois
      transferred 75% of Qingdao St George Dairy Co., Ltd ownership to Sheng Zhi
      Da
      Dairy Corporation and Synutra Illinois retained 25% of the company. In February
      2005 Sheng Zhi Da Dairy Corporation transferred all of its ownership in Qingdao
      St. George Dairy Co., Ltd. (75%) to Synutra Illinois, resulting in a 100%
      ownership of Qingdao St. George Dairy Co., Ltd by Synutra Illinois. In
      September, 2006 Qingdao St. George Dairy Co., Ltd. incorporated into its
      existing operations the research and development functions of the then dissolved
      Qingdao Mother and Infant Nutrition Research and Development Company,
      Ltd.





Beian
      Yi
      Pin Dairy Co., Ltd. (“Beian”) is engaged in the production and processing of
      adult dairy based nutritional products and various milk powder products. Beian
      Yi Pin Dairy Co., Ltd. was formed In June 2004,by Sheng Zhi Da Dairy Corporation
      and Synutra Illinois-. In January 2005, Sheng Zhi Da Dairy Corporation
      transferred 71.26% of its ownership in Beian to Synutra Illinois, resulting
      in a
      100% ownership of Beian Yi Pin Dairy Co., Ltd. by Synutra Illinois





27





Luobei
      Sheng Yuan Dairy Co., Ltd. (“Loubei”) is engaged in the production and
      processing of Synutra’s products for infants and children under the brand names
      U-Smart, U-Strong, and National Standards under the “Sheng Yuan” label. Loubei
      was formed in April 2001 by Mr. Liang Zhang, and Ms. Xiu Qing Meng. In June
      2003, Mr. Zhang transferred 67% of his ownership to Sheng Zhi Da Dairy
      Corporation. In January 2005, Ms. Xiu Qing Meng transferred 33% of her ownership
      to Synutra Illinois , Sheng Zhi Da Dairy Corporation transferred 67% of its
      ownership to Synutra Illinois, resulting in a 100% ownership of Luobei Sheng
      Yuan Dairy Co., Ltd by Synutra Illinois.





Qingdao
      Mother and Infant Nutrition Research Company Limited was engaged in the research
      and development of various nutritional products for both infants and children
      as
      well as pregnant and lactating women. Qingdao Mother and Infant Nutrition
      Research Company Limited was formed in April 2004 by Sheng Zhi Da Dairy
      Corporation (80%) and Ms. Xiu Qing Meng (20%). In May 2005, Sheng Zhi Da Dairy
      Corporation transferred 80% of its ownership to Synutra Illinois and Ms. Xiu
      Qing Meng transferred 20% of her ownership to Synutra Illinois, resulting in
      a
      100% ownership of Qingdao Mother and Infant Nutrition Research Company Limited
      by Synutra Illinois. In July 2006 Qingdao Mother and Infant Nutrition Research
      Company Limited was dissolved.





Chabei
      Sheng Yuan Dairy Co., Ltd. is engaged in the production and processing of all
      of
      Synutra’s products under the brand names Super, U-Smart, U-Strong, and National
      Standards. Chabei Sheng Yuan Dairy Co., Ltd. was formed in February 2002,by
      Ms,
      Xiu Qing Meng(20%) and Sheng Zhi Da Dairy Corporation(80%). In March 2005,
      Ms.
      Xiu Qing Meng transferred 20% of her ownership to Synutra Illinois and Sheng
      Zhi
      Da Dairy Corporation transferred 80% of its ownership to Synutra Illinois,
      resulting in a 100% ownership of Chabei Sheng Yuan Dairy Co., Ltd. by Synutra
      Illinois. In August 2005, Chabei Sheng Yuan Diary Co., Ltd. was merged with
      Zhangjiakou Sheng Yuan Diary Co., Ltd. Zhangjiakou Sheng Yuan Diary Co., Ltd.
      emerged as the surviving entity from the merger.




Zhangjiakou
      Sheng Yuan Dairy Co., Ltd. (“Zhangjiakou”) is engaged in the production and
      processing of all of Synutra’s products under the brand names Super, U-Smart,
      U-Strong, and National Standards. Zhangjiakou Sheng Yuan Dairy Co., Ltd. was
      formed in March 2004 by Sheng Zhi Da Dairy Corporation(40%) and Synutra
      Illinois(60%). In March 2005, Sheng Zhi Da Dairy Corporation transferred 40%
      of
      its ownership to Synutra Illinois, resulting in Synutra Illinois owing 100%
      of
      Zhangjiakou.





On
      July
      15, 2005, pursuant to a Share Exchange Agreement dated as of June 14, 2005
      among
      the Company, Thomas Braun, Beams Power Investment Limited, Strong Gold Finance
      Ltd and Synutra Illinois, the Company issued 48,879,500 shares of its common
      stock in exchange for all of the issued and outstanding shares of Synutra
      Illinois that owned all the registered capital of the six subsidiaries (the
      “Exchange”). As a result of this Exchange, Synutra Illinois became a wholly
      owned subsidiary of the Company.




28





Immediately
      prior to the Exchange, the Company had 2,638,713 outstanding shares of common
      stock and no outstanding shares of preferred stock. The Company’s Certificate of
      Incorporation provides for authorized capital of two hundred and seventy million
      shares (270,000,000) of which two hundred and fifty million (250,000,000) are
      $0.0001 par value common stock and twenty million (20,000,000) are $0.0001
      par
      value preferred stock. Prior to the Exchange, Thomas Braun, the sole director
      and officer of the Company, and his affiliates owned 2,200,000 shares of the
      Company common stock. Pursuant to the Exchange, the Company cancelled
      approximately 1,517,500 shares of common stock owned by Mr. Braun and his
      affiliates reducing their ownership to 682,500 shares, resulting in the total
      issued and outstanding shares of the Company common stock equaling 1,121,213
      shares.





Pursuant
      to the Exchange, the Company issued 46,000,000 shares of its common stock in
      exchange for all of the outstanding capital stock of Synutra Illinois held
      by
      Beams Power Investment Limited and Strong Gold Finance Ltd., 2,844,500 shares
      were issued to various financial consultants and/or their designees and 35,000
      shares to a finder. Therefore, the total issued and outstanding shares of the
      Company’s common stock were 50,000,713 shares after giving effect to the
      Exchange.





As
      a
      result of the Exchange, the stockholders of the Company immediately prior to
      the
      Exchange owned approximately 1,121,213 shares, or approximately 2% of the issued
      and outstanding shares of the Company’s common stock and the Company is now
      controlled by the former stockholders of Synutra Illinois.





The
      Share
      Exchange Agreement was determined through arms’ length negotiations between the
      Company and Synutra Illinois.





Immediately
      following the completion of the Exchange, all of the existing members of the
      Company’s board of directors and all of its executive officers resigned and new
      appointees were elected to the Company’s board of directors.





On
      September 9, 2005 the Company changed its name to Synutra International, Inc.
      (OTCBB: SYUT).





Although
      the Company acquired Synutra Illinois pursuant to the Exchange, the Exchange
      was
      treated as a “reverse merger” whereby Synutra Illinois is considered to be the
      accounting acquirer. As such, the results of operations are those of Synutra
      Illinois.




On
      November 6, 2006, the Company consummated a transaction with the Department
      of
      Finance of Zheng Lan Qi (County) of Inner Mongolia in which the Company acquired
      certain assets owned by them including approximately $ 256,000 in land use
      rights and $5,635,000 in plant and buildings under construction. The transaction
      was consummated in order to establish a wholly foreign-owned company to produce
      milk fat and other diary-based food ingredients. The agreement, provided that
      the effective date of the transaction was when the Company received 60% of
      the
      non refundable subsidy of RMB 30,000,000 (approximately $3,800,000). This
      occurred during September 2006 and thus the assets were recorded during that
      period, notwithstanding that the official ownership certificates have not yet
      been obtained. The non refundable subsidy was received in two installments
      and
      was recorded in the periods received as subsidy income. The acquisition was
      considered immaterial since the acquired assets only comprise approximately
      5%
      of the Company’s total assets. No additional disclosures are deemed necessary in
      this filing.


29




In
      November, 2006 Zhangjiakou Sheng Yuan Co., Ltd., (“Zhangjiakou ”) one of the
      Company’s operating subsidiaries, entered into an agreement with the
      shareholders of Inner Mongolia Meng Yuan Food Co., Ltd. (“Meng Yuan”) to acquire
      100% of the equity interest in Meng Yuan for a consideration of about $900,000.
      At the close of the transaction Meng Yuan transferred assets under its control
      to Zhangjiakou which included land use rights, plant equipment and plant
      buildings under construction. The Meng Yuan project is anticipated to be put
      in
      service in mid 2007 and it is designed to produce 7,200 tons per year infant
      formula products. The transfer of the above assets and the payment of the
      considerations have been accounted for in this quarterly report and no
      additional disclosure is deemed necessary.





**RESULTS
      OF OPERATIONS**





**Three
      Months Ended December 31, 2006 Compared to Three Months Ended December 31,
      2005**




**Sales**





Sales
      for
      the three months ended December 31, 2006 increased by $12,844,312 or 29% to
      $56,649,606 from $43,805,294 for the three months ended December 31, 2005.





Increase
      in volume of products sold was due in part to greater market penetration as
      a
      result of various measures including changes made by management to incentive
      programs and policies affecting the Synutra sales system. Such changes enhanced
      sales force productivity through targeted resource allocation down to the store
      level, and strengthened promotional efforts in the medium sized city markets
      and
      rural markets of China by aligning bonuses with sales performance.





The
      sales
      of traditional main products, such as the dairy based nutritional products
      for
      infants, children and adults under its brand names of Super, U-Smart, U-Strong,
      and National Standards, mostly contributed to the increasing trend of revenue.
      The total revenue also included sales generated from processing and packaging
      of
      nutritional supplement ingredients, anhydrous milk-fat, non-fat dry milk, and
      toll packaging and blending services.




a.
            The
                tons sold of traditional main products increased to 7,331 tons in
                the
                three months ended December 31, 2006 from 5,160 tons in the three
                months
                ended December 31, 2005, resulting in an increase of $11,365,575
                in gross
                sales





b.
            Higher
                average selling price also contributed to the increase in sales.
                For the
                three months ended December 31, 2006, the average selling price of
                the
                Company’s traditional main products increased from $5,236 to $5,923 per
                ton, resulting in an increase of $3,547,407 in gross sales.




30





c.
            Sales
                growth attributable to the combined factors of the increase of the
                volume
                and the price was $1,492,195.





d.
            New
                product launches contributed $4,826,695 to gross sales for the three
                months ended December 31, 2006, reflecting a net increase of $1,958,930
                in
                new product contributions over the amount of $2,867,765 for the same
                three
                months the year before.





e.
            Revenue
                generated from processing and packaging of nutritional supplement
                ingredients, anhydrous milk-fat, non-fat dry milk, and toll packaging
                and
                blending services was $8,398,263 and $13,918,058 for the three months
                ended December 31 of 2006 and 2005 respectively. The decrease of
                $5,519,795 partially offset the sales growth as discussed
                above.





For
      the
      three months ended December 31, 2006, the Company generated approximately 98.05%
      of its traditional main products sales revenue of $43 million through its
      wholesale distributor networks and about 1.05% through supermarket retailers.
      Of
      the traditional main products sales revenue of $27 million generated for the
      three months period ended December 31, 2005, about 98.84% was from distributors
      and about 1.16% from supermarket retailers.





Management
      believes that the overall infant formula industry in China has grown faster
      than
      its traditional natural growth due to increased consumer recognition and
      acceptance of the products, especially Synutra’s name-brand products. Management
      believes Synutra name brand product lines have gained recognition in the
      marketplaces where it operates and thus has captured a greater portion of the
      increased growth experienced by the industry. In addition, management believes
      premium products with a higher margin have grown faster in the period across
      the
      industry.





**Cost
      of Sales**





Cost
      of
      sales for the three months ended December 31, 2006 decreased to $27,721,449
      from
      $27,930,627 for the three months ended December 31, 2005.





The
      cost
      of traditional main products for the three months ended December 31,
      2006 increased to $15,029,170 from $11,228,984 for the three months ended December
      31, 2005. The increase of $3,800,186 was a result of increases in purchases
      of
      raw materials and other ingredients, as well as increases in processing
      expenses, all in proportion to the production volume increases. Among the
      $3,800,186 increase related to the traditional main products, the increase
      of
      2,171 tons sold of the traditional main products resulted in a $4,723,403 cost
      increase. The average cost per unit decreased by $126 per metric ton, resulting
      in a $923,218 cost decrease for the three months ended December 31, 2006. The
      decrease was due to the Company’s continuous effort in improving the formula mix
      in additional to achieving economics of scale.





The
      launch of new products accounted for an increase of $2,122,096 in the total
      cost
      of sales for the three months ended December 31, 2006 compared to the three
      months ended December 31, 2005.


31





The
      total
      cost of sales also included costs associated with processing and packaging
      of
      nutritional supplement ingredients, anhydrous milk-fat, non-fat dry milk, and
      toll packaging and blending services which
      decreased $6,131,460 to $7,929,486 for the three months ended December 31,2006
      from $14,060,946 in the same period prior year. This cost decrease was in
      proportion to the level of business activities in these areas. Due to the fact
      that such non-core business activities are carried out only at times when excess
      capacities are available, their output and related costs tend to fluctuate
      since
      related sales and service contracts are often made on an ad hoc
      basis.





**Gross
      Profit**





Concurrent
      with the sales increase in the three months ended December 31, 2006 compared
      to
      2005, the Company experienced a significant increase in gross profit. This
      increase was primarily a result of increased volume of products sold and the
      average sales price during the year. Due to implementation of targeted sales
      incentive programs, sales of the higher margin lines of products increased
      more,
      contributing to the increase in gross margin for these traditional main
      products.





Gross
      profit was $28,928,157 or 51% of sales for the three months ended December
      31,
      2006, compared to $15,874,667 or 36% of sales for the three months ended
      December 31, 2005, an increase of $13,053,490 or 82%.





The
      sales
      of traditional main products contributed $28,395,478 of gross profit for the
      three months ended December 31, 2006, compared to $15,790,487 of gross profit
      for the three months ended December31, 2005. New product launches accounted
      for
      $63,902 in gross profit for the three months ended December 31, 2006, as
      compared to $227,068 for the same three months period the year before. Other
      non-core products and services accounted for $468,777 in gross profit for the
      three months ended December 31, 2006, as compared to a loss of $142,888 for
      the
      three months ended December 31, 2005.





**Selling
      and Distribution Expenses**





Selling
      and distribution expenses increased by $4,653,045 or 86% to $10,093,222 for
      the
      three months ended December 31, 2006, as compared to $5,440,177 for the three
      months ended December 31, 2005. The increase was a result of increased
      transportation and travel expenses in proportion to the increase in sales
      volume, in addition to increases in expenses such as wages. ** The
      total
      compensation to the sales force increased by $1,343,685 from $1,116,689 in
      the
      three months ended December 31, 2005 to $2,460,374 in the three months ended
      December 31, 2006. The increase was due to the hiring of additional sales
      personnel in response to expanding business and greater market penetration.
      In
      the meantime shipping and handling expenses increased by $836,268 from $461,928
      in the three months ended December 31, 2005 to $1,298,195 in the three months
      ended December 31, 2006, proportionate to the increase in sales; and travel
      expenses increased by $152,453 from $383,418 in the three months ended December
      31, 2005 to $535,961 in the three months ended December 31, 2006. The Company
      continued to expand its sales efforts both in rural and urban areas by utilizing
      motorized marketing and sales teams to expand the reach of its products and
      to
      build brand image by participating in trade shows and in other marketing
      activities. These efforts accounted for much of the increases in
      expenses.


32





**Advertising
      and Sales Promotion Expenses**





Advertising
      and sales promotion increased by $8,407,717 or 175% to $13,216,811 for the
      three
      months ended December 31, 2006, as compared to $4,809,094 for the three months
      ended December 31, 2005 as a result of increased advertising and promotional
      activities. The major components of advertising and sales promotion expenses
      are
      placement of advertisements with major media outlets and points of sale and
      community promotional activities.





**Three
                months ended**
              **December
                31,****2006**
            
            **2005**
            
            **change
                in $**
            
            **change
                in %**Advertising
            
            $
            2,964,720
            
            $
            1,038,577
            
            $
            1,926,143
            
            
            185.46
            %Sales
                promotion
            
            
            10,252,091
            
            
            3,770,517
            
            
            6,481,573
            
            
            171.90
            %**Totals**
            
            **$**
            **13,216,811**
            
            **$**
            **4,809,094**
            
            **$**
            **8,407,717**
            
            
            **174.83**
            **%**





**General
      and Administrative Expenses**





General
      and administrative expenses increased by $683,874 or 53% to $1,965,139 for
      the
      three months ended December 31, 2006, as compared to $1,281,265 for the three
      months ended December 31, 2005. Most
      of
      the increases were for staff salaries, management expenses, and legal,
      accounting, and consulting costs related to corporate transactions and the
      costs
      associated with operating as a public company. Moreover, due to the
      consolidation of certain business functions and development of shared services
      throughout the nine months ended December 31, 2006, total general and
      administrative expenses increased only slightly from the same period the year
      before.





**Income
      from Operations**





Based
      on
      the sales increase of $12.8 million or 29% and the cost of sales decrease of
      $0.2 million for the three months ended December 31, 2006, gross profit
      increased by $13.1 million or 82% compared to the three months ended December
      31, 2005. In the meantime, operational expenses also increased by approximately
      $13.7 million from $11.5 million for the three months ended December 31, 2005
      to
      $25.3 million for the respective period ended December 31, 2006. As a result,
      income from operations was $3,652,985 for the three months ended December 31,
      2006, as compared to $4,344,131 for the three months ended December 31,
      2005.





**Finance
      costs**





Finance
      costs increased by $404,678 to $704,107 for the three months ended December
      31,
      2006, as compared to $299,429 for the three months ended December 31, 2005,
      due
      to the increasing borrowing activities took place in the fiscal quarter.





**Subsidy
      income**





Subsidy
      income from local governments increased by $1,342,953 to $1,408,630 for the
      three months ended December 31, 2006 as compared to $65,677 for the three months
      ended December 31, 2005. These subsidies were provided to the Company as
      economic incentives and no repayment by the Company is required. In the three
      months ended December 31, 2006 the Company continued to receive installments
      of
      subsidy payment from Inner Mongolia Zheng Lan Qi (County) as part of the cash
      award to the Company for its investment commitment in the county. On a
      non-recurring basis, the Company receives such subsidy from time to time.


33




**Other
      Income (Expenses), Net**





Other
      income, net was $11,921 for the three months ended December 31, 2006, and other
      expense, net was $125,805 for the three months ended December 31, 2005. The
      Company incurred these net income or expenses mainly as a result of sales and
      disposal of certain assets or fixed assets.





**Provision
      for Income Taxes**





The
      provision for income taxes, which is computed on a per subsidiary basis, was
      $286,944 and $208,552 for the three months ended December 31, 2006 and 2005,
      respectively. The difference in income tax provisions was due to changes in
      the
      status of tax holidays and abatement treatment for the fiscal year 2007 for
      some
      of the operating subsidiaries.





**Net
      Income Attributable to Shareholders**





Net
      income attributable to shareholders for the three months ended December 31,
      2006
      increased by $414,224 or 11% to $4,191,842 from $3,777,618 for the three months
      ended December 31, 2005 due to the factors discussed above.





**Earnings
      Per Share**





Basic
      and
      diluted Earnings Per Share were $0.08 for three months ended December 31, 2006
      and $0.08 for three months ended December 31, 2005.





**Nine
      Months Ended December 31, 2006 Compared to Nine Months Ended December 31,
      2005**




**Sales**




Sales
      for
      the nine months ended December 31, 2006 increased by $56,759,682 or 60% to
      $151,900,818 from $95,141,136 for the nine months ended December 31, 2005.





Increase
      in volume of products sold was due in part to greater market penetration as
      a
      result of various measures including changes made by management to incentive
      programs and policies affecting the Synutra sales system. Such change enhanced
      sales force productivity through targeted resource allocation down to the store
      level, and strengthened promotional efforts in the medium sized city markets
      and
      rural markets of China by aligning bonuses with sales
      performance.


34





The
      sales
      of traditional main products, such as the dairy based nutritional products
      for
      infants, children and adults under its brand names of Super, U-Smart, U-Strong,
      and National Standards, mostly contributed to the increasing trend of revenue.
      The total revenue also included sales generated from processing and packaging
      of
      nutritional supplement ingredients, anhydrous milk-fat, non-fat dry milk, and
      toll packaging and blending services.




a.
            The
                tons sold of traditional main products increased to 19,767 tons in
                the
                nine months ended December 31, 2006 from 13,266 tons in the nine
                months
                ended December 31, 2005, resulting in an increase of $33,001,277
                in gross
                sales





b.
            Higher
                average selling price also contributed to the increase in sales.
                For the
                nine months ended December 31, 2006, the average selling price of
                the
                Company’s traditional main products increased from $5,076 to $5,900 per
                ton, resulting in an increase of $10,924,620 in gross sales.





c.
            Sales
                growth attributable to the combined factors of the increase of the
                volume
                and the price was $5,353,607.





d.
            New
                product launches contributed $17,368,066 to gross sales for the nine
                months ended December 31, 2006, reflecting a net increase of $12,209,291
                in new product contributions over the amount of $5,158,775 for same
                nine
                months the year before.





e.
            Revenue
                generated from processing and packaging of nutritional supplement
                ingredients, anhydrous milk-fat, non-fat dry milk, and toll packaging
                and
                blending services was $17,910,539 and $22,639,652 for the nine months
                ended December 31 of 2006 and 2005 respectively. The decrease of
                $4,729,113 partially offset the sales growth as discussed
                above.





For
      the
      nine months ended December 31, 2006, the Company generated approximately 98.86%
      of its traditional main products sales revenue of $117 million through its
      wholesale distributor networks and about 1.14% through the supermarket
      retailers. Of the traditional main products sales revenue of $67 million
      generated for the nine months ended December 31, 2005, about 98.57% was from
      distributors and about 1.43% from supermarket retailers.





Management
      believes that the overall infant formula industry in China has grown faster
      than
      its traditional natural growth due to increased consumer recognition and
      acceptance of the products, especially Synutra’s name-brand products. Management
      believes Synutra name brand product lines have gained recognition in the
      marketplaces where it operates and thus has captured a greater portion of the
      increased growth experienced by the industry. In addition, management believes
      premium products with a higher margin have grown faster in the period across
      the
      industry.





**Cost
      of Sales**





Cost
      of
      sales for the nine months ended December 31, 2006 increased to $77,069,117
      from
      $55,210,185 for the nine months ended December 31, 2005.


35





The
      cost
      of traditional main products for the nine months ended December 31,
      2006 increased to $43,952,525 from $28,833,625 for the nine months ended December
      31,
      2005. The increase of $15,118,900 was a result of increases in purchases of
      raw
      materials and other ingredients, as well as increases in processing expenses,
      all in proportion to the production volume increases. Among the increase of
      $15,118,900 related to traditional main products, the increase of 6,501 tons
      sold of the traditional main products resulted in $14,129,911 increase of cost.
      The average cost per unit increased by $50 per metric ton, resulting in $988,989
      cost increase for the nine months ended December 31, 2006.





The
      launch of new products accounted for an increase of $10,963,886 in the total
      cost of sales for the nine months ended December 31, 2006 compared to the
      respective prior year.





The
      total
      cost of sales also included costs associated with processing and packaging
      of
      nutritional supplement ingredients, anhydrous milk-fat, non-fat dry milk, and
      toll packaging and blending services which
      decreased $4,223,854 to $17,695,031 for the nine months ended December 31,
      2006
      from $21,918,886 in the same period prior year. This cost decrease was in
      proportion to the level of business activities in these areas. Due to the fact
      that such non-core business activities are carried out only at times when excess
      capacities are available, their output and related costs tend to fluctuate
      since
      related sales and service contracts are often made on an ad hoc
      basis.





**Gross
      Profit**





Concurrent
      with the sales increase in the nine months ended December 31, 2006 compared
      to
      2005, the Company experienced a significant increase in gross profit. This
      increase was primarily a result of increased volume of products sold and the
      average sales price during the year. Due to implementation of targeted sales
      incentive programs, sales of the higher margin lines of products increased
      more,
      contributing to the increase in gross margin.





Gross
      profit was $74,831,701 or 49% of sales for the nine months ended December 31,
      2006, compared to $39,930,950 or 42% of sales for the nine months ended December
      31, 2005. It was an increase of $34,900,750 or 87%.





The
      sales
      of traditional main products contributed $72,669,688 or 97% of gross profit
      for
      the nine months ended December 31, 2006 compared to $38,509,083 or 96% of gross
      profit for the nine months ended December 31, 2005. New product launches
      accounted for $1,946,505 in gross profit for the nine months ended December
      31,
      2006, as compared to $701,101 for the same nine months period the year before.
      Other non-core products and services accounted for $215,508 in gross profit
      for
      the nine months ended December 31, 2006, as compared to $720,767 for the nine
      months ended December 31, 2005.




**Selling
      and Distribution Expenses**





Selling
      and distribution expenses increased by $9,164,420 or 82% to $20,329,597 for
      the
      nine months ended December 31, 2006, as compared to $11,165,177 for the nine
      months ended December 31, 2005. The increase in selling and distribution
      expenses in the nine months ended December 31 2006 as compared to 2005 was
      a
      result of increased transportation and travel expenses in proportion to the
      increase in sales volume, in addition to increases in expenses such as wages. ** The
      total
      compensation to the sales force increased by $3,426,868 from $2,843,106 in
      the
      nine months ended December 31, 2005 to $6,269,974 in the nine months ended
      December 31, 2006. The increase was due to the hiring of additional sales
      personnel in response to expanding business and greater market penetration.
      In
      the meantime shipping and handling expenses increased by $1,325,423 from
      $1,578,107 in the nine months ended December 31, 2005 to $2,903,530 in the
      nine
      months ended December 31, 2006, proportionate to the increase in sales; and
      travel expenses increased by $462,939 from $1,010,833 in the nine months ended
      December 31, 2005 to $1,473,773 in the nine months ended December 31, 2006.
      The
      Company continued to expand its sales efforts both in rural and urban areas
      by
      utilizing motorized marketing and sales teams to expand the reach of its
      products and to build brand image by participating in trade shows and in other
      marketing activities. These efforts accounted for much of the increases in
      expenses.


36





**Advertising
      and Sales Promotion Expenses**





Advertising
      and sales promotion increased by $15,521,022 or 95% to $31,785,677 for the
      nine
      months ended December 31, 2006, as compared to $16,264,655 for the nine months
      ended December 31, 2005 as a result of increased advertising and promotional
      activities. The major components of advertising and sales promotion expenses
      are
      placement of advertisements with major media outlets and points of sale and
      community promotional activities.





**Nine
                months ended**
              **December
                31****2006**
            
            **2005**
            
            **change
                in $**
            
            **change
                in %**Advertising
            
            $
            6,044,502
            
            $
            4,426,714
            
            $
            1,617,788
            
            
            36.55
            %Sales
                promotion
            
            
            25,741,175
            
            
            11,837,941
            
            
            13,903,234
            
            
            117.45
            %**Totals**
            
            **$**
            **31,785,677**
            
            **$**
            **16,264,655**
            
            **$**
            **15,521,022**
            
            
            **95.43**
            **%**





**General
      and Administrative Expenses**





General
      and administrative expenses increased by $75,997 to $4,282,151 for the nine
      months ended December 31, 2006, as compared to $4,206,155 for the nine months
      ended December 31, 2005. Most
      of
      the increases were for staff salaries, management expenses, and legal,
      accounting, and consulting costs related to corporate transactions and the
      costs
      associated with operating as a public company. Moreover, due to the
      consolidation of certain business functions and development of shared services
      throughout the nine months ended December 31, 2006, total general and
      administrative expenses increased only slightly from the same period the year
      before.


**Income
      from Operations**





Based
      on
      the sales increase of $56.8 million or 60% and the cost of sales increase of
      $21.9 million or 40% for the nine months ended December 31, 2006, gross profit
      increase by almost $35 million or 87% compared to the nine months ended December
      31, 2005. In the meantime, operational expenses also increased by approximately
      $24.8 million from $31.6 million for the nine months ended December 31, 2006
      to
      $56.4 million for the respective period prior year. As a result, income from
      operations was $18,434,276 for the nine months ended December 31, 2006, as
      compared to $8,294,964 for the nine months ended December 31,
      2005.


37





**Finance
      costs**





Finance
      costs increased by $4,625 to $1,590,602 for the nine months ended December
      31,
      2006, as compared to $1,585,976 for the nine months ended December 31, 2005.





**Subsidy
      income**





Subsidy
      income from local governments increased by $3,785,539 to $4,498,493 for the
      nine
      months ended December 31, 2006 as compared to $712,953 for the nine months
      ended
      December 31, 2005. These subsidies were provided to the Company as economic
      incentives and no repayment by the Company is required. In the nine months
      ended
      December 31, 2006 the Company received installments of subsidy payment from
      Inner Mongolia Zheng Lan Qi (County) as part of the cash award to the Company
      for its investment commitment in the county. On a non-recurring basis, the
      Company receives such subsidy from time to time.





**Other
      Income/(Expenses), Net**





Other
      income, net was $1,823 for the nine months ended December 31, 2006, and other
      expenses, net was $174,929 for the nine months ended December 31, 2005. The
      Company incurred these net income or expenses mainly as a result of sales and
      disposal of certain assets or fixed assets.





**Provision
      for Income Taxes**





The
      provision for income taxes, which is computed on a per subsidiary basis, was
      $1,732,811 and $513,551 for the nine months ended December 31, 2006 and 2005,
      respectively. The difference in income tax provisions was due to changes in
      the
      status of tax holidays and abatement treatment for the fiscal year 2007 for
      some
      of the operating subsidiaries.





**Net
      Income Attributable to Shareholders**





Net
      income attributable to shareholders for the nine months ended December 31,
      2006
      increased by $13,003,296 or 190% to $19,841,836 from $6,838,540 for the nine
      months ended December 31, 2005 due to the factors discussed above.





**Earnings
      Per Share**





Basic
      and
      diluted Earnings Per Share were $0.40 for nine months ended December 31, 2006
      and $0.14 for nine months ended December 31, 2005.


38





**CHANGE
      IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES**





**Cash**





The
      cash
      balance increased by $2,357,929 to $24,491,798 at December 31, 2006, as compared
      to $22,133,869 at March 31, 2006. The increase was mainly attributable to
      new bank loans of $15,298,524, offset by cash used in operating activities
      of $3,671,653 and cash spent in construction projects on plant and acquisition
      of fixed assets which amounted to $10,814,706. The remaining increase of
      $1,545,764 was the effect of exchange rate changes on cash items.





The
      Company used $3,671,653 of cash in operating activities for the nine months
      ended December 31, 2006. Trade receivables increased by $2,840,954 and advances
      to suppliers increased by $3,579,939. Expanded scale of operations from the
      increase in sales revenues in the nine months ended December 31, 2006 resulted
      in additional demand on working capital. Therefore, we experienced increased
      trade receivables and inventories to support our increased sales revenues and
      production activities.





Cash
      flows used in investing activities amounted to $10,814,706. During the nine
      months, we used $8,889,271 for the construction of a new factory plant and
      facilities. The facilities are expected to be completed by the end of
      2007 *.* We
      also
      spent around $1,984,109 for new machinery and equipment.





**Working
      Deficit**





Working
      deficit improved by $6.7 million to $2.6 million at December 31, 2006, from
      $9.3
      million at March 31, 2006. The improvement in working deficit reflects an
      increase in the ratio of current assets over current liabilities to 97% from
      84%
      over the periods in discussion.





During
      the fiscal year ending March 31, 2007, we intend to continue to work to expand
      our product lines and product mix, as well as our product distribution
      throughout China. We believe our existing cash, cash from operations and credit
      facilities at December 31, 2006 are adequate to fund our operations for at
      least
      the next twelve months.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      do not
      have any special purpose entities or off-balance sheet financing
      arrangements.





**CONTRACTUAL
      OBLIGATIONS**





Please
      refer to footnote 14 to the Consolidated Financial Statements for a detailed
      discussion.





**CRITICAL
      ACCOUNTING ESTIMATES AND JUDGEMENTS**





There
      are
      no material changes in our critical accounting estimates as disclosed in our
      Annual Report on Form 10-KSB/A for the year ended March 31,
      2006.


39





**RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS**





Please
      refer to footnote 4 to the Consolidated Financial Statements for detailed
      discussion.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





There
      were no material changes in quantitative or qualitative disclosure about market
      risk during the nine months ended December 31, 2006. For additional information,
      refer to Management’s Discussion and Analysis of Financial Condition and Results
      of Operations as presented in our Annual Report on Form 10-KSB/A for the year
      ended March 31, 2006.





**ITEM
      4. CONTROLS AND PROCEDURES**





As
      of
      December 31, 2006, the end of the period covered by this report, our Chief
      Executive Officer and our Chief Financial Officer reviewed and evaluated the
      effectiveness of our disclosure controls and procedures (as defined in Exchange
      Act Rule 13a-15(e) and 15d-15(e)), which are designed to ensure that
      material information we are required to disclose in our reports filed or
      submitted under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”) is recorded, processed, summarized, and reported within required time
      periods. Disclosure controls and procedures include, without limitation,
      controls and procedures designed to ensure that information required to be
      disclosed is accumulated and communicated to the Company’s management including
      its Chief Executive Officer and Chief Financial Officer as appropriate to allow
      timely decision regarding required disclosures. We have concluded, based on
      that
      evaluation, that as of the end of the period covered by this report, our
      disclosure controls and procedures were effective to ensure that material
      information required to be disclosed by us in reports that we file or submit
      under the Exchange Act is accumulated, recorded, processed, summarized and
      reported within the required time periods and is communicated to our Chief
      Executive Officer and Chief Financial Officer as appropriate to allow timely
      decisions regarding required disclosure.





**CHANGES
      IN INTERNAL CONTROL OVER FINANCIAL REPORTING**





There
      was
      no change in our internal controls over financial reporting that occurred during
      the third quarter of fiscal year 2007 covered by this Quarterly Report on
      Form 10-Q that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.




40


**PART
      II**


**OTHER
      INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





**None.**





**ITEM
      1A. RISK FACTORS**





For
      information regarding risk factors, please refer to Part I Item 1 as presented
      in our Annual Report on Form 10-KSB/A for the year ended March 31, 2006. There
      has been no material changes in our risk factors during the nine months ended
      December 31, 2006.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





**None.**





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





**None.**





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





**None.**





**ITEM
      5. OTHER INFORMATION**





**None.**


41


**ITEM
      6. EXHIBITS**





**EXHIBIT
                NO.**
            
            **DOCUMENT
                DESCRIPTION**3.1
            
            Articles
                of Incorporation (1)3.2
            
            Bylaws
                (1)10.1
            
            Share
                Exchange Agreement dated as of June 14, 2005 (2)10.2
            
            License
                and Supply Agreement dated as of September 1st,
                2003 (3)10.3
            
            Agreement
                between he Company and the Department of Finance of Zheng Lan Qi
                (County)
                of Inner Mongolia, with Amendment and Schedule (4)31.1
            
            Certification
                of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as amended.31.2
            
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as amended.32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer).32.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer).





(1)
            Incorporated
                herein by reference from the Registrant’s Form 10SB126 filed with the
                Securities and Exchange Commission on June 15, 2005.(2)
            Incorporated
                herein by reference from the Registrant’s Form 8-K filed with Securities
                and Exchange Commission on July 21, 2005.(3)
            Incorporated
                herein by reference from the Registrant’s Form 10-KSB filed with the
                Securities and Exchange Commission on June 29, 2006.(4)
            Incorporated
                herein by reference from the Registrant’s Form 8-K filed with the
                Securities and Exchange Commission on November 9,
                2006.




42


**SIGNATURES**





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


SYNUTRA
                INTERNATIONAL, INC.liangzhangDate:
                February 13, 2007
            By:
            /s/ Liang
                ZhangName: 
                Liang ZhangTitle:  
                Chief Executive Officer




43