**UNITED
          STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-Q/A**
 
 (Mark
        One)
 
 **x**
              **Quarterly
                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934**
 
 For
        the
        quarterly period ended June 30, 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.**
 **(Exact name of registrant as specified in its charter)**
 
 DELAWARE
              
              13-4306188**(State
                  or other jurisdiction of**
                **incorporation
                  or organization)**
              
              **(IRS
                  Employer Identification No.)**
 
 15200
        Shady Grove Road, Suite 350
 Rockville,
        Maryland 20850
 **(Address of principal executive offices)**
 
 (301)
        840-3888
 **(Registrant’s
        telephone number, including area code)**
 
 Vorsatech
        Ventures, Inc.
 **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
        July 31, 2006, there were 50,000,713 shares of Common Stock outstanding.
 
 **Back
          to Table of Contents**
  Reasons
        For Amendment
  This
        filing is being amended to include, revise or omit information necessary
        to
        improve the disclosures as follows:
  Disclosure
                  of the financial statements has been revised to describe and quantify
                  material activities that generate income statement variances between
                  periods (the amount of increase in sales that was attributable
                  to price
                  increases separately from the change attributable to volume
                  increases).Financial
                  Statements have been revised to disclose the dollar amount of related
                  party transactions on the face of financial statements.Financial
                  Statements have been revised to present the historical shares of
                  common
                  stock of Vorsatech that were issued and the historical activity
                  in the
                  Common Stock and Additional Paid-in Capital accounts during periods
                  to the
                  merger. The earnings per share have been revised also.Financial
                  Statements have been revised to reflect the cost of services rendered
                  by
                  various consultants and finder that received 2,844,500 shares and
                  35,000
                  shares, respectively, in conjunction with the share exchange.Disclosure
                  has been added to the financial statements, “Restatement” to elaborate
                  upon the criteria of revenue recognition policy specifically applies
                  to
                  the retailers and to the distributors.Disclosure
                  has been added to the financial statements, “Restatement” to describe the
                  nature and amounts of revenue dilution.Disclosure
                  has been added to the financial statements , “Restatement” to describe the
                  tax holiday of subsidiaries.
  **Back
            to Table of Contents**
 
 **SYNUTRA
        INTERNATIONAL, INC.**
 **FORM
        10-Q**
 For
        the
        Quarter Ended June 30, 2006
 
 **INDEX**
  PART
                  I. FINANCIAL INFORMATIONItem
                  1. Consolidated Financial
                  Statements:Condensed
                  Consolidated Balance Sheet as of June 30, 2006
                  (unaudited) and March 31, 2006 (audited)
              
              3
                  -4Condensed
                  Consolidated Statements of Operations for the
                  three months ended June 30, 2006 and 2005 (unaudited)
              
              5Consolidated
                  Statements of Changes in Stockholders' Equity for
                  the three months ended June 30, 2006 and 2005 (unaudited)
              
              6Condensed
                  Consolidated Statements of Cash Flows for the three
                  months ended June 30, 2006 and 2005 (unaudited)
              
              7-8Notes
                  to the Condensed Consolidated Financial Statements
              
              9-20Item
                  2. Management’s Discussion and Analysis of Financial
                  Condition and Results of Operations
              
              21PART
                  II. OTHER INFORMATIONItem
                  6. Exhibits
              
              27Signatures
              
              28
  -2-
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            to Table of Contents**
  **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**
 **June
                  30,**
              
              **March
                  31,****2006**
              
              **2006****ASSETS**
              
              **(as
                  restated, unaudited)**
              
              **(as
                  restated, audited)****Current
                  Assets**Cash
                  and cash equivalents
              
              $
              25,877,244
              
              $
              22,133,869Short
                  term investment - at market
              
              
              42,671
              
              
              42,557Notes
                  receivables
              
              
              148,955
              
              
              —Trade
                  receivables, net of provisions
              
              
              8,287,013
              
              
              2,539,717Inventories,
                  net of provisions
              
              
              8,464,441
              
              
              11,789,433Advances
                  to suppliers
              
              
              2,328,675
              
              
              354,052Other
                  receivables, net of provisions
              
              
              2,993,559
              
              
              2,229,869Due
                  from related parties
              
              
              7,383,290
              
              
              8,602,363
  Including:
                  Trade receivables
              
              
              35,910
              
              
              2,018,344Other
                  receivables
              
              
              1,562,275
              
              
              2,058,250Prepayment
              
              
              5,785,105
              
              
              4,525,769
  Deferred
                  expenses
              
              
              79,667
              
              
              125,931**Total
                  current assets**
              
              
              **55,605,515**
              
              
              **47,817,791****Property,
                  plant and equipment, net**
              
              
              **13,601,653**
              
              
              **13,727,873****Other
                  Assets**Intangible
                  assets,net
              
              
              246,937
              
              
              264,562Construction
                  in progress
              
              
              21,693,020
              
              
              21,198,431**TOTAL
                  ASSETS**
              
              **$**
              **91,147,125**
              
              $
              83,008,658
 The
        accompanying notes are an integral part of the consolidated financial
        statements.
 -3-
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            to Table of Contents**
  **SYNUTRA
        INTERNATIONAL, INC. AND SUBSIDIARIES**
 **(INCORPORATED
        IN THE STATE OF DELAWARE**
 **WITH
        LIMITED LIABILITY)**
 **CONSOLIDATED
        BALANCE SHEETS**
 **June
                  30,**
              
              **March
                  31,****2006**
              
              **2006****LIABILITIES
                & SHAREHOLDERS' EQUITY**
              
              **(as
                  restated, unaudited)**
              
              **(as
                  restated,**
                **audited)****Current
                  Liabilities**Bank
                  loans
              
              $
              17,551,071
              
              $
              13,133,534Notes
                  payable
              
              
              23,200,260
              
              
              19,112,823Trade
                  payables
              
              
              9,312,636
              
              
              12,579,942Advance
                  from customers
              
              
              756,034
              
              
              932,843Other
                  payables
              
              
              5,395,525
              
              
              4,569,873Accrued
                  expenses
              
              
              605,794
              
              
              498,786Tax
                  payables
              
              
              1,910,042
              
              
              1,996,789Due
                  to related parties
              
              
              2,204,319
              
              
              4,301,137
  Including:
                  Trade payables
              
              
              2,204,319
              
              
              4,301,137
  **Total
                  current liabilities**
              
              **$**
              **60,935,681**
              
              **$**
              **57,125,726****Long
                  term debt**
              
              
              —
              
              
              **4,932,182****Total
                  liabilities**
              
              **$**
              **60,935,681**
              
              **$**
              **62,057,909****Minority
                  interest**
              
              
              —
              
              
              —**Shareholders'
                  equity**Preferred
                  Stock ($0.0001 par value; 20,000,000 authorized; 0 issued and
                  outstanding)
              
              
              —
              
              
              —Common
                Stock (0.0001 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
              
              
              20,838,996
              
              
              11,618,515Accumulated
                  other comprehensive income/(loss)
              
              
              1,095,611
              
              
              1,055,397**Total
                  shareholders' equity**
              
              **$**
              **30,211,444**
              
              **$**
              **20,950,749****TOTAL
                  LIABILITIES AND SHAREHOLDERS' EQUITY**
              
              **$**
              **91,147,125**
              
              **$**
              **83,008,658**
 The
        accompanying notes are an integral part of the consolidated financial
        statements.
 -4-
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            to Table of Contents**
  **SYNUTRA
        INTERNATIONAL, INC. AND SUBSIDIARIES**
 **(INCORPORATED
        IN THE STATE OF DELAWARE**
 **WITH
        LIMITED LIABILITY)**
 
 **CONSOLIDATED
        STATEMENTS OF INCOME**
 **Three
                  Months ended**
                **June
                  30****2006**
              
              **2005****(as
                  restated, unaudited)**
              
              **(as
                  restated, unaudited)****Sales**
              
              $
              42,676,120
              
              $
              17,401,827
  Including
                  sales to related parties
              
              
              **47,708**
              
              
              341,500
  Cost
                  of sales
              
              
              20,644,247
              
              
              8,456,140
  Including
                  cost of sales to related parties
              
              
              23,091
              
              
              165,969
  **Gross
                  profit**
              
              
              **22,031,873**
              
              
              **8,945,687**Selling
                  & distribution expenses
              
              
              5,042,348
              
              
              1,814,977Advertising
                  and promotion
              
              
              6,928,074
              
              
              5,257,881General
                  & administrative expenses
              
              
              993,542
              
              
              859,501**Income
                  from operations**
              
              
              **9,067,909**
              
              
              **1,013,328**Finance
                  costs
              
              
              (408,794
              )
              
              (415,286
              )Subsidy
                  income
              
              
              1,387,420
              
              
              604,120Interest
                  income
              
              
              61,132
              
              
              63,830Other
                  income/(expenses)
              
              
              (92,551
              )
              
              484,355**Income
                  before tax**
              
              
              **10,015,116**
              
              
              **1,750,346**Corporation
                  income tax - current
              
              
              794,635
              
              
              25,566**Net
                  income before minority interests**
              
              
              **9,220,481**
              
              
              **1,724,780**Minority
                  interests
              
              
              —
              
              
              (576
              )**Net
                  income attributable to shareholders**
              
              
              **9,220,481**
              
              
              **1,724,204**Other
                  Comprehensive income/-Foreign currency translation
              
              
              40,214
              
              
              26,877**Comprehensive
                  income**
              
              
              **9,260,695**
              
              
              **1,751,081****Earning
                  per share**Basic
                  and diluted
              
              $
              0.18
              
              $
              0.04**Weighted
                  average common shares outstanding**Basic
                  and diluted
              
              
              50,000,713
              
              
              46,000,000
 The
        accompanying notes are an integral part of the consolidated financial
        statement.
 -5-
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            to Table of Contents**
  **SYNUTRA
        INTERNATIONAL, INC. AND SUBSIDIARIES**
 **(INCORPORATED
        IN THE STATE OF DELAWARE**
 **WITH
        LIMITED LIABILITY)**
 
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY**
 **(as
        restated, unaudited)**
 Common
              
              
              
              Additional
              
              
              
              
              
              Accumulated
              
              TotalStock
              
              Share
              
              paid-in
              
              
              
              Retained
              
              comprehensive
              
              Stockholder’soutstanding
              
              capital
              
              capital
              
              Reserves
              
              profits
              
              income(loss)
              
              EquityBalance
                  at March 31, 2005
              
              
              46,000,000
              
              $
              4,600
              
              $
              7,205,809
              
              $
              45,804
              
              $
              583,603
              
              $
              (218,158
              )
              $
              7,621,658Capital
                  contribution during quarter
              
              
              —
              
              
              —
              
              
              470,985
              
              
              —
              
              
              —
              
              
              —
              
              
              470,985Net
                  income for the quarter
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,724,204
              
              
              —
              
              
              1,724,204Foreign
                  currency translation
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              26,877
              
              
              26,878Balance
                  at June 30, 2005
              
              
              46,000,000
              
              
              4,600
              
              
              7,676,794
              
              
              45,804
              
              
              2,307,807
              
              
              (191,281
              )
              
              9,843,725Balance
                  at March 31, 2006
              
              
              50,000,713
              
              
              5,000
              
              
              8,226,033
              
              
              45,804
              
              
              11,618,515
              
              
              1,055,397
              
              
              20,950,749Net
                  income for the quarter
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              9,220,481
              
              
              —
              
              
              9,220,481Foreign
                  currency translation
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              40,214
              
              
              40,214Balane
                  at June 30, 2006
              
              
              50,000,713
              
              $
              5,000
              
              $
              8,226,033
              
              $
              45,804
              
              $
              20,838,996
              
              $
              1,095,611
              
              $
              30,211,444
 
 (1)
              All
                  shares and additional paid-in capital have been restated to reflect
                  recapitalization on July 15, 2005.
  The
        accompanying notes are an integral part of the consolidated financial
        statements.
 -6-
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            to Table of Contents**
  **SYNUTRA
          INTERNATIONAL, INC. AND SUBSIDIARIES**
 **(INCORPORATED
        IN THE STATE OF DELAWARE**
 **WITH
        LIMITED LIABILITY)**
 
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **Three
                  Months ended**
                **June
                  30****2006**
              
              **2005****(as
                  restated, unaudited)**
              
              **(as
                  restated, unaudited)****Cash
                  Flows from Operating Activities:**Net
                  income
              
              $
              9,220,481
              
              $
              1,724,204Adjustments
                  to reconcile net income tonet
                  cash provided by operating activities:Depreciation
                  and amortization
              
              
              371,436
              
              
              358,370Bad
                  Debt Expenses/øIncome)
              
              
              (18,566
              )
              
              -Gain
                  on short term investment
              
              
              (114
              )
              
              (3,891
              )Minority
                  interest
              
              
              —
              
              
              576Changes
                  in operating assets and liabilities:Notes
                  receivable
              
              
              (148,955
              )
              
              (4,470
              )Trade
                  receivable
              
              
              (5,728,730
              )
              
              (13,649
              )Inventories
              
              
              3,324,992
              
              
              311,389Advances
                  to suppliers
              
              
              (1,974,624
              )
              
              83,834Other
                  receivable, net
              
              
              (763,690
              )
              
              (561,641
              )Deferred
                  expenses
              
              
              46,265
              
              
              (2,436,600
              )Due
                  from related parties
              
              
              1,219,073
              
              
              2,767,135Due
                  to related parties
              
              
              (2,096,817
              )
              
              (1,452,258
              )Notes
                  payable
              
              
              4,087,438
              
              
              1,329,064Trade
                  payable
              
              
              (3,267,307
              )
              
              436,083Advances
                  from customers
              
              
              (176,809
              )
              
              855,871Other
                  payable & accrued expenses
              
              
              932,661
              
              
              32,061Tax
                  payable
              
              
              (86,747
              )
              
              -**Net
                  Cash Provided by Operating Activities**
              
              
              **4,939,986**
              
              
              **3,426,079****Cash
                  Flows from Investing Activities:**Acquisition
                  of property, plant and equipment
              
              
              (224,551
              )
              
              (1,066,068
              )Cash
                  used for construction in progress
              
              
              (494,589
              )
              
              (1,208,507
              )Purchases
                  of intangible assets
              
              
              (3,039
              )
              
              (302
              )**Net
                  Cash Used in Investing Activities**
              
              
              **(722,179**
              **)**
              
              **(2,274,877**
              **)**
 The
        accompanying notes are an integral part of the consolidated financial
        statements.
 -7-
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            to Table of Contents**
  **SYNUTRA
        INTERNATIONAL, INC. AND SUBSIDIARIES**
 **(INCORPORATED
        IN THE STATE OF DELAWARE**
 **WITH
        LIMITED LIABILITY)**
 
 **CONSOLIDATED
        STATEMENTS OF CASH FLOW (CONTINUED)**
 **Three
                  Months ended**
                **June
                  30****2006**
              
              **2005****(as
                  restated, unaudited)**
              
              **(as
                  restated, unaudited)****Cash
                  Flows from Financing Activites:**Inception
                  of bank loans, net
              
              
              
              
              
              1,208,240Repayment
                  of bank loans, net
              
              
              (514,646
              )(Excess
                  of)/ capital contribution
              
              
              —
              
              
              470,985**Net
                  Cash Used in Financing Activities**
              
              
              **(514,646**
              **)**
              
              **1,679,225****Net
                  Change in Cash and Cash Equivalents**
              
              
              **3,703,161**
              
              
              **2,830,427**Effect
                  of Exchange Rate Changes on Cash and Cash Equivalents
              
              
              40,214
              
              
              26,877Cash
                  and cash equivalents, beginning of period
              
              
              22,133,869
              
              
              16,085,403**Cash
                  and cash equivalents, end of period**
              
              $
              25,877,244
              
              $
              18,942,707**Supplementary
                  Cash Flows Disclosures**Interest
                  paid
              
              $
              344,945
              
              $
              360,243Income
                  taxes paid
              
              $
              795,699
              
              $
              7,793
 The
        accompanying notes are an integral part of the consolidated financial
        statements.
 -8-
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            to Table of Contents**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **1.
        DESCRIPTION OF BUSINESS**
 
 The
        Company is a Delaware corporation that at June 30, 2006 owned 100% of six
        subsidiary companies in the People’s Republic of China (“PRC” or “China”). These
        six subsidiaries are all principally engaged in different stages of the
        production, distribution, and sales of dairy based infant formulas and other
        nutritional products. The Company’s extensive sales network covers 24 provinces,
        227 cities, and more than 800 counties throughout China. In 2004, the Company’s
        infant formula market share was rated number eight among international
        manufacturers and number three among domestic manufacturers in China. The
        Company’s fiscal year end is March 31.
 
 **2.
        CRITICAL ACCOUNTING POLICIES AND ESTIMATES**
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with generally accepted accounting principles for
        interim
        financial information and with the instructions to Form 10-Q. Accordingly,
        they
        do not include all of the information and footnotes required by generally
        accepted accounting principles for complete financial statements and related
        notes.
 
 In
        the
        opinion of management, the accompanying unaudited condensed consolidated
        financial statements contain all adjustments (which include only normal
        recurring adjustments) necessary to present fairly the balance sheet of Synutra
        , Inc. and subsidiaries as of June 30, 2006, and the results of their operations
        and their cash flows for the three month periods ended June 30, 2006 and
        2005.
        The results of operations for the three month periods ended June 30, 2006
        and
        2005 are not necessarily indicative of the results to be expected for the
        entire
        year. The condensed consolidated balance sheet information as of March 31,
        2006
        was derived from the audited Fiscal 2005 Annual Report. These financial
        statements should read in conjunction with that report.
 
 The
        following critical accounting policies affect the more 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.
 -9-
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            to Table of Contents**
 
 **Accounting
        method**
 
 The
        Company uses the accrual method of accounting which recognizes revenues when
        earned and expenses when incurred.
 
 **Principles
        of consolidation**
 
 The
        consolidated financial statements as of June 30, 2006, the related consolidated
        statements of income for the three months ended June 30, 2006 and 2005, and
        the
        related consolidated statements of cash flows and stockholders’ equity
        statements for the three months ended June 30, 2006 and 2005 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**
              
              June 30, 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
 
 * *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.
 
 **30-Jun-06**
              
              **30-Jun-05**
              
              **31-Mar-06**Cash
              
              $
              8,777,152
              
              $
              7,703,052
              
              $
              5,676,616Cash
                  restricted
              
              
              17,100,092
              
              
              11,239,654
              
              
              16,457,253Total
              
              $
              25,877,244
              
              $
              18,942,707
              
              $
              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.
 
 **Accounts
        receivable**
 
 The
        Company presents accounts receivable, net of allowance for doubtful accounts.
        The allowance is calculated based on review of individual customer
        accounts.
 -10-
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            to Table of Contents**
 
 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 $398,577
        and
        $202,401 as at June 30, 2006 and 2005, 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.
 
 **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 income statement 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
              40
                  - 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
        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 is0%, resulting in an aggregate tax rate of 24%. The
        subsidiary will not be subject to local income tax prior to 2003,The
        subsidiary’s first cumulative profit-making year was 2004.
 
 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 is3%, resulting in an aggregate tax rate of 33%. The
        subsidiary will not be subject to local income tax prior to 2005, The
        subsidiary’s first cumulative profit-making year was2006.
 
 Bei’an
        Yipin Dairy Co., Ltd. is under such preferential tax treatment until December
        31, 2009. Accordingly, the applicable enterprise income tax rate is30% and
        the
        local tax rate is 3%, resulting in an aggregate tax rate of 33%. The subsidiary
        will not be 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 will not be 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 is subject to 33% income
        tax.
  Tax
        Rates
        Schedule for various operating subsidiaries of the Company in China is as
        follows.
 
 
  -11-
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            to Table of Contents**
  **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 dilution is accounted for either
        as
        reductions in sales in the same period the related sales are recorded, or
        as
        provisions with best estimates.
 
 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, therefore, met and self-evident.
 
 A
        fraction 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.
 
 Product
        returns to the supermarket retailers are charged against current sales revenues.
        These include product returns due to package damages in transportation and
        shelf-life expiration . Majority
        of the Company’s products carry shelf lives of 18 to 24 months. Unsold products
        with expired shelf life are returned and deducted from sales revenue. The
        arrangement meets the revenue recognition criteria under FASB Statement of
        Financial Accounting Standards No.48.
 
 The
        Company has put in place internal controls to track and assess product returns
        from retailers. Product returns are verified at the source, removed from
        shelf,
        and deducted from revenue . The
        Company evaluates market conditions for products or groups of products primarily
        through the analysis of third party sell-through and market research data,
        as
        well as internally generated information. Portions of the sales returns are
        estimated and recorded based on historical sales and returns information.
        Products that exhibit unusual sales or return patterns due to dating,
        competition or other marketing matters are specifically investigated and
        analyzed as part of the accounting for sales return accruals.
 
 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.
 
 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 months ended June 30, 2006 was
        $73,641 associated with construction in progress
 
 **Intangible
        assets**
 
 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
        net
        carrying amount of the intangible assets was $246,937 at June 30, 2006 and
        $311,934 at June 30, 2005 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 $1,387,420 and
        $604,120 during the three months ended June 30, 2006 and 2005,
        respectively.
 -12-
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            to Table of Contents**
 
 **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.
        The related parties were excluded from consolidation due to equity structure
        and
        other business reasons.
 
 **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.
 
 **June
                  30, 2006**Balance
                  sheet
              
              
              RMB
              
              
              7.9956
              
              
              to
                  US
              
              $
              1.00Operating
                  statement
              
              
              RMB
              
              
              8.0063
              
              
              to
                  US
              
              $
              1.00**June
                  30, 2005**Balance
                  sheet
              
              
              RMB
              
              
              8.2765
              
              
              to
                  US
              
              $
              1.00Operating
                  statement
              
              
              RMB
              
              
              8.2765
              
              
              to
                  US
              
              $
              1.00
 
 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 yuan
        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 / (loss) of $40,214 and $26,877 for the three
        months
        ended June 30, 2006 and 2005 respectively.
 
 **Use
        of estimates**
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles in the United States of America requires management
        to
        make estimates and assumptions that affect the reported amounts of assets
        and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements, and the reported amounts of revenue and expenses
        during the reporting period. Actual results when ultimately realized could
        differ from those estimates.
 -13-
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  **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 June
        30,
        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 $950,728 and $588,181 during the
        three
        months ended June 30, 2006 and 2005, respectively
 
 **Advertising
        costs and promotion**
 
 Advertising
        costs and promotion include salaries for all salesmen all over the Mainland
        China and are expensed as incurred. The advertising costs and promotion
        expenses were $6,928,074 and $5,257,881 during the three months ended June
        30,
        2006 and 2005, respectively.
 
 **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/(loss)**
 
 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 (loss) 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 $40,214 and
        $26,877 for the three months ended June 30, 2006 and 2005, respectively.
 
 **3.
        CONCENTRATION OF CREDIT RISK**
 
 Financial
        instruments that potentially subject the Company to significant concentrations
        of credit risk consist primarily of accounts 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.
 -14-
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  (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.
 
 **4.
        RECENT PRONOUNCEMENTS**
 
 None.
 
 **5.
        ACCOUNT RECEIVABLES**
 
 The
        Company's trade receivables as at June 30, 2006 and 2005 are summarized as
        follows:
 
 **June
                  30, 2006**
              
              **June
                  30, 2005**
              
              **March
                  31**,**2006**Trade
                  receivables
              
              $
              8,685,590
              
              $
              2,184,284
              
              $
              2,956,860Less:
                  Allowance for doubtful accounts
              
              
              (398,577
              )
              
              (202,401
              )
              
              (417,143
              )Trade
                  receivables, net
              
              $
              8,287,013
              
              $
              1,981,883
              
              $
              2,539,717
 
 **6.
        PROPERTY, PLANT AND EQUIPMENT**
 
 **June
                  30, 2006**
              
              **June
                  30, 2005**
              
              **March
                  31**,**2006****Cost:**Buildings
                  and leasehold improvement
              
              $
              7,433,559
              
              $
              7,348,308
              
              $
              7,313,860Land
                  use rights
              
              
              1,668,050
              
              
              1,607,166
              
              
              1,659,542Plant
                  and machinery
              
              
              7,317,238
              
              
              6,567,167
              
              
              7,206,411Office
                  equipment and furnishings
              
              
              947,166
              
              
              861,796
              
              
              988,330Motor
                  vehicles
              
              
              1,237,656
              
              
              1,573,864
              
              
              1,210,97418,603,669
              
              
              17,958,301
              
              
              18,379,117**Less:
                  Accumulated depreciation:**Buildings
                  and leasehold improvement
              
              
              1,376,661
              
              
              1,079,344
              
              
              1,264,683Land
                  use rights
              
              
              122,546
              
              
              83,285
              
              
              113,585Plant
                  and machinery
              
              
              2,495,349
              
              
              1,737,303
              
              
              2,306,131Office
                  equipment and furnishings
              
              
              323,057
              
              
              367,074
              
              
              336,235Motor
                  vehicles
              
              
              684,403
              
              
              893,210
              
              
              630,6105,002,016
              
              
              4,160,216
              
              
              4,651,244Property,
                  plant and equipment, net
              
              $
              13,601,653
              
              $
              13,798,085
              
              $
              13,727,873
 
 Depreciation
        expenses relating to property, land, plant and equipment was $350,064 and
        $337,805 for the three months ended June 30, 2006 and 2005,
        respectively.
 -15-
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            to Table of Contents**
  **7.
        INVENTORIES**
 
 The
        Company's inventories at June 30, 2006 and 2005 are summarized as follows:
 **June
                  30,2006**
              
              **June
                  30,2005**
              
              **March
                  31**,**2006**Raw
                  Materials
              
              $
              917,612
              
              $
              1,054,037
              
              $
              1,984,520Work
                  in Process
              
              
              5,578,816
              
              
              3,324,858
              
              
              7,586,465Finished
                  Goods
              
              
              1,291,860
              
              
              1,541,000
              
              
              2,131,552Packing
                  Materials & Other Consumables
              
              
              676,153
              
              
              525,737
              
              
              86,896Total
              
              $
              8,464,441
              
              $
              6,445,632
              
              $
              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**
 
 **June
                  30, 2006**
              
              **June
                  30, 2005**
              
              **March
                  31,****2006**Heilongjiang
                  Baoquanling Shen Yuan Dairy Co. Ltd
              
              $
              514,450
              
              $
              78,946
              
              **$**
              **226,383**Sheng
                  Zhi Da Dairy Group Corporation
              
              
              629,693
              
              
              2,924,653
              
              
              **(268,349**
              **)**Beijing
                  Kelqin Dairy Co. Ltd
              
              
              399,495
              
              
              625,286
              
              
              **1,708,230**St.
                  Angel (Beijing Business Service)
              
              
              35,910
              
              
              1,146,200
              
              
              **1,761,265**Beijing
                  Honnete Dairy Corporation Ltd
              
              
              5,481,582
              
              
              308,766
              
              
              **4,185,149**Beijing
                  Ao Naier Feed Stuff LLC
              
              
              303,524
              
              
              231,466
              
              
              **297,892**Beijing
                  Ludin Xueyuan Trading Co. Ltd
              
              
              18,636
              
              
              —
              
              
              **691,793**Total
                  Due from Related Companies
              
              $
              7,383,290
              
              $
              5,315,317
              
              **$**
              **8,602,363**
 
 -16-
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 **b.
        Due to related parties**
 **June
                  30, 2006**
              
              **June
                  30, 2005**
              
              **March
                  31,****2006**Heilongjiang
                  Baoquanling Shen Yuan Dairy Co. Ltd
              
              $
              1,200,241
              
              $
              1,673,937
              
              $
              705,602Sheng
                  Zhi Da Dairy Group Corporation
              
              
              798,162
              
              
              5,682,709
              
              
              2,192,892Beijing
                  Kelqin Dairy Co. Ltd
              
              
              205,916
              
              
              —
              
              
              63,909Beijing
                  Honnete Dairy Corporation Lrd
              
              
              
              
              
              
              
              
              1,338,734Total
                  Due to Related Companies
              
              $
              2,204,319
              
              $
              7,356,646
              
              $
              4,301,137
 
 B.
        Classification of Related Party Transactions by Nature
 
 **a.
                  Due from related parties**
  **June
                  30,2006**
              
              **June
                  30,2005**
              
              **March 31,****2006**Trade
                  receivables
              
              $
              35,910
              
              $
              552,627
              
              $
              2,018,344Prepayments
                  for goods
              
              
              5,785,105
              
              
              1,765,543
              
              
              4,525,769Other
                  receivables(other income)
              
              
              1,562,275
              
              
              2,924,653
              
              
              2,058,250Notes
                  receivables
              
              
              —
              
              
              72,494**Total**
              
              $
              7,383,290
              
              $
              5,315,317
              
              **$**
              **8,602,363**
 
 **b.
                  Due to related parties**
  **June
                  30,2006**
              
              **June
                  30,2005**
              
              **March
                  31,2006**Trade
                  payables
              
              $
              2,204,319
              
              $
              7,356,087
              
              $
              4,301,137Notes
                  payables
              
              
              —
              
              
              —Other
                  payables
              
              
              —
              
              
              559**Total**
              
              $
              2,204,319
              
              $
              7,356,646
              
              **$**
              **4,301,137**
 
 **9.
        RELATED PARTY TRANSACTIONS**
  The
        following related party transactions occurred during the three months ended
        June
        30, 2006 and 2005:
  In
        the
        three months ended June 30, 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, 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
        price.
 
 **Sales
        to related parties**
  **Three
                  Months ended**
                **June
                  30,2006**
              
              **Three
                  Months ended**
                **June
                  30,2005**Beijing
                  Honnete Dairy Corporation Ltd
              
              
              —
              
              
              -St.
                  Angel (Beijing Business Service)
              
              
              31,776
              
              
              250,134Beijing
                  Ao Naier Feed Stuff LLC
              
              
              —
              
              
              —Beijing
                  Ludin Xueyuan Trading Co. Ltd
              
              
              15,932
              
              
              91,366Total
              
              $
              47,708
              
              $
              341,500
  **Other
        income to related parties**
 
 **Three
                  Months ended**
                **June
                  30,2006**
              
              **Three
                  Months ended**
                **June
                  30,2005**Beijing
                  Kelqin Dairy Co. Ltd
              
              $
              378,526
              
              
              507,784Sheng
                  Zhi Da Dairy Group Corporation
              
              
              —
              
              
              353,621Heilongjiang
                  Baoquanling Shen Yuan Dairy Co. Ltd
              
              
              836,306
              
              
              563,269Beijing
                  Honnete Dairy Corporation Ltd
              
              
              4,157,688
              
              
              95,593Beijing
                  Ao Naier Feed Stuff LLC
              
              
              —
              
              
              —Total
              
              $
              5,372,520
              
              $
              1,520,267
 
 In
        the
        three months ended June 30, 2006 and 2005, the Company’s purchases from related
        parties included whey protein powders from Beijing Kelgin Dairy Co. Ltd.,
        Beijing Ao Naier Feed Stuff LLC and Beijing Honnete Dairy Corporation Ltd;
        various ingredients and materials (packaging, etc.) from Sheng Zhi Da Dairy
        Group Corporation; and spray-dried milk powder from Heilongjiang Baoquanling
        Sheng Yuan Dairy Co. Ltd.. Terms of these transactions are all done at market
        prices.
 
 **Purchases
        from related parties**
  **Three
                  months ended**
                **June
                  30, 2006**
              
              **Three
                  months ended**
                **June
                  30, 2005**Beijing
                  Kelqin Dairy Co. Ltd
              
              $
              157,678
              
              $
              921,657Sheng
                  Zhi Da Dairy Group Corporation
              
              
              —
              
              
              617,819Heilongjiang
                  Baoquanling Sheng Yuan Dairy Co.
              
              
              3,354,660
              
              
              2,158,034Beijing
                  Honnete Dairy Corporation Ltd
              
              
              1,159,260
              
              
              970,682Beijing
                  Ao Naier Feed Stuff LLC
              
              
              45,923
              
              
              —Beijing
                  Sheng Long Media Co. Ltd
              
              
              —
              
              
              22,685Total
              
              $
              4,717,521
              
              $
              4,690,877
  -17-
 **Back
            to Table of Contents**
  **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:
 
 **June
                  30, 2006**
              
              **June
                  30, 2005**
              
              **March
                  31,****2006**Gross
                  Carrying
                Amount
              
              Accumulated
                Amortization
              
              Gross
                  Carrying
                Amount
              
              Accumulated
                Amortization
              
              Gross
                  Carrying
                Amount
              
              Accumulated
                AmortizationComputer
                  software and applications
              
              $
              437,152
              
              $
              190,215
              
              $
              411,083
              
              $
              99,149
              
              $
              426,430
              
              $
              161,868**Total
                  intangible assets**
              
              
              437,152
              
              
              190,215
              
              
              411,083
              
              
              99,149
              
              
              426,430
              
              
              161,868
 
 Amortization
        expenses for the three months ended June 30, 2006 and 2005 was $21, 372 and
        $20,565 respectively
 -18-
 **Back
            to Table of Contents**
 
 **11.
        BANK LOANS**
 
 As
        at
        June 30, 2006 and 2005, the Company had short-term loans from banks in the
        amount of $17,551,071 and $13,508,125 bearing interest ranging from 5.576%
        to
        7.488% per annum. Such loans are extendable for terms of no less than one
        year
        to June 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
        $11.56 million and $9.95 million during the three months ended June 30, 2006
        and
        2005, respectively.
 
 There
        are
        no other long term borrowings by the Company at the time of this report.
 
 **12.
        INCOME TAXES**
 
 The
        Company’s income/(loss) before income taxes was comprised of the following for
        the three months ended June 30,2006 and 2005,respectively
 
 
 **Three
                  months ended**
                **June
                  30, 2006**
              
              **Three
                  months ended**
                **June
                  30, 2005**United
                  States
              
              $
              26,211
              
              $
              68,116PRC
              
              
              9,988,905
              
              
              1,682,230Total
              
              $
              10,015,116
              
              $
              1,750,346
 
 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 months ended June 30, 2006 and
        2005,
        respectively, are summarized as follows:
  **Three
                  months ended**
                **June
                  30, 2006**
              
              **Three
                  months ended**
                **June
                  30, 2005**Current
              
              $
              794,635
              
              $
              25,566Deferred
              
              
              —
              
              
              —Total
              
              $
              794,635
              
              $
              25,566
 
 **13.
        NET INCOME/(LOSS) PER SHARE--EPS**
 
 SFAS
        128
“Earnings Per Share” requires the Company to calculate its net income
        (loss) per share based on basic and diluted net income (loss) per
        share, as defined. Basic EPS excludes dilution and is computed by dividing
        net
        income (loss) 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.
  **For
                  the three Months Ended June 30, 2006****Income**
              
              **Shares**
              
              **Per-Share****(Numerator)**
              
              **(Denominator)**
              
              **Amount****Basic
                  EPS**Income
                  available to common stockholders
              
              $
              **9,220,481**
              
              
              **50,000,713**
              
              **$**
              **0.18****Effect
                  of Dilutive Securities**Warrants
                  and options
              
              
              —
              
              
              —Convertible
                  preferred stock
              
              
              —
              
              
              —**Diluted
                  EPS**Income
                  available to common stockholders + assumed conversions
              
              $
              **9,220,481**
              
              
              **50,000,713**
              
              **$**
              **0.18**
 
  -19-
 **Back
            to Table of Contents**
  **14.
        COMMITMENTS AND CONTINGENCIES**
 
 **A.
        CAPITAL COMMITMENTS**
 
 As
        of
        June 30, 2006, the Company had no significant capital commitments required
        for
        disclosure. **
 
 **B.
        LEASE COMMITMENTS**
 
 The
        lease
        commitments of the Company as at June 30, 2006 and 2005 were as follows:
 
 **Expiration
                  date**
              
              **Monthly**
                **payment**
              
              **Mar-07**
              
              **Mar-08**
              
              **Mar-09**
              
              **Mar-10**
              
              **Mar-11**Office
                  facilities in Beijing (SOHO)
              
              
              20-Apr-05
              
              
              -14-Dec-07
              
              $
              7,239
              
              $
              86,863
              
              $
              57,909
              
              
              —
              
              
              —
              
              
              —Office
                  facilities in Beijing (SOHO 2903-2905)
              
              
              15-Dec-04
              
              
              -14-Dec-07
              
              
              10,975
              
              
              131,700
              
              
              87,800
              
              
              —
              
              
              —
              
              
              —Office
                  facilities in Beijing
              
              
              1-Jan-06
              
              
              -31-Dec-07
              
              
              3,950
              
              
              47,400
              
              
              35,550
              
              
              —
              
              
              —
              
              
              —Warehouses
                  in Qingdao
              
              
              21-Nov-05
              
              
              -20-May-06
              
              
              2,640
              
              
              4,400
              
              
              —
              
              
              —
              
              
              —
              
              
              —Warehouses
                  in Qingdao
              
              
              21-Nov-05
              
              
              -10-May-06
              
              
              1,401
              
              
              1,868
              
              
              —
              
              
              —
              
              
              —
              
              
              —**Total
                  rent expenses**
              
              
              
              
              
              
              
              
              
              
              **$**
              **272,230**
              
              **$**
              **181,258**
              
              
              —
              
              
              —
              
              
              —
 
 **C.
        LEGAL PROCEEDINGS**
 
 N/A
 
 **15.
        RESTATEMENT**
 
 The
        financial statements for the period ended June 30, 2006 have been restated
        to
        give effect to the fair value of the 2,879,500 shares of common stocks issued
        to
        consultants for the services related to the recapitalization transaction
        of the
        company going public. The financial statement for the periods ended June
        30,
        2006 and 2005 have also been restated to reflect the historical shares of
        common
        stock of Vorsatech that were issued and the related earnings per share for
        the period prior to the merger. The effects on current liabilities,
        additional paid in capital, retained earnings, earnings per share, and weighted
        average common shares outstanding are summarized as follows:
 
 Current
                  Liabilities as of
                June
                  30, 2006
              
              Additional
                  Paid In Capital as of
                June
                  30, 2006
              
              Retained
                  Earnings as of
                June
                  30, 2006As
                  previously stated
              
              $
              60,918,320
              
              $
              7,676,394
              
              $
              21,405,996Stock
                  compensation and recapitalization
              
              $
              17,361
              
              $
              549,639
              
              
              ($567,000
              )Restated
              
              $
              60,935,681
              
              $
              8,226,033
              
              $
              20,838,996
 
 
 For
                  the three months ended
                June
                  30, 2006
              
              For
                  the three months ended
                June
                  30, 2005Earnings
                  per share as previously stated
              
              $
              0.18
              
              $
              0.03Earnings
                  restated
              
              $
              0.18
              
              $
              0.04Weighted
                  average common shares outstanding as previously stated
              
              
              50,000,713
              
              
              50,000,713Weighted
                  average common shares outstanding restated
              
              
              50,000713
              
              
              46,000,000
 
 The
        weighted average common shares outstanding have been restated to reflect
        the
        actual time outstanding of common shares issued in connection with the
        recapitalization transaction of the company.
 -20-
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            to Table of Contents**
  **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 six 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 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 as well as anhydrous
        milk-fat.
 
 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.
 
 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
 
 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 is 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.
 
 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.
 
 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.
 -21-
 **Back
            to Table of Contents**
 
 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.
 
 **RESULTS
        OF OPERATIONS**
 
 **Three
        Months Ended June 30, 2006 Compared to Three Months Ended June 30,
        2005**
 -22-
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            to Table of Contents**
  **Sales**
 
 Sales
        for
        the three months ended June 30, 2006 increased by $25,274,293 or 145.24%
        to
        $42,676,120 from $17,401,827 for the three months ended June 30, 2005.
 
 Sales
        increased due to greater market penetration as a result of various measures
        including changes made by management to incentive programs and policies
        affecting the Synutra sales force. Such changes strengthened promotional
        efforts
        in the medium-sized city markets and rural markets of China by modifying
        sales
        force incentive programs through aligning rewards 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.
 a.
              The
                  tons sold of such products increased 2,204 tons for the three months
                  ended
                  June 30, 2006, resulting in$10,951,921
                  increase of gross sales.
 b.
              The
                  average selling price also contributed to the increase of gross
                  sales. For
                  the period ended June 30, 2006, the average selling price increased
                  $881
                  per ton, resulting in an increase of $3,504,923 in gross sales.
 c.
              Sales
                  growth attributable to combined factor of the increase of the volume
                  and
                  the price was $2,205,839; d. New product launched contributed $8,661,610
                  in gross sales growth.
 
 For
        the
        three months ended June 30, 2006, the Company realized and earned close to
        99.6%
        of its total sales revenue of $43 million through its wholesale distributor
        networks and about 0.4% through the supermarket retailers. Of the total $17.4
        million sales earned in the 3 months period ended June 30, 2005, about 98.5%
        was
        from distributors and about 1.5% 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 June 30, 2006 increased to $20,644,247 from
        $8,456,140 for the three months ended June 30, 2005. The 144.13% increase
        in
        cost of sales of $12,188,107 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.
 
 The
        increase of 2,204 tons sold of the traditional main products resulted in
        $5,321,911 increase of cost. The average cost per unit decreased by $109
        per
        metric ton, resulting in $381,789 cost reduction for the three months ended
        June
        30, 2006. Additionally, the combined factor of production volume and reduction
        of unit cost led to $240,286 decline of cost of products sold. The launch
        of new
        products accounted for $7,488,280 in the total cost of sales for the three
        months ended June 30, 2006.
 -23-
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            to Table of Contents**
  **Gross
        Profit**
 
 Gross
        profit was $22,031,873 or 51.63% of sales for the three months ended June
        30,
        2006, compared to $8,945,687 or 51.41% of sales for the three months ended
        June
        30, 2005. It was an increase of $13,086,187 or 146.28%.
 
 The
        sales
        of traditional main products mostly
        contributed $20,908,544 or 95% of gross profits for the three months ended
        June
        30, 2006. Such main products contributed $ 8,945,687
        or 100% gross profits for the three months ended June 30, 2005.
 
 With
        sales increasing in the three months ended June 30, 2006 compared to 2005,
        the
        Company experienced an increase in both gross profit and gross margin. 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.
 
 **Selling
        and Distribution Expenses**
 
 Selling
        and distribution expenses increased by $3,227,371 or 177.82% to $5,042,348
        for
        the three months ended June 30, 2006, as compared to $1,814,977 for the three
        months ended June 30, 2005. The increase in selling and distribution expenses
        in
        the three months ended June 30, 2006 as compared to 2005 was a result of
        increased transportation expenses due to the increase in sales volume, in
        addition to increases in other major components of such expenses such as
        wages,
        supermarket expenses and service expenses. ** The
        increase in total compensation to the sales force constitutes most of the
        increase in selling and distribution expenses.
 
 **Advertising
        and Sales Promotion**
 
 Advertising
        and sales promotion increased by $1,670,193 or 31.77% to $6,928,074 for the
        three months ended June 30, 2006, as compared to $5,257,881 for the three
        months
        ended June 30, 2005 as a result of increased advertising and promotional
        activity expenses. The major components of advertising and sales promotion
        are
        placement of advertisements with major media outlets and points of sale and
        community promotional activities.
  **Three
                  months ended**
                **June
                  30, 2006**
              
              **Three
                  months ended**
                **June
                  30, 2005**
              
              **change
                  in $**
              
              **change
                  in %**Advertising
              
              $
              715,878
              
              $
              691,881
              
              $
              23,997
              
              
              3.47
              %Sales
                  promotion
              
              
              6,212,196
              
              
              4,566,000
              
              
              1,646,196
              
              
              36.05
              %**Totals**
              
              **$**
              **6,928,074**
              
              **$**
              **5,257,881**
              
              $
              1,670,193
              
              
              **31.77**
              **%**
 
 **General
        and Administrative Expenses**
 
 General
        and administrative expenses increased by $134,041 or 15.6% to $993,542 for
        the
        three months ended June 30, 2006, as compared to $859,501 for the three months
        ended June 30, 2005. The major increases of general and administrative expenses
        were for staff salaries, management expenses and expenses relating to the
        Company’s public status.
 -24-
 **Back
            to Table of Contents**
  **Income
          from Operations**
 
 Based
        on
        the sales increase of $25.3 million or 145.24% and the cost of sales increase
        of
        $12.2 million or 144.13% for the three months ended June 30, 2006, gross
        profit
        was up by almost $13 million or 146.28% compared to the three months ended
        June
        30, 2005. In the meantime, operational expenses also increased by approximately
        $5 million for the three months. As a result, income from operations was
        $9,067,909 for the three months ended June 30, 2006, as compared to $1,013,328
        for the three months ended June 30, 2005, an increase of $8,054,581 or 794.86%.
 
 **Finance
        costs**
 
 Finance
        costs decreased by $6,492 or 1.56% to $408,794 for the three months ended
        June
        30, 2006, as compared to $415,286 for the three months ended June 30, 2005.
 
 **Subsidy
        income**
 
 Subsidy
        income from local governments increased by $783,300 to $1,387,420 for the
        three
        months ended June 30, 2006 as compared to $604,120 for the three months ended
        June 30, 2005. These subsidies were provided to the Company as economic
        incentives and no repayment by the Company is required. The Company receives
        such subsidy from time to time.
 
 **Other
        Income (Expenses)**
 
 Other
        expenses were $92,551 for the three months ended June 30, 2006, as compared
        to
        other income of $484,355 for the three months ended June 30, 2005. These
        other
        expenses were incurred as a result of costs associated with disposal of returned
        products.
 
 **Three
                  Months ended**
                **June
                  30,2006**
              
              **Three
                  Months ended**
                **June
                  30,2005**Other
                  income
              
              $
              6,715,646
              
              $
              4,581,844Other
                  expenses
              
              $
              6,808,197
              
              $
              4,097,489**Other
                  income/(expenses),net**
              
              $
              (92,551
              )
              $
              484,355
 
 **Provision
        for Income Taxes**
 
 The
        provision for income taxes, which is computed on a per subsidiary basis,
        was
        $794,635 and $25,566 for the three months ended June 30, 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 year 2006 for some
        of the
        operating subsidiaries.
 
 **Net
        Income Attributed to Shareholders**
 
 Net
        income attributable to shareholders for the three months ended June 30, 2006
        increased by $7,496,277 or 434.77% to $9,220,481 from $1,724,204 for the
        three
        months ended June 30, 2005 due to the factors discussed above.
 
 **Earnings
        Per Share**
 
 Basic
        and
        diluted Earnings Per Share were $0.18 for three months ended June 30, 2006
        and
        $0.03 for three months ended June 30, 2005.
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            to Table of Contents**
  **FINANCIAL
        CONDITION**
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 **Cash**
 
 The
        cash
        balance increased by $3,743,375 to $25,877,244 at June 30, 2006, as compared
        to
        $22,133,869 at March 31, 2006. The increase was mainly attributable to cash
        flow
        from operations in 2006 which amounted to $4,939,986, being offset by cash
        spent
        in construction projects on plant and acquisition of fixed assets which amounted
        to$722,179 and repayment of bank loans which amounted to $514,646. The remaining
        $40,214 was the effect of exchange rate changes on cash items.
 
 Cash
        flow
        generated from operations was $4,939,986 for the three months ended June
        30,
        2006. Trade receivables increased by $5,728,730 and advances to suppliers
        increased by $1,974,624. Expanded scale of operations from the increase in
        sales
        revenues in the three months ended June 30, 2006 resulted in additional demand
        on working capital. Therefore, we experienced increased account receivables
        and
        inventories to support our increased sales revenues and production activities.
 
 Cash
        flows used in investing activities amounted to $722,179. During this quarter,
        we
        used $494,589 for the construction of a new factory plant and facilities.
        The
        facilities are expected to be completed in the year 2006 *.* We
        also
        spent around $224,551 for new machinery and equipment.
 
 Cash
        used
        in repayment of bank loans was $514,646.
 
 **Working
        Capital**
 
 Working
        capital increased by $4 million to negative $5.3 million at June 30, 2006,
        as
        compared to negative $9.3 million at March 31, 2006. The increase in working
        capital reflects an improvement in the ratio of current assets over current
        liabilities to 91.28% from 83.73% over the period in discussion.
 
 Although
        the Company continues to have a working capital deficit, since 2004, growth
        of
        the Company’s pretax earnings continues to outpace by an average factor of about
        10 times the interest payments over current liabilities, demonstrating the
        Company’s ability to meet interest payment of current liabilities with cash from
        operations. In addition, management believes much of the bank loans and notes
        payables booked as current liabilities can be readily extended on a revolving
        bases.
 
 The
        Company currently generates its cash flow through operations which it believes
        will be sufficient to sustain operations for at least the next twelve months.
        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 plan to use our working capital for such
        purposes.
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            to Table of Contents**
  **PART
        II**
 **OTHER
        INFORMATION**
 
 **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)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.
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  **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: September
                  28, 2006
              By:
              /s/ Liang
                  ZhangName:Liang
                  ZhangTitle:  
                  Chief Executive Officer
 
 Date: September
                  28, 2006
              By:
              /s/ Jibin
                  ZhangName:Jibin
                  ZhangTitle:  
                  Chief Financial Officer
  -28-