**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 June 30, 2008





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


( Address
      of Principal Executive Offices, Zip Code )





(301)
      840-3888


(Registrant's
      Telephone Number, Including Area Code)





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, a non-accelerated filer or a smaller reporting company.
      See
      definition of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  ̈  Accelerated
      filer x Non-accelerated
      filer  ̈ (Do not
      check if a smaller reporting company)   Smaller
      reporting company  ̈





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
      August 8, 2008, there were 54,000,713 shares of Common Stock issued and
      outstanding.


1


**TABLE
      OF CONTENTS**




PagePART
                IItem
                1. Financial Statements (unaudited)
            
            3Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operation
            
            
            13Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            
            
            18Item
                4. Controls and Procedures
            
            
            18PART
                IIItem
                1. Legal Proceedings
            
            
            20Item
                1A. Risk Factors
            
            
            20Item
                2. Unregistered Sales of Equity Securities and Use of Proceeds
            
            
            20Item
                3. Defaults Upon Senior Securities
            
            
            20Item
                4. Submission of Matters to a Vote of Security Holders
            
            
            20Item
                5. Other Information
            
            
            20Item
                6. Exhibits
            
            
            21Signatures
            
            
            22




2




**PART
      I**


**FINANCIAL
      INFORMATION**




**ITEM
      1. FINANCIAL STATEMENTS.**




**SYNUTRA
      INTERNATIONAL, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**(in
      thousands, except share par value)**


**(unaudited)**





**June
                30,**
              **2008**
            
            **March 31,**
              **2008**ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            99,215
            
            $
            97,425Restricted
                cash
            
            
            4,278
            
            
            9,744Accounts
                receivable, net of allowance of $179 and $185,
                respectively
            
            
            12,775
            
            
            11,325Inventories
            
            
            57,929
            
            
            61,853Due
                from related parties
            
            
            1,720
            
            
            -Deferred
                tax assets
            
            
            1,040
            
            
            1,448Prepaid
                expenses and other current assets
            
            
            16,454
            
            
            12,701Assets
                held for sale
            
            
            -
            
            
            1,316Total
                current assets
            
            
            193,411
            
            
            195,812Property,
                plant and equipment, net
            
            
            105,809
            
            
            85,719Land
                use rights, net
            
            
            4,579
            
            
            4,496Deferred
                tax assets
            
            
            2,531
            
            
            2,077Other
                assets
            
            
            6,308
            
            
            8,115TOTAL
                ASSETS
            
            $
            312,638
            
            $
            296,219LIABILITIES
                AND SHAREHOLDERS’ EQUITYCurrent
                Liabilities:Short-term
                debt
            
            $
            14,288
            
            $
            21,228Long-term
                debt - current portion
            
            
            1,968
            
            
            1,923Accounts
                payable
            
            
            33,520
            
            
            26,438Due
                to related parties
            
            
            4,605
            
            
            2,970Advances
                from customers
            
            
            6,084
            
            
            9,465Income
                tax payable
            
            
            2,445
            
            
            4,168Other
                current liabilities
            
            
            16,853
            
            
            18,390Total
                current liabilities
            
            
            79,763
            
            
            84,582Long-term
                debt
            
            
            34,264
            
            
            34,184Deferred
                revenue
            
            
            4,665
            
            
            4,559Other
                long term liabilities
            
            
            1,360
            
            
            1,250Total
                liabilities
            
            
            120,052
            
            
            124,575Minority
                interest
            
            
            386
            
            
            385Shareholders’
                equity:Common
                stock, $.0001 par value: 250,000 authorized; 54,001 and 54,001 issued
                and
                outstanding at June 30, 2008 and March 31, 2008, respectively
            
            
            5
            
            
            5Additional
                paid-in capital
            
            
            76,607
            
            
            76,607Retained
                earnings
            
            
            92,519
            
            
            76,875Accumulated
                other comprehensive income
            
            
            23,069
            
            
            17,772Total
                shareholders’ equity
            
            
            192,200
            
            
            171,259TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            312,638
            
            $
            296,219




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


3


**SYNUTRA
      INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**AND
      COMPREHENSIVE INCOME**


**(in
      thousands except earnings per share data)**


**(unaudited)**


**Three
                  Months Ended June 30,****2008**
              
              **2007**Net
                  sales
              
              $
              127,380
              
              $
              67,492Cost
                  of sales
              
              
              60,485
              
              
              30,430Gross
                  profit
              
              
              66,895
              
              
              37,062Selling
                  and distribution expenses
              
              
              11,423
              
              
              7,574Advertising
                  and promotion expenses
              
              
              32,096
              
              
              18,448General
                  and administrative expenses
              
              
              3,930
              
              
              2,880Total
                  operating expenses
              
              
              47,449
              
              
              28,902Income
                  from operations
              
              
              19,446
              
              
              8,160Interest
                  expense
              
              
              521
              
              
              2,174Interest
                  income
              
              
              198
              
              
              352Other
                  income (expense), net
              
              
              (434
              )
              
              (265
              )Income
                  before provision for income tax and minority interests
              
              
              18,689
              
              
              6,073Provision
                  for income tax
              
              
              3,044
              
              
              729Net
                  income before minority interests
              
              
              15,645
              
              
              5,344Minority
                  interests
              
              
              1
              
              
              4Net
                  income attributable to shareholders
              
              $
              15,644
              
              $
              5,340Other
                  comprehensive income
              
              
              5,297
              
              
              1,098Total
                  comprehensive income
              
              $
              20,941
              
              $
              6,438Earnings
                  per share – basic
              
              $
              0.29
              
              $
              0.11Earnings
                  per share – diluted
              
              $
              0.29
              
              $
              0.11Weighted
                  average common share outstanding – basic
              
              
              54,001
              
              
              50,667Weighted
                  average common share outstanding – diluted
              
              
              54,291
              
              
              50,786




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


4


**SYNUTRA
      INTERNATIONAL, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(in
      thousands)**


**(unaudited)**




**Three
                Months Ended**
              **June
                30,****2008**
            
            **2007**Cash
                flow from operating activities:Net
                income
            
            $
            15,644
            
            $
            5,340Adjustments
                to reconcile net income to net cash provided by operating
                activities:Amortization
                of debt discount
            
            
            -
            
            
            1,032Amortization
                of debt issuance costs
            
            
            80
            
            
            -Depreciation
                and amortization
            
            
            1,585
            
            
            993Bad
                debt expense
            
            
            (6
            )
            
            (34
            )Loss
                on disposal of property, plant and equipment
            
            
            3
            
            
            45Deferred
                income tax
            
            
            31
            
            
            (291
            )Minority
                interest
            
            
            1
            
            
            4Changes
                in assets and liabilities:Accounts
                receivable
            
            
            (1,132
            )
            
            (2,370
            )Inventories
            
            
            5,151
            
            
            (254
            )Due
                from related parties
            
            
            (2,560
            )
            
            (1,465
            )Prepaid
                expenses and other current assets
            
            
            (115
            )
            
            (1,741
            )Accounts
                payable
            
            
            4,670
            
            
            2,452Due
                to related parties
            
            
            4,043
            
            
            21Advances
                from customers
            
            
            (3,457
            )
            
            2,338Income
                tax payable
            
            
            (1,810
            )
            
            681Other
                liabilities
            
            
            (1,639
            )
            
            572Net
                cash provided by operating activities
            
            
            20,489
            
            
            7,323Cash
                flow from investing activities:Acquisition
                of property, plant and equipment
            
            
            (19,000
            )
            
            (9,174
            )Disposal
                of investment in a subsidiary
            
            
            -
            
            
            (1,046
            )Change
                in restricted cash
            
            
            5,465
            
            
            4,046Acquisition
                of a subsidiary
            
            
            -
            
            
            190Advance
                to related companies
            
            
            -
            
            
            (3,324
            )Net
                cash used in investing activities
            
            
            (13,535
            )
            
            (9,308
            )Cash
                flow from financing activities:Proceeds
                from short-term debt
            
            
            -
            
            
            55,866Repayment
                of short-term debt
            
            
            (7,389
            )
            
            (24,959
            )Proceeds
                from issuance of common stock, net of issuance costs
            
            
            -
            
            
            65,857Net
                cash (used in)/provided by financing activities
            
            
            (7,389
            )
            
            96,764Effect
                of exchange rate changes on cash and cash equivalents
            
            
            2,225
            
            
            528Net
                change in cash and cash equivalents
            
            
            1,790
            
            
            95,307Cash
                and cash equivalents, beginning of period
            
            
            97,425
            
            
            20,836Cash
                and cash equivalents, end of period
            
            $
            99,215
            
            $
            116,143Supplemental
                cash flow information:Interest
                paid
            
            $
            1,016
            
            $
            1,088Income
                tax paid
            
            $
            2,527
            
            $
            537Non-cash
                investing and financing activities:Purchase
                of property, plant and equipment by accounts payable
            
            $
            1,537
            
            $
            102Issuance
                of warrant in relation to the long-term debt
            
            $
            -
            
            $
            1,032




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


5




**SYNUTRA
      INTERNATIONAL, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(unaudited)**





**1.** **ORGANIZATION
          AND PRINCIPAL ACTIVITIES**




Through
      its wholly owned subsidiary, Synutra Inc., an Illinois corporation (“Synutra
      Illinois”), Synutra International, Inc. (collectively with its wholly owned
      subsidiaries, the “Company” or “Synutra”) owns all or majority of the equity
      interests of ten companies in the People’s Republic of China (“China” or “PRC”)
      that are principally engaged in the production, marketing and distribution
      of
      dairy based nutritional products under the Company’s own brands in China.
      The Company is a leader in sales of infant formula products in China.




The
      Company produces, markets and sells nutritional products under “Sheng Yuan”, or
“Synutra”, its master brand, and several sub-brands, including “Super”,
“U-Smart”, and “U-Strong”. The Company focuses on selling premium infant formula
      products, which are supplemented by more affordable infant
      formula products targeting the mass market as well as other
      nutritional products and ingredients.




The
      Company has opportunistically utilized excess capacity and resources to provide
      toll packaging, toll drying services and sales of ingredients and materials
      to
      industrial customers. These businesses, however, are not the Company’s core
      businesses and do not contribute significantly to the Company’s result of
      operations.





**2.** **BASIS
          OF PRESENTATION**




The
      Company is responsible for the unaudited condensed consolidated financial
      statements included in this document, which have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      (“GAAP”) and include all normal and recurring adjustments that management of the
      Company considers necessary for a fair presentation of its financial position
      and operating results.  The Company prepared these statements following the
      requirements of the U.S. Securities and Exchange Commission (the “SEC”) for
      interim reporting.  As permitted under those rules, the Company condensed
      or omitted certain footnotes or other financial information that are normally
      required by GAAP for annual financial statements.  These statements should
      be read in combination with the consolidated financial statements in the
      Company’s Annual Report on Form 10-K and its subsequent amendments, if any, for
      the fiscal year ended March 31, 2008.




These
      statements include the accounts of the Company and its subsidiaries.  All
      significant inter-company accounts and transactions have been eliminated in
      consolidation.




Revenues,
      expenses, assets and liabilities can vary during each quarter of the year.
      Therefore, the results and trends in these interim financial statements may
      not
      be the same as those for the full year.





**3.** **RECENTLY
          ADOPTED ACCOUNTING PRONOUNCEMENTS**




On
      April 1, 2008, the Company adopted Financial Accounting Standards Board
      (FASB) Statement of Financial Accounting Standards (SFAS) No. 157,
“Fair Value Measurements” (FAS 157) with respect to financial assets and
      liabilities and elected to defer the adoption of FAS 157 for nonfinancial assets
      and liabilities as permitted by Financial Accounting Standards Board
      (FASB) Staff Position No. SFAS 157-2 (FSP 157-2). SFAS 157 defines
      fair value, establishes a framework for measuring fair value and expands
      disclosures about fair value measurements. The adoption of SFAS 157 for
      financial assets and liabilities had no effect on the financial position,
      results of operations or cash flows. The Company will adopt FSP 157-2 for
      nonfinancial assets and liabilities on April 1, 2009, and is currently
      evaluating the impact such adoption will have on the financial
      statements.




In
      February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial
      Assets and Financial Liabilities”. The standard requires unrealized gains and
      losses to be included in earnings for items reported using the fair value
      option. SFAS No.159 permits companies to choose to measure many financial
      instruments and certain other items at fair value. SFAS No.159 is effective
      for
      financial statements issued for fiscal years beginning after November 15, 2007.
      The Company did not elect the fair value option described in SFAS No.159 for
      financial instruments and certain other items.





6


**4.** **RECENTLY
          ISSUED ACCOUNTING PRONOUNCEMENTS**




In
      December 2007, the FASB issued SFAS No. 141 (R), “Business
      Combinations” (“SFAS No. 141(R)”).
      SFAS No. 141(R) requires an entity to recognize the assets
      acquired, liabilities assumed, contractual contingencies, and contingent
      consideration at their fair value on the acquisition date.  Subsequent
      changes to the estimated fair value of contingent consideration will be
      reflected in earnings until the contingency is settled. 
SFAS No. 141(R) also requires acquisition-related costs and
      restructuring costs to be expensed as incurred rather than treated as part
      of
      the purchase price. The adoption of SFAS No. 141(R) will change
      the Company’s accounting treatment for business combinations on a prospective
      basis beginning April 1, 2009.




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements” to improve the relevance, comparability, and
      transparency of financial information provided to investors by requiring all
      entities to report noncontrolling (minority) interests in subsidiaries in the
      same way as required in the consolidated financial statements. Moreover, SFAS
      No. 160 eliminates the diversity that currently exists in accounting for
      transactions between an entity and noncontrolling interests by requiring they
      be
      treated as equity transactions. SFAS No. 160 is effective for fiscal years,
      and interim periods within those fiscal years, beginning on or after
      December 15, 2008. Earlier adoption is prohibited. The Company is currently
      evaluating whether the adoption of SFAS No. 160 will have a significant
      effect on its consolidated financial position, results of operations or cash
      flows.




In
      March 2008, the FASB issued SFAS No. 161, “Disclosures about
      Derivative Instruments and Hedging Activities - an Amendment of FASB Statement
      133.” SFAS No. 161 provides new disclosure requirements for an entity’s
      derivative and hedging activities. SFAS No. 161 is effective for periods
      beginning after November 15, 2008. The Company has not yet determined the
      impact on its consolidated financial statements of adopting
      SFAS No. 161.




In
      April 2008, the FASB issued Staff Position No. FAS 142-3,
“Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). This
      position amends the factors an entity should consider when developing renewal
      or
      extension assumptions used in determining the useful life over which to amortize
      the cost of a recognized intangible asset under SFAS No. 142, “Goodwill and
      Other Intangible Assets.” FSP FAS 142-3 requires an entity to consider its own
      historical experience in renewing or extending similar arrangements in
      determining the amortizable useful life. Additionally, this position requires
      expanded disclosure regarding renewable intangible assets. FSP FAS 142-3 is
      effective for fiscal years beginning after December 15, 2008. The guidance
      for determining the useful life of a recognized intangible asset must be applied
      prospectively to intangible assets acquired after the effective date. Early
      adoption is prohibited. The Company expects to adopt FSP FAS 142-3 as of
      April 1, 2009.




**5.** **INVENTORIES**




The
      Company’s inventories at June 30, 2008 and March 31, 2008 are summarized as
      follows:


**June 30,**
                **2008**
              
              **March 31,**
                **2008****(In
                  thousands)**Raw
                  materials
              
              $
              28,250
              
              $
              30,550Work-in-progress
              
              
              20,802
              
              
              16,786Finished
                  goods
              
              
              8,877
              
              
              14,517Total
                  Inventories
              
              $
              57,929
              
              $
              61,853





7


**6.** **DUE
          FROM/(TO) RELATED PARTIES AND RELATED PARTY
          TRANSACTIONS**




**A.**  **Classification
      of related party balances by name**





**a.
      Due from related parties**


**June 30,**
                **2008**
              
              **March 31,**
                **2008****(In thousands)**Sheng
                  Zhi Da Dairy Group Corporation
              
              $
              1,720
              
              $
              —Total
                  Due from Related Parties
              
              $
              1,720
              
              $
              —




**b.
      Due to related parties**




**June 30,**
              **2008**
            
            **March 31,**
              **2008****(In
                thousands)**Sheng
                Zhi Da Dairy Group Corporation
            
            $
            2,151
            
            $
            2,404St.
                Angel (Beijing) Business Service Co., Ltd.
            
            
            -
            
            
            4Beijing
                Honnete Dairy Co., Ltd.
            
            
            2,454
            
            
            562Total
                Due to Related Parties
            
            $
            4,605
            
            $
            2,970




**B.**  **Sales
      to related parties**




In
      the
      fiscal quarters ended June 30, 2008 and 2007, the Company’s sales to the related
      parties included milk fat and non-fat dry milk to Kelqin and the Company’s name
      brand products to Luding Xueyuan for direct sales, catalogue sales, and regional
      retail outlets distribution.




The
      following tables categorize sales to related companies as main product sales
      and
      ancillary product sales as presented in the income statements:




**a.** **Main
          product sales to related parties**




**Three Months Ended**
                **June 30,****2008**
              
              **2007****(In
                  thousands)**Beijing
                  Kelqin Dairy Co., Ltd.
              
              $
              —
              
              $
              1,293Beijing
                  Luding Xueyuan Trading Co., Ltd.
              
              
              —
              
              
              402Total
              
              $
              —
              
              $
              1,695


**b.** **Ancillary
            product sales to related parties**


**Three Months Ended**
                  **June 30,****2008**
                
                **2007****(In
                    thousands)**Beijing
                    Luding Xueyuan Trading Co., Ltd.
                
                $
                —
                
                $
                10Total
                
                $
                —
                
                $
                10Total
                    of main product and ancillary product sales to related
                    companies
                
                $
                —
                
                $
                1,705




8


**C.**  **Purchases
      from related parties**




In
      the
      fiscal quarters ended June 30, 2008 and 2007, the Company’s purchases from
      related parties included whey protein powders from Kelqin and Honnete, and
      catalogues, brochures, and marketing materials from St. Angel.





**Three Months Ended**
                  **June 30,****2008**
                
                **2007****(In
                    thousands)**Beijing
                    Kelqin Dairy Co., Ltd.
                
                $
                -
                
                $
                1,941Beijing
                    Honnete Dairy Co., Ltd.
                
                
                1,881
                
                
                1,249St.
                    Angel (Beijing) Business Service Co., Ltd.
                
                
                1,639
                
                
                -Beijing
                    Sheng Long Media Co.,Ltd.
                
                
                154
                
                
                2Total
                
                $
                3,674
                
                $
                3,192




**D.**  **Others**




In June 2008, the Company sold two commercial buildings to Sheng Zhi Da Dairy Group Corporation, an entity 100%
controlled by the Company's CEO, at the carrying value of $1.7 million.





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


**June 30,**
                **2008**
              
              **March 31,**
                **2008****(In thousands)**Property,
                  plant and equipment, cost:Buildings
              
              $
              33,421
              
              $
              27,004Plant
                  and machinery
              
              
              40,912
              
              
              38,430Office
                  equipment and furnishings
              
              
              2,772
              
              
              2,534Motor
                  vehicles
              
              
              1,886
              
              
              1,340Others
              
              
              417
              
              
              348Total
                  cost
              
              $
              79,408
              
              $
              69,656Less:
                  Accumulated depreciation:Buildings
              
              
              3,096
              
              
              2,831Plant
                  and machinery
              
              
              8,110
              
              
              6,933Office
                  equipment and furnishings
              
              
              831
              
              
              705Motor
                  vehicles
              
              
              561
              
              
              545Others
              
              
              217
              
              
              197Total
                  accumulated depreciation
              
              
              12,815
              
              
              11,211Construction
                  in progress
              
              
              39,216
              
              
              27,274Property,
                  plant and equipment, net
              
              $
              105,809
              
              $
              85,719




Construction
      in progress primarily represents the construction of manufacturing facilities
      and administrative buildings.




The
      Company recorded depreciation expense of $1.5 million and $1.0 million for
      the
      fiscal quarters ended June 30, 2008 and 2007, respectively.




9


**8.** **BANK
          LOANS**




On
      October 11, 2007, ABN and certain other lenders provided a three year term
      loan, or the New ABN Loan, to the Company in the aggregate amount of $35
      million. The principal amount, and any unpaid accrued interest on the New ABN
      Loan, will be due on October 11, 2010 and may be prepaid without penalty.
      The proceeds of the New ABN Loan were used to pay the outstanding principal
      and
      accrued interest of a six-month term loan provided to the Company by ABN on
      April 19, 2007, or the Original ABN Loan. The New ABN Loan bears interest
      at LIBOR for deposits in U.S. dollars plus 3.5% with interest payable on the
      last day of each three-month period. The loan is secured by a pledge of 10,000
      shares of common stock, or 100% of the outstanding common stock of Synutra
      Illinois.





The
      loan
      agreement for the New ABN Loan provides for mandatory prepayment upon the
      occurrence of certain events, and contains customary covenants for financings
      of
      this type, including restrictions on the incurrence of liens, payment of
      dividends, and disposition of properties. The
      loan
      agreement for the New ABN Loan also contains certain financial covenants,
      including a requirement tomaintain
      specified leverage and interest coverage ratio, tangible net worth, and
      indebtedness to tangible net worth ratio. The
      Company has performed an analysis of the relevant ratios and confirmed that
      these financial covenants were satisfied as of June 30, 2008.




In
      addition to the New ABN Loan, as of June 30, 2008 and March 31, 2008, the
      Company had short-term loans from banks in the amount of $14.3 million and
      $21.2
      million, respectively. The weighted average interest rate on short-term loans
      outstanding at June 30, 2008 and March 31, 2008 was 7.38% and 7.08%,
      respectively. 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
      $18.1 million as of both June 30, 2008 and March 31, 2008.




As of
      June 30, 2008, Baoquanling had a 3 year long-term loan from Junchuan Ranch
      of Heilongjiang Province in the amount of $2.0 million bearing interest at
      3.24% per annum. The loan, maturing on August 16, 2008, is secured by
      a personal guarantee from the Company’s Chief Executive Officer and his spouse.




**9.** **INCOME
          TAX**




The
      effective tax rate is based on expected income, statutory tax rates and tax
      planning opportunities available in the various jurisdictions in which the
      Company operates. For interim financial reporting, the Company estimates the
      annual tax rate based on projected taxable income for the full year and records
      a quarterly income tax provision in accordance with the anticipated annual
      rate.
      As the year progresses, the Company refines the estimates of the year’s taxable
      income as new information becomes available, including year-to-date financial
      results. This continual estimation process often results in a change to the
      expected effective tax rate for the year. When this occurs, the Company adjusts
      the income tax provision during the quarter in which the change in estimate
      occurs so that the year-to-date provision reflects the expected annual tax
      rate.
      Significant judgment is required in determining the effective tax rate and
      in
      evaluating the tax positions.




The
      Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes, an Interpretation of FASB Statement No. 109,” on April 1,
      2007. The Company recognized a tax benefit associated with an uncertain tax
      position when, in management's judgment, it is more likely than not that the
      position will be sustained upon examination by a taxing authority. For a tax
      position that meets the more-likely-than-not recognition threshold, the Company
      initially and subsequently measures the tax benefit as the largest amount that
      it judges to have a greater than 50% likelihood of being realized upon ultimate
      settlement with a taxing authority. The liability associated with unrecognized
      tax benefits is adjusted periodically due to changing circumstances, such as
      the
      progress of tax audits, case law developments and new or emerging legislation.
      Such adjustments are recognized entirely in the period in which they are
      identified. The effective tax rate includes the net impact of changes in the
      liability for unrecognized tax benefits and subsequent adjustments as considered
      appropriate by management.




The
      2008
      first quarter effective tax rate of 16.3% was up 4.3% from the 12% effective
      rate for the three months ended June 30, 2007. This increase resulted primarily
      from the expiration of tax holidays enjoyed by certain subsidiaries.




10


**10.** **EARNINGS
          PER SHARE (EPS)**




For
      purposes of calculating basic and diluted earnings per share, the Company used
      the following weighted average common shares outstanding:


**Three Months Ended June 30,****2008**
              
              **2007****(In thousands except for per share data)**Net
                  income attributable to common shareholders
              
              $
              15,644
              
              $
              5,340Basic
                  weighted average common shares outstanding
              
              
              54,001
              
              
              50,667Dilutive
                  potential common shares from warrants
              
              
              290
              
              
              119Diluted
                  weighted average shares outstanding
              
              
              54,291
              
              
              50,786Earnings
                  per share—basic
              
              $
              0.29
              
              $
              0.11Earnings
                  per share—diluted
              
              $
              0.29
              
              $
              0.11




There
      were no anti-dilutive warrants excluded from the computation of diluted earnings
      per share for the fiscal quarters ended June 30, 2008 and 2007.




**11.** **SEGMENT
          REPORTING AND GEOGRAPHIC INFORMATION**




The
      Company has determined that it operates its business in one reportable segment
      based upon the manner in which internal financial information is produced and
      evaluated by its chief operating decision maker (“CODM”) (the Company’s Chief
      Executive Officer).




11


**12.** **SUBSEQUENT
          EVENTS**




**A.**  **Postponement
      of public offering process**




Due to the current stock market conditions, the Company announced on July 18, 2008 that it had postponed its proposed public offering of common stock.




**B.**  **Acquisition
      of Assets from Beijing Huilian Food Co., Ltd. (“Huilian”)**




On
      July
      14, 2008, Sheng Yuan Nutrition, a Chinese operating subsidiary of the Company,
      entered into an asset purchase agreement (the “Agreement”) with Beijing Huilian
      Food Co., Ltd. (“Huilian”), a baby food producer in China, to purchase various
      assets from Huilian, including, but not limited to, Huilian’s plant in Beijing
      (together with the buildings and equipment at the plant), the “Hui Li Duo”
series registered trademarks for Huilian’s products, Huilian’s baby food
      formulas, and Huilian’s production procedures. Pursuant to the Agreement, within
      45 business days after the first installment of the purchase price is paid,
      both
      parties have to use their best efforts to submit to the relevant government
      authorities applications to effect the transfer of the land, buildings and
      trademarks.




The
      purchase price for the assets is RMB45 million (approximately US$6.6 million)
      and will be paid in three installments, as follows: (i) first installment of
      RMB4.5 million, or 10%, was paid on July 21, 2008; (ii) second installment
      of
      RMB31.5 million, or 70%, is payable upon the parties obtaining receipts from
      the
      relevant government authorities with respect to the transfer applications
      required under the Agreement; and (iii) third installment of RMB9.0 million,
      or
      20%, is payable within five business days after the transfer of the assets
      is
      completed and the government approvals for the transfer have been obtained.
      The
      completion of the sale and purchase of the assets is expected to occur by
      October 2008.




**C.**  **Incorporation
      of Beijing Sheng Yuan Huimin Technology Service Co., Ltd.
      (“Huimin”)**




PRC
      regulations currently limit foreign ownership of companies that provide medical
      treatment services, including diagnostic services for pregnant women. To comply
      with these regulations, the Company will conduct all of its diagnostic service
      activities through Huimin, a variable interest entity which was incorporated
      on
      July 10, 2008 and its subsidiaries. Huimin entered into various agreements
      with
      a 100% owned subsidiary of the Company, Sheng Yuan Nutrition, including a
      business operating agreement and an exclusive services agreement. Under the
      business operating agreement, the Company has the right to make decisions about
      Huimin’s activities that has a significant effect on the success of Huimin.
      Under the exclusive services agreement, Huimin has the right to receive
      consulting services from the Company and its subsidiaries. In return, Huimin
      and
      its subsidiaries are required to pay Sheng Yuan Nutrition service fees for
      the
      consulting services it receives. The consulting service fees are set at a
      preliminary level of 10% to 50% of Huimin’s net sales and are adjustable at
      Sheng Yuan Nutrition’s sole discretion.




In
      addition, the Company, through Sheng Yuan Nutrition, has been assigned all
      voting rights by the shareholders of Huimin through an agreement valid
      indefinitely that cannot be amended or terminated except by written consent
      of
      all parties, and has the option to acquire the equity interests of Huimin and
      its subsidiaries for a purchase price equal to the respective registered capital
      of Huimin and its subsidiaries or a proportionate amount thereof, or such higher
      price as required under PRC laws at the time of such purchase. The shareholders
      of Huimin have agreed to pay the Company any excess of the purchase price paid
      for such equity interests in, or assets of, Huimin or its subsidiaries over
      the
      registered capital of Huimin or its subsidiaries in the event that such option
      is exercised.




Through
      the contractual arrangements described above, the Company is deemed the primary
      beneficiary of Huimin under the requirements of FIN 46 (Revised), “Consolidation
      of Variable Interest Entities” (“FIN 46(R)”). Accordingly, the Company’s
      financial statements will reflect the consolidated financial statements of
      the
      Company and its subsidiaries, which include Huimin and its subsidiaries
      beginning from the three months ending September 30, 2008.




12


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




Sections
      of this Quarterly Report on Form 10-Q (the “Form 10-Q”) including, in
      particular, the Company’s Management’s Discussion and Analysis of Financial
      Condition and Results of Operations above, contain forward-looking
      statements.  These forward-looking statements are not guarantees of future
      performance and are subject to certain risks, uncertainties and assumptions
      that
      are difficult to predict; therefore, actual results may differ materially from
      those expressed, implied or forecasted in any such forward-looking
      statements.




Expressions
      of future goals and expectations or similar expressions including, without
      limitation, “may,” “should,” “could,” “expects,” “does not currently expect,”
“plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,”
“potential,” “targets,” or “continue,” reflecting something other than
      historical fact are intended to identify forward-looking statements.  The
      factors described below in PART II. OTHER INFORMATION – Item 1A. Risk
      Factors could cause the Company’s actual results to differ materially from those
      described in the forward-looking statements.  Unless required by law, the
      Company undertakes no obligation to update publicly any forward-looking
      statements, whether as a result of new information, future events or
      otherwise.  However, readers should carefully review the reports and
      documents the Company files from time to time with the SEC, particularly its
      Quarterly Reports on Form 10-Q, Annual Report on Form 10-K , Current Reports
      on
      Form 8-K and all amendments to those reports.





**Available
      Information**





The
      Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
      Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a)
      and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), are available on the SEC website. The public may read and copy any
      materials filed by the Company with the SEC at the SEC’s Public Reference Room
      at 100 F Street, NE, Room 1580, Washington, DC 20549.  The public may
      obtain information on the operation of the Public Reference Room by calling
      the
      SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains
      reports, proxy and information statements and other information regarding
      issuers that file electronically with the SEC at http://www.sec.gov.  The
      contents of these websites are not incorporated into this filing.  Further,
      the Company’s references to the URLs for these websites are intended to be
      inactive textual references only.




13




**OVERVIEW**




We
      are a
      leading infant formula company in China. We principally produce, market and
      sell
      our products under “Sheng Yuan,” or “Synutra,” our master brand, and several
      sub-brands, including “Super,” “U-Smart” and “U-Strong.” We focus on selling
      premium infant formula products, which are supplemented by more affordable
      infant formulas targeting the mass market as well as other nutritional products
      and ingredients. We sell our products through an extensive nationwide sales
      and
      distribution network covering 29 provinces and provincial-level municipalities
      in China. As of June 30, 2008, this network comprised over 450 distributors and over 1,000 sub-distributors who sell our products in over
      65,000 retail outlets. Our extensive sales, and distribution network, combined
      with our strong customer service and infant mutation education programs, has
      helped us build brand recognition and customer loyalty in our primary markets,
      which, prior to 2007, mainly comprised small to mid-size cities and rural areas
      in China. By leveraging our strong brand recognition in our primary markets,
      we
      have begun to expand into many of China’s major urban centers, which have
      historically been dominated by several large multinational firms.




We
      have
      opportunistically utilized excess capacity and resources to provide toll
      packaging services, toll drying services, and sales of ingredients and materials
      to industrial customers. These businesses, however, are not our core businesses
      and do not contribute significantly to our results of operations.




Our
      net
      sales for the fiscal quarter ended June 30, 2008 grew by 88.7% to $127.4
      million from $67.5 million for the same period in the previous year. Our gross
      profit for the fiscal quarter ended June 30, 2008 grew by 80.6% to $66.9
      million from $37.1 million for the same period in the previous year. Our net
      income for the fiscal quarter ended June 30, 2008 grew by 193.0% to $15.6
      million from $5.3 million for the same period in the previous year.




The
      significant increase in our net sales and gross profit is attributable primarily
      to the following:




n
            rapid
                growth of the infant formula market in China, which increased in
                terms of
                sales revenue by 28.2% from RMB15.8 billion ($2.3 billion) in 2006
                to
                RMB20.3 billion ($2.9 billion) in 2007, according to Euromonitor,
                an
                international market research
                company;




n
            Strong
                sales in our primary markets, which we believe are experiencing rapid
                growth in powdered infant formula consumption, and which have enabled
                us
                to increase our national market share;
                and




n
            increases
                in our average selling prices and increases in the proportion of
                sales of
                our premium infant formula products with higher average selling prices,
                which are one of our fastest growing product
                categories.





**CRITICAL
      ACCOUNTING POLICIES**




We
      follow
      certain significant accounting policies when preparing our consolidated
      financial statements. A summary of these policies is included in our Annual
      Report on Form 10-K for the year ended March 31, 2008 (Form 10-K). The
      preparation of these financial statements in conformity with accounting
      principles generally accepted in the United States of America requires us to
      make estimates and judgments that affect our reported amounts of assets,
      liabilities, revenues and expenses, and the related disclosures of contingent
      assets and liabilities at the date of the financial statements. We evaluate
      these estimates and judgments on an ongoing basis and base our estimates on
      historical experience, current conditions and various other assumptions that
      are
      believed to be reasonable under the circumstances. The results of these
      estimates form the basis for making judgments about the carrying values of
      assets and liabilities as well as identifying and assessing the accounting
      treatment with respect to commitments and contingencies. Our actual results
      may
      differ from these estimates.




We
      believe that the estimates, assumptions and judgments involved in the accounting
      policies described in the “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations” section of our most recent Annual Report on
      Form 10-K have the greatest potential impact on our financial statements, so
      we
      consider these to be our critical accounting policies.




14


**RESULTS
      OF OPERATIONS**




**THREE
      MONTHS ENDED JUNE 30, 2008 COMPARED TO THREE MONTHS ENDED JUNE 30, 2007**




***Net
      Sales***




Net
      sales
      for the three months ended June 30, 2008 increased by 88.7% to $127.4 million
      from $67.5 million for the same period in the previous year. This increase
      in net sales was a result of an increase in volume of products sold and an
      increase in average selling price. The increase in the volume of products sold
      was partly driven by the growth of the infant formula market in China and
      increased market awareness for our products as a result of our marketing
      initiatives. These marketing initiatives included intensive nationwide TV
      advertising campaign, targeted store level promotions, database marketing and
      education programs at health facilities.




Net
      sales
      of our nutritional products, including infant formula and other nutritional
      products for children and adults under our Super, U-Smart, U-Strong, accounted
      for 92.7% of our total sales for the fiscal quarter ended June 30, 2008. Net
      sales of our nutritional products for the fiscal quarter ended June 30, 2008
      increased by 104.3% to $118.1 million from $57.8 million for the same period
      in
      the previous year, primarily as a result of the following factors:




n
            Sales
                volume of nutritional products increased by 59.2% to 13,066 tons
                for the
                fiscal quarter ended June 30, 2008 from 8,200 tons for the same period
                in
                the previous year.




n
            The
                average selling price of our nutritional products for the fiscal
                quarter
                ended June 30, 2008 increased by 28.3% to $9,036 per ton from $7,040
                per
                ton for the same period in the previous year. This increase in average
                selling price was primarily due to an increase in sales of Super
                infant
                formula products, which resulted in a greater proportion of higher-priced
                products in our product mix, and a substantial increase in the average
                selling price for our U-Smart infant formula products which resulted
                primarily from our introduction of U-Smart Gold Package in April
                2007.





Net
      sales
      from our other activities, such as sales of industrial materials and the
      provision of certain services, such as toll drying, blending and packaging
      services, for the fiscal quarter ended June 30, 2008 decreased by 4.0% to $9.3
      million from $9.7 million for the same period in the previous year due to
      fluctuations in our capacity and customer orders.




***Cost
      of Sales***




Cost
      of
      sales for the fiscal quarter ended June 30, 2008, including purchases from
      third-party producers, increased by 98.8% to $60.5 million from $30.4 million
      for the same period in the previous year. The increase in cost of sales was
      due
      to an increase in the cost of sales for our nutritional products, which was
      partially offset by a decrease in cost of sales of our other
      products.




Cost
      of
      sales for our nutritional products for the fiscal quarter ended June 30,
      2008 increased by 140.9% to $52.3 million from $21.7 million for the same period
      in the previous year. The increase of 4,859 tons of nutritional products sold
      for the fiscal quarter ended June 30, 2008 as compared to the same period in
      the
      previous year was the primary reason for the increase in cost of sales. In
      addition, the increase in unit prices of major raw materials, principally raw
      milk and whey protein powder, also contributed to the increase in our cost
      of
      sales. To a lesser extent, our increase in cost of sales for the fiscal quarter
      ended June 30, 2008 was also due to the increase in the percentage of premium
      products sold which had a higher cost of sales compared to our other
      products.




Cost
      of
      sales for our other products and services for the fiscal quarter ended June
      30,
      2008 decreased by 5.8% to $8.2 million from $8.7 million for the same period
      in
      the previous year due to a decrease of net sales from such products and
      services.




***Gross
      Profit and Gross Margin***




As
      a
      result of the foregoing, gross profit for the fiscal quarter ended June 30,
      2008
      increased by 80.5% to $66.9 million from $37.1 million for the same period
      in
      the previous year. Gross profit for our nutritional products for the fiscal
      quarter ended June 30, 2008 increased by 82.4% to $65.8 million from $36.1
      million for the same period in the previous year primarily due to the increase
      in net sales of our nutritional products.




Our
      overall gross margin decreased to 52.5% for the fiscal quarter ended June 30,
      2008 from 54.9% for the same period in the previous year. Our gross margin
      for
      nutritional products and other products was 55.7% and 11.7%, respectively,
      for
      the fiscal quarter ended June 30, 2008, as compared to 62.5% and 10.0%,
      respectively, for the same period in the previous year. Our overall gross margin
      decreased primarily due to the decrease in the gross margin of our nutritional
      products. The decrease in the gross margin of our nutritional products was
      primarily due to rising raw material costs, which was partially offset by an
      increase in the proportion of sales of our higher margin infant formula
      products. The gross margin of our nutritional products was also negatively
      impacted by the increased supermarket/shopping mall related expenses, such
      as
      end-cap placement costs and admission fees, which are recoded as reduction
      of
      revenue.




15


***Selling
      and Distribution Expenses***




Selling
      and distribution expenses for the fiscal quarter ended June 30, 2008 increased
      by 50.8% to $11.4 million from $7.6 million for the same period in the previous
      year. This increase was primarily a result of increased compensation expenses
      for our sales force, and an increase in shipping and handling expenses as well
      as travel and entertainment expenses. Total compensation for our sales force
      for
      the fiscal quarter ended June 30, 2008 increased by 112.8% to $5.2 million
      from
      $2.4 million for the same period in the previous year. This increase was
      primarily due to the continuation of our targeted sales incentive programs.
      In
      addition, the increase in the number of sales staff to 2,621 as of June 30,
      2008
      from 2,125 as of June 30, 2007 also contributed to the increase in compensation
      expense relating to our sales force. As a result of increases in sales and
      business activities, shipping and handling expenses for the fiscal quarter
      ended
      June 30, 2008 increased by 93.2% to $2.3 million from $1.2 million for the
      same
      period in the previous year, generally in proportion to the increase in sales.
      Travel and entertainment expenses for the fiscal quarter ended June 30, 2008
      increased by 56.0% to $1.4 million from $0.9 million for the same period in the
      previous year.




***Advertising
      and Promotion Expenses***




Advertising
      and promotion expenses for the fiscal quarter ended June 30, 2008 increased
      by
      74.0% to $32.1 million from $18.4 million for the same period in the previous
      year, due to increased nationwide TV advertising and promotional activities
      at
      the store level, such as offering promotional products and organizing
      promotional events. Advertising expenses for the fiscal quarter ended June
      30,
      2008, which accounted for 58.5% of total advertising and promotion expenses,
      increased by 240.1% to $18.8 million from $5.5 million for the same period
      in
      the previous year. Promotion expenses for the fiscal quarter ended June 30,
      2008, which accounted for 41.5% of total advertising and promotion expenses,
      increased by 3.1% to $13.3 million from $12.9 million for the same period in
      the
      previous year.




***General
      and Administrative Expenses***




General
      and administrative expenses for the fiscal quarter ended June 30, 2008 increased
      by 36.5% to $3.9 million from $2.9 million for the same period in the previous
      year. The increase in general and administrative expenses was primarily due
      to
      increased headquarter salary and social insurance expenses as our business
      continued to expand, partially offset by a decrease in legal and professional
      expenses.




***Interest
      Income***




Interest
      income for the fiscal quarter ended June 30, 2008 decreased to $0.2 million
      from
      $0.4 million for the same period in the previous year due to decreased bank
      deposits.




***Interest
      Expense***




Interest
      expense for the fiscal quarter ended June 30, 2008 decreased to $0.5 million
      from $2.2 million for the same period in the previous year, due primarily to
      the
      amortization of debt discount associated with the issuance of warrants to ABN
      which amounted to $1.0 million in the fiscal quarter ended June 30, 2007, and
      lower average loan balances outstanding in the fiscal quarter ended June 30,
      2008.




***Provision
      for Income Tax***




The
      provision for income taxes, which is computed on an individual legal entity
      basis, was $3.0 million and $0.7 million for the fiscal quarter ended June
      30,
      2008 and 2007, respectively. Our effective tax rate increased to16.3% for the
      fiscal quarter ended June 30, 2008 from 12.0% for the same period in the
      previous year. This increase in our effective income tax rate was primarily
      due
      to the expirations of tax holidays enjoyed by certain subsidiaries.




***Net
      Income Attributable to Stockholders***




As
      a
      result of the foregoing, net income attributable to stockholders for the fiscal
      quarter ended June 30, 2008 increased by 193.0% to $15.6 million from $5.3
      million for the same period in the previous year.




16


**LIQUIDITY
      AND CAPITAL RESOURCES**




Our
      financial condition remained constant during the fiscal quarter ended June
      30,
      2008. Our cash and cash equivalent balance increased slightly by $1.8 million
      to
      $99.2 million at June 30, 2008, as compared to $97.4 million at March 31,
      2008.




***Cash
      Flows from Operating Activities***




Net
      cash
      provided by operating activities was $20.5 million for the fiscal quarter ended
      June 30, 2008, as compared to net cash provided by operating activities of
      $7.3 million for the same period in the previous year. Net cash provided by
      operating activities for the fiscal quarter ended June 30, 2008 was mainly
      due
      to net income of $15.6 million, non-cash items not affecting 2008 cash flows
      of
      $1.7 million and a $3.2 million increase in working capital. The changes in
      working capital for the fiscal quarter ended June 30, 2008, were primarily
      related to a $5.1 million decrease in inventories, a $4.7 million increase
      in
      accounts payable, and a $4.0 million increase in due to related parties, a
      $3.5
      million decrease in advances from customers, There were no material policy
      changes in our credit terms to customers and payment terms to suppliers for
      the
      fiscal quarter ended June 30, 2008.




***Cash
      Flows from Investing Activities***




Net
      cash
      used in investing activities was $13.5 million for the fiscal quarter ended
      June
      30, 2008, as compared to $9.3 million for the same period in the previous year.
      This was primarily due to our plant expansion to increase our production
      capacities. Cash invested in purchases of property and equipment was
      $19.0 million and $9.2 million for the fiscal quarters ended June 30, 2008,
      and 2007, respectively.




Restricted
      cash decreased by $5.5 million for the fiscal quarter ended June 30, 2008,
      as
      compared to a decrease of $4.0 million for the same period in the previous
      year. Restricted cash represents cash deposited with banks as security against
      the issuance of letters of credit.




***Cash
      Flows from Financing Activities***




Net
      cash
      used in financing activities was $7.4 million for the fiscal quarter ended
      June
      30, 2008, as compared to net cash provided by financing activities of $96.8
      million for the same period in the previous year. Cash used in financing
      activities during the fiscal quarter ended June 30, 2008 resulted from the
      repayment of short-term bank loans of $7.4 million.




***Outstanding
      Indebtedness***




On
      October 11, 2007, ABN and certain other lenders provided a three year term
      loan, or the New ABN Loan, to us in the aggregate amount of $35 million. The
      principal amount, and any unpaid accrued interest on the New ABN Loan, is due
      on
      October 11, 2010 and may be prepaid without penalty. The proceeds of the
      New ABN Loan were used to pay the outstanding principal and accrued interest
      of
      a six-month term loan provided to us by ABN on April 19, 2007, or the
      Original ABN Loan. The New ABN Loan bears interest at LIBOR for deposits in
      U.S.
      dollars plus 3.5% with interest payable on the last day of each three-month
      period. The loan is secured by a pledge of 10,000 shares of common stock, or
      100% of the outstanding common stock of Synutra Illinois.




The
      loan
      agreement for the New ABN Loan provides for mandatory prepayment upon the
      occurrence of certain events, and contains customary covenants for financings
      of
      this type, including restrictions on the incurrence of liens, payment of
      dividends, and disposition of properties. The
      loan
      agreement for the New ABN Loan also contains certain financial covenants,
      including a requirement tomaintain
      specified leverage and interest coverage ratio, tangible net worth, and
      indebtedness to tangible net worth ratio. We
      have
      performed an analysis of the relevant ratios and confirmed that these financial
      covenants were satisfied as of June 30, 2008.




In
      addition to the New ABN Loan, as of June 30, 2008, we had short-term loans
      from
      banks in the amount of $14.3 million bearing weighted average interest rate
      of
      7.38% per annum.




As
      of
      June 30, 2008, Baoquanling had a 3 year long-term loan from Junchuan Ranch
      of
      Heilongjiang Province in the amount of $2.0 million bearing interest at
      3.24% per annum. The loan, maturing on August 16, 2008, is secured by
      a personal guarantee from the Company’s Chief Executive Officer and his spouse.




***Off-Balance
      Sheet Arrangements***




We
      do not
      have off-balance sheet arrangements other than the guarantee issued to the
      Zhangbei Branch of the Agricultural Bank of China related to various bank loans
      of $1.1 million to 104 dairy farmers in the Zhangbei area of Hebei Province
      in
      China, which was discussed in our Annual Report on Form 10-K for the fiscal
      year
      ended March 31, 2008.




17


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




There
      were no material changes in quantitative or qualitative disclosures about market
      risk during the three months ended June 30, 2008. For additional information,
      please refer to Item 7A Quantitative and Qualitative Disclosures about Market
      Risk as presented in our Annual Report on Form 10-K for the fiscal year ended
      March 31, 2008.




**ITEM
      4. CONTROLS AND PROCEDURES**




Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      does not expect that our disclosure controls and procedures or our internal
      control over financial reporting will prevent all errors and all fraud. A
      control system, no matter how well conceived and operated, can provide only
      reasonable, not absolute, assurance that the objectives of the control system
      are met. Further, the design of a control system must reflect the fact that
      there are resource constraints, and the benefits of controls must be considered
      relative to their costs. Because of the inherent limitations in all control
      systems, no evaluation of controls can provide absolute assurance that all
      control issues and instances of fraud, if any, within the Company have been
      detected.




*Conclusion
      Regarding Effectiveness of Disclosure Controls and Procedures*




The
      Company’s management, with the participation of the Company’s Chief Executive
      Officer and Chief Financial Officer, has evaluated the effectiveness of the
      Company’s disclosure controls and procedures (as such term is defined in
      Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
      period covered by this report. Based on such evaluation, the Company’s Chief
      Executive Officer and Chief Financial Officer have concluded that, as of June
      30, 2008, the Company’s disclosure controls and procedures were not effective to
      ensure that the information required to be disclosed by the Company in the
      reports that it files or submits under the Securities Exchange Act of 1934
      is
      (a) recorded, processed, summarized, and reported within the time periods
      specified in the SEC’s rules and forms and (b) accumulated and
      communicated to the Company’s management, including its Chief Executive Officer
      and Chief Financial Officer, or persons performing similar functions, as
      appropriate to allow timely decisions regarding required disclosure. The Chief
      Executive Officer’s and Chief Financial Officer’s conclusion regarding the
      Company’s disclosure controls and procedures is based solely on management’s
      conclusion that the Company’s internal control over financial reporting as
      identified in our Management’s Report on Internal Control Over Financial
      Reporting included with our Annual Report on Form 10-K for the fiscal year
      ended
      March 31, 2008, continues not to be effective as of June 30, 2008.




In
      connection with our Annual Report on Form 10-K for the fiscal year ended March
      31, 2008, our management assessed the effectiveness of the Company’s internal
      control over financial reporting and concluded that the Company’s internal
      control over financial reporting was not effective based on management’s
      identification of one material weakness and four deficiencies in the Company’s
      internal control over financial reporting, as defined in Auditing Standard
      No. 5, “An Audit of Internal Control Over Financial Reporting That Is
      Integrated with An Audit of Financial Statements.”




Our
      material weakness related to:




·
            
            (i)
                an insufficient complement of personnel in our corporate accounting
                and
                financial reporting function with an appropriate level of technical
                accounting knowledge, experience, and training in the application
                of
                generally accepted accounting principles commensurate with the Company’s
                complex financial accounting and reporting requirements and materiality
                thresholds; and (ii) an inadequacy of competent staff in our internal
                audit function to effectively monitor the Company’s operational, financial
                and compliance-oriented controls, including controls over the financial
                closing and reporting process.




Our
      deficiencies related to:




·
            
            inadequate
                training of employees, especially new hires, on our antifraud programs
                and
                code of ethics;




·
            
            inadequate
                segregation of duties related to our stock count process and lack
                of
                controls to regularly monitor, document and determine the value of
                certain
                inventories on a timely basis;




·
            
            Inadequate
                controls related to managing staff cash advances; and




·
            
            failure
                to maintain an appropriate level of security within our computer
                operating
                systems and applications.




18




*Remediation
      and Changes in Internal Control over Financial Reporting*




The
      Company has discussed the material weakness and deficiencies in its internal
      control over financial reporting with the Audit Committee of the Board of
      Directors. The following specific remedial actions were in process during the
      Company’s most recent fiscal quarter, and are currently in process, to address
      the material weakness in our internal control over financial reporting described
      above:





·
            
            Reorganize
                and restructure the Company’s corporate accounting staff (“Corporate
                Accounting”) by (1) revising the reporting structure and establishing
                clear roles, responsibilities, and accountability, (2) hiring
                additional technical accounting personnel to address the Company’s complex
                accounting and financial reporting requirements, and (3) training
                accounting personnel at our subsidiaries to ensure the right complement
                of
                knowledge and skills; and




·
            
            Improve
                period-end closing procedures by (1) ensuring that account
                reconciliations and analyses for significant financial statement
                accounts
                are reviewed for completeness and accuracy by qualified accounting
                personnel, (2) implementing a process that ensures the timely review
                and approval of complex accounting estimates by qualified accounting
                personnel and subject matter experts, where appropriate, and
                (3) developing better monitoring controls at Corporate Accounting and
                at our subsidiaries.




In
      addition, remediation actions have been implemented to address the deficiencies
      described above. These actions included: (1) implementing a formal training
      program and training of all key employees, especially new hires, on our
      antifraud programs, corporate governance guidance, and business ethics; (2)
      reorganizing the stock count process by including staff from different
      departments to ensure adequate segregation of duties; (3) introducing tighter
      controls which include regular checks and alerts to manage staff cash advances;
      and (4) increasing the level of security within our computer operating system
      and applications through keeping a record of audit logs and performing regular
      review of such audit logs and implementing adequate password
      controls.




19




**PART
      II**


**OTHER
      INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**




We
      are
      not currently a party to any material legal proceedings. From time to time,
      we
      may be subject to various claims and legal actions arising in the ordinary
      course of business.




**ITEM
      1A. RISK FACTORS**




For
      information regarding the risks and uncertainties affecting our business, please
      refer to “Part I, Item 1A Risk Factors” of our Annual Report on Form 10-K for
      the year ended March 31, 2008. There have been no material changes to these
      risks and uncertainties during the three months ended June 30,
      2008.




**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**




By
      written consent of our majority stockholder, dated June 11, 2008, in lieu of
      a
      special meeting of stockholders pursuant to Section 228 of the Delaware General
      Corporation Law, the following actions were approved:




·
            Amendment
                and restatement of our Certificate of Incorporation to: (i) implement
                a
                staggered Board of Directors with three classes; (ii) clarify the
                rights
                of holders of our common stock, par value $0.0001; (iii) clarify
                the
                Board’s authority with respect to our preferred stock, $0.0001; (iv)
                increase the minimum size of the Board to four (4); and (v) make
                any such
                other changes to the Certificate of Incorporation as are necessary
                and/or
                incidental to the foregoing; and




·
            The
                adoption of the Synutra International, Inc. 2008 Stock Incentive
                Plan.





The
      actions above were approved at a meeting of our Board on June 11, 2008 and
      the
      stockholder consent was executed by the holder of at least a majority of the
      issued and outstanding shares of Common Stock entitled to vote on the matters
      above.




We
      filed
      an initial Preliminary Information Statement on Schedule 14C with the SEC on
      June 17, 2008, and a discussion of these actions is contained in such
      Preliminary Information Statement, as revised. The action to adopt the 2008
      Stock Incentive Plan, if not revoked or terminated, will not become effective
      until twenty (20) calendar days after the date the Definitive Information
      Statement is first sent or given to our stockholders. The action to amend and
      restate our Certificate of Incorporation, if not revoked or terminated, will
      not
      become effective until twenty (20) calendar days after the date the Definitive
      Information Statement is first sent or given to our stockholders and the date
      of
      filing of the Certificate of Amendment to the Company’s Certificate of
      Incorporation with the Delaware Secretary of State, which will occur immediately
      thereafter. As of the date of this Report, we have not filed the Definitive
      Information Statement on Schedule 14C with the SEC or sent the Definitive
      Information Statement discussing these actions to our stockholders and therefore
      the action to adopt the 2008 Stock Incentive Plan and the action to amend and
      restate our Certificate of Incorporation are not yet effective.




**ITEM
      5. OTHER INFORMATION**




At
      a
      meeting of the Board on June 11, 2008, our Board approved an amendment and
      restatement of our Bylaws to: (i) revise the advance notice provision for
      stockholder business and stockholder nominees to be presented at an annual
      meeting of stockholders; (ii) provide for plurality voting with respect to
      the
      election of directors; (iii) authorize the issuance of uncertificated shares;
      (iv) authorize the adoption of a Rights Plan by the Board of Directors; and
      (v)
      make any such other changes to the Bylaws as are necessary and/or incidental
      to
      the foregoing. Pursuant to Section 109 of the Delaware General Corporation
      Law
      and Article VIII of our current Certificate of Incorporation, the amendment
      and
      restatement of our Bylaws was not submitted to a vote of the stockholders.
      The
      action to amend and restate our Bylaws became effective on June 11,
      2008.


20


**ITEM
      6. EXHIBITS**





**EXHIBIT**
              **NO.**
            
            **DOCUMENT
                DESCRIPTION**3.1
            
            Certificate
                of Incorporation and Certificate of Amendment of Certificate of
                Incorporation of Synutra International, Inc. (incorporated by reference
                to
                Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1
                (333-150216) filed on April 11, 2008)3.2
            
            Bylaws
                of Synutra International, Inc.10.1
            
            Registration
                Rights Agreement among Synutra International, Inc., Beams Power Investment
                Limited and Warburg Pincus Private Equity IX, L.P., dated April 23,
                2008,
                (incorporated by reference to Exhibit 4.1 to the Synutra International,
                Inc. Current Report on Form 8-K filed on April 24,
                2008)




10.2
            
            Asset
                Purchase Agreement, dated July 14, 2008, between Sheng Yuan Nutritional
                Food Co.. Ltd. and Beijing Huilian Food Co., Ltd.(incorporated by
                reference to Exhibit 2.1 from the registrant's Form 8-K filed with
                the SEC
                on July 18, 2008 ).31.1
            
            Certification
                of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule
                15d-14(a), promulgated under the Securities Exchange Act of 1934,
                as
                amended.31.2
            
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule
                15d-14(a), promulgated under the Securities 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).





21


**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.Date:
                August 8,
                2008
            By:
            /s/ Liang
                ZhangName: 
                Liang ZhangTitle: 
                Chief Executive Officer




22