**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-QSB/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 December 31, 2005
 
 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 small business issuer 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
 **(Issuer’s
        telephone number)**
 
 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 shell company (as defined in Rule
        12b-2of the Exchange Act).
 
 Yes  ̈ No x
 
 As
        of
        January 20, 2006, there were 50,000,713 **** shares
        of
        Common Stock outstanding.
 
 Transitional
        Small Business Disclosure Format
 
 Yes  ̈ No x
 
 **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:
  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.Financial
                  Statements have been revised to reflect the slotting fee that should
                  be
                  deducted from revenue, rather than included in Advertising and
                  Sales
                  Promotion expense.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**
  **INDEX**
 
 PART
                  I. FINANCIAL INFORMATIONItem
                  1.
              
              Consolidated
                  Financial Statements:
              
              F-1Consolidated
                  Balance Sheets as of December 31, 2005 (unaudited)
                  and March 31, 2005 (audited)
              
              F-2Consolidated
                  Statements of Operations for three and nine
                  months ended December 31, 2005 and 2004 (unaudited)
              
              F-3Consolidated
                  Statements of Cash Flows for the nine-months ended
                  December 31, 2005 and 2004 (unaudited)
              
              F-4Consolidated
                  Statements of Changes in Stockholders' Equity
                  December 31, 2005 (unaudited)
              
              F-6Notes
                  to Financial Statements (unaudited)
              
              F-7
                  - F-12Item
                  2.
              
              Management's
                  Discussion and Analysis or Plan of Operations
              
              13PART
                  II. OTHER INFORMATIONItem
                  1.
              
              Exhibits
              
              23SIGNATURES
              
              24
  -i-
 **Back
            to Table of Contents**
  **PART
        I**
 **FINANCIAL
        INFORMATION**
 
 **Item
        1.      Financial Statements.**
 
 **SYNUTRA,
        INC.**
 **Rockville,
        MD**
 
 **CONSOLIDATED
        BALANCE SHEETS**
 **December
                  31,**
                **2005**
              
              **March
                  31,**
                **2005****(as
                  restated, unaudited)**
              
              (as
                  restated,
                audited)**ASSETS**
              
              **USD**
              
              USD**Current
                  Assets**Cash
                  and Cash Equivalents
              
              **$**
              **19,727,274**
              
              $
              16,085,403Short
                  Term Investment - at Market
              
              
              **42,276**
              
              
              45,237Trade
                  Receivables, Net of Provisions
              
              
              **1,418,545**
              
              
              1,968,235Other
                  Receivables, Net of Provisions
              
              
              **2,525,362**
              
              
              1,745,985Notes
                  Receivable
              
              
              **94,226**
              
              
              27,790Inventory
              
              
              **11,479,627**
              
              
              6,757,021Prepaid
                  Expenses
              
              
              **176,650**
              
              
              721,623Due
                  from Related Companies
              
              
              **7,696,812**
              
              
              8,082,451
  Including:
                  Trade receivables
              
              
              **323,074**
              
              
              357,204Prepayments
              
              
              **5,265,550**
              
              
              5,552,056Other receivables
              
              
              **2,108,188**
              
              
              2,173,191
  Deferred
                  Costs
              
              
              **7,126**
              
              
              383,869**Total
                  Current Assets**
              
              **$**
              **43,167,897**
              
              $
              35,817,613**Property,
                  Plant and Equipment, Net of Accumulated Depreciation**
              
              
              **13,940,346**
              
              
              13,887,012**Other
                  Assets**Intangible
                  Assets, Net of Accumulated Amortization
              
              
              **283,892**
              
              
              334,392Construction
                  In Progress
              
              
              **19,967,212**
              
              
              14,152,518**Total
                  Assets**
              
              **$**
              **77,359,348**
              
              $
              64,191,535
  F-1
 **Back
            to Table of Contents**
  **SYNUTRA,
        INC.**
 **Rockville,
        MD**
 
 **CONSOLIDATED
        BALANCE SHEETS**
 **Continued**
 **December
                  31,**
                **2005**
              
              **March
                  31,**
                **2005****(as
                  restated, unaudited)**
              
              (as
                  restated,
                audited)**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**
              
              **USD**
              
              USD**Current
                  Liabilities**Accounts
                  Payable
              
              
              **10,122,306**
              
              
              4,966,997Other
                  Payables
              
              
              **4,998,192**
              
              
              4,400,128Notes
                  Payable
              
              
              **17,795,624**
              
              
              19,821,180Deposit
                  Received from Customers
              
              
              **1,482,530**
              
              
              540,843Bank
                  Loans
              
              
              **12,366,484**
              
              
              12,299,885Accrued
                  Expenses
              
              
              **151,437**
              
              
              899,555Due
                  to Related Companies
              
              
              **9,213,171**
              
              
              8,808,904
  Including:
                  Trade payables
              
              
              **18,109**
              
              
              6,452,836Notes
                  payables
              
              
              **—**
              
              
              2,356,068Other
                  payables
              
              
              **9,195,062**
              
              
              **—**
  **Total
                  Current Liabilities**
              
              **$**
              **56,129,744**
              
              $
              51,737,492**Long
                  Term Liabilities**Bank
                  Loans
              
              
              **4,932,182**
              
              
              4,832,961**Total
                  Liabilities**
              
              **$**
              **61,061,926**
              
              $
              56,570,453**Minority
                  Interest**
              
              
              **—**
              
              
              (576
              )**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 and 46,000,000
                    issued and outstanding as of December 31, 2005 and March 31,
                    2005,
                    respectively)
              
              
              **5,000**
              
              
              4,600Additional
                  Paid-in Capital
              
              
              **8,226,033**
              
              
              7,205,809Reserve
              
              
              **45,804**
              
              
              45,804Retained
                  Earnings
              
              
              **7,422,142**
              
              
              583,603Accumulated
                  Comprehensive Income (Loss)
              
              
              **598,443**
              
              
              (218,158
              )**Total
                  Shareholders’ Equity**
              
              
              **16,297,422**
              
              
              7,621,658**Total
                  Liabilities and Shareholders’ Equity**
              
              **$**
              **77,359,348**
              
              $
              64,191,535
  F-2
 **Back
            to Table of Contents**
  **SYNUTRA,
        INC.**
 **Rockville,
        MD**
 
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME**
 **Three
                  Months Ended**
                **December
                  31,**
              
              **Nine
                  Months Ended**
                **December
                  31,****(as
                  restated, unaudited)**
              
              **(as
                  restated, unaudited)****USD**
              
              **USD****2005**
              
              2004
              
              **2005**
              
              2004**Sales**
              
              **$**
              **29,887,236**
              
              $
              16,472,207
              
              **$**
              **72,501,483**
              
              $
              38,692,235
  Including
                  sales to related parties
              
              
              **410,054**
              
              
              **—**
              
              
              **1,280,670**
              
              
              78,966
  Cost
                  of Sales
              
              
              **13,869,681**
              
              
              8,775,545
              
              
              **33,291,299**
              
              
              20,203,921
  Including
                  cost of sales to related parties
              
              
              **190,293**
              
              
              **—**
              
              
              **586,387**
              
              
              38,629
  **Gross
                  Profit**
              
              **$**
              **16,017,555**
              
              $
              7,696,662
              
              **$**
              **39,210,184**
              
              $
              18,488,314Selling
                  Expenses
              
              
              **5,440,177**
              
              
              1,727,673
              
              
              **11,165,177**
              
              
              6,706,458Advertising
                  and Sales Promotion
              
              
              **4,809,094**
              
              
              1,749,429
              
              
              **16,264,655**
              
              
              8,105,718General
                  and Administrative Expenses
              
              
              **1,281,265**
              
              
              1,033,343
              
              
              **4,206,155**
              
              
              2,215,729**Income
                  (Loss) from Operations**
              
              **$**
              **4,487,019**
              
              $
              3,186,217
              
              **$**
              **7,574,196**
              
              **$**
              **1,460,409**Other
                  Expenses (Income)
              
              
              **64,834**
              
              
              (673,506
              )
              
              **(1,602,388**
              **)**
              
              (636,546
              )Interest
                  Expense
              
              
              **299,429**
              
              
              379,666
              
              
              **1,585,976**
              
              
              940,042Other
                  Expenses
              
              
              **136,586**
              
              
              70,093
              
              
              **237,942**
              
              
              304,774**Total
                  Other Expenses**
              
              **$**
              **436,015**
              
              $
              449,759
              
              **$**
              **1,823,918**
              
              $
              1,244,816**Income
                  (Loss) from Operations Before Provision for Income Taxes**
              
              
              **3,986,169**
              
              
              3,409,964
              
              
              **7,352,666**
              
              
              852,139Income
                  Taxes - Current
              
              
              **208,552**
              
              
              18,875
              
              
              **513,551**
              
              
              56,669**Net
                  Income (Loss) Before Minority Interest**
              
              
              **3,777,618**
              
              
              3,391,089
              
              
              **6,839,115**
              
              
              795,470Minority
                  Interest
              
              
              **—**
              
              
              2,563,701
              
              
              **576**
              
              
              2,243,946**Net
                  Income (Loss)**
              
              **$**
              **3,777,618**
              
              $
              827,388
              
              **$**
              **6,838,539**
              
              
              ($1,448,476
              )**Comprehensive
                  Income (Loss)**Foreign
                  Currency Translation
              
              
              **172,596**
              
              
              (441,214
              )
              
              **824,793**
              
              
              (77,939
              )Unrealized
                  Loss on Investment
              
              
              **—**
              
              
              (10,222
              )
              
              **(8,192**
              **)**
              
              (22,764
              )**Comprehensive
                  Income (Loss)**
              
              **$**
              **3,950,214**
              
              $
              375,952
              
              **$**
              **7,655,140**
              
              
              ($1,549,179
              )Earnings
                  per Share (EPS)EPS
                  Basic and Diluted
              
              **$**
              **0.08**
              
              **$**
              **0.02**
              
              **$**
              **0.14**
              
              
              **($0.03**
              **)**Weighted
                  Average Shares Basic and Diluted
              
              
              **50,000,713**
              
              
              **46,000,000**
              
              
              **48,444,880**
              
              
              **46,000,000**
  F-3
 **Back
            to Table of Contents**
  **SYNUTRA,
        INC.**
 **Rockville,
        MD**
 
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **Nine
                  Months Ended**
                **December
                  31****2005**
              
              2004**(as
                  restated, unaudited)**
              
              **(as
                  restated, unaudited)****USD**
              
              **USD****Cash
                  Flows from Operating Activities****Net
                  Income**
              
              **$**
              **6,838,539**
              
              
              ($1,448,476
              )**Adjustments
                  to Reconcile Net Income to Net Cash Provided by (Used in) Operating
                  Activities**Minority
                  Interest
              
              
              **576**
              
              
              2,243,946Depreciation
                  and Amortization
              
              
              **1,082,140**
              
              
              1,056,814Bad
                  Debts
              
              
              **4,214**
              
              
              62,606Financial
                  consultants and finders fee
              
              
              **567,000**
              
              
              -**(Increase)
                  Decrease in Assets:**Inventory
              
              
              **(4,722,607**
              **)**
              
              166,191Trade
                  Receivables, Net of Provisions
              
              
              **549,690**
              
              
              (1,841,769
              )Other
                  Receivables, Net of Provisions
              
              
              **(779,377**
              **)**
              
              11,135,933Intangible
                  Assets
              
              
              **35,235**
              
              
              -Prepaid
                  Expenses
              
              
              **544,974**
              
              
              66,331Deferred
                  Costs and Other Assets
              
              
              **376,743**
              
              
              40,670Due
                  from Related Companies
              
              
              **385,639**
              
              
              (2,190,100
              )Due
                  to Related Companies
              
              
              **457,372**
              
              
              (1,098,795
              )**Increase
                  (Decrease) in Liabilities:**Accounts
                  Payable
              
              
              **5,155,309**
              
              
              (595,949
              )Other
                  Payables
              
              
              **452,011**
              
              
              (1,186,740
              )Accrued
                  Expenses
              
              
              **(750,618**
              **)**
              
              (1,350,980
              )Deposit
                  Received from Customers
              
              
              **941,688**
              
              
              539,890**Net
                  Cash Provided By (Used in) Operating Activities**
              
              **$**
              **11,138,528**
              
              $
              5,599,572
  F-4
 **Back
            to Table of Contents**
  **SYNUTRA,
        INC.**
 **Rockville,
        MD**
 
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **Continued**
 **Nine
                  Months Ended**
                **December
                  31****2005**
              
              2004**(as
                  restated, unaudited)**
              
              **(as
                  restated, unaudited)******
              
              **USD**
              
              **USD****Cash
                  Flows from Investing Activities**Cash
                  Purchase of Short Term Investments
              
              **$**
              **7,431**
              
              $
              11,330Acquisition
                  of Property, Plant and Equipment
              
              
              **(993,492**
              **)**
              
              (854,057
              )Cash
                  Proceeds from Sales of Fixed Assets
              
              
              **—**
              
              
              52,775Cash
                  Used for Construction in Progress
              
              
              **(5,814,694**
              **)**
              
              (12,746,910
              )Notes
                  Receivable
              
              
              **(66,436**
              **)**
              
              (10,083
              )Purchase
                  of Intangible Assets
              
              
              **(4,213**
              **)**
              
              **—****Net
                  Cash Used in Investing Activities**
              
              
              **($6,871,404**
              **)**
              
              ($13,546,945
              )**Cash
                  Flows from Financing Activities**Bank
                  Loans
              
              
              **165,821**
              
              
              2,899,776Notes
                  Payable
              
              
              **(2,025,556**
              **)**
              
              7,370,265Capital
                  Contributions - Stockholders
              
              
              **417,880**
              
              
              419**Net
                  Cash Provided by Financing Activities**
              
              
              **($1,441,855**
              **)**
              $
              10,270,460**Effect
                  of Exchange Rate Changes on Cash and Cash Equivalents**
              
              **$**
              **816,602**
              
              
              ($77,939
              )Net
                  Change in Cash and Cash Equivalents
              
              
              **3,641,871**
              
              
              2,245,148Cash
                  and Cash Equivalents - Beginning of Period
              
              
              **16,085,403**
              
              
              13,737,303**Cash
                  and Cash Equivalents - End of Period**
              
              **$**
              **19,727,274**
              
              $
              15,982,451**SUPPLEMENTARY
                  CASH FLOWS DISCLOSURES**Interest
                  Paid
              
              **$**
              **1,018,976**
              
              $
              930,959Taxes
                  Paid
              
              **$**
              **513,551**
              
              $
              89,689
  F-5
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            to Table of Contents**
  **SYNUTRA,
        INC.**
 **Rockville,
        MD**
 
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY**
 **(as
        restated, unaudited)**
 **Common**
                **Stock
                  Outstanding**
              
              **Registered
                  Capital**
              
              **Additional
                  Paid-In**
                **Capital**
              
              **Reserve**
              
              **Retained
                  Earnings(Deficit)**
              
              **Accumulated
                  Comprehensive Income(Loss)**
              
              **Total
                  Stockholder’s Equity****Balance
                  2004-12-31**
              
              
              **46,000,000**
              
              $
              4,600
              
              $
              7,001,558
              
              $
              45,804
              
              $
              (3,852,561
              )
              $
              (209,054
              )
              $
              2,990,347Net
                  Income(Loss)
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              4,436,164
              
              
              —
              
              
              4,436,164Other
                  Comprehensive Income (Loss)
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (9,104
              )
              
              (9,104
              )Capital
                  Contributions
              
              
              
              
              
              —
              
              
              204,251
              
              
              —
              
              
              —
              
              
              —
              
              
              204,251**Balance
                  2005-3-31**
              
              
              **46,000,000**
              
              $
              4,600
              
              $
              7,205,809
              
              $
              45,804
              
              $
              583,603
              
              $
              (218,158
              )
              $
              7,621,658Net
                  Income(Loss)
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              1,724,204
              
              
              —
              
              
              1,724,204Other
                  Comprehensive Income (Loss)
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              26,877
              
              
              26,877Capital
                  Contributions
              
              
              
              
              
              —
              
              
              470,985
              
              
              —
              
              
              —
              
              
              —
              
              
              470,985**Balance
                  2005-6-30**
              
              
              **46,000,000**
              
              $
              4,600
              
              $
              7,676,794
              
              $
              45,804
              
              $
              2,307,807
              
              $
              (191,281
              )
              $
              9,843,724Acquisiion
                  of Vorsatech
              
              
              2,638,713
              
              
              264
              
              
              (17,625
              )
              
              —
              
              
              —
              
              
              —
              
              
              **(17,361**
              **)**Capital
                  stock cancelled
              
              
              (1,517,500
              )
              
              (152
              )
              
              152
              
              
              —
              
              
              —
              
              
              —
              
              
              —Capital
                  stock issued to Financial consultant and finders
              
              
              2,879,500
              
              
              288
              
              
              566,712
              
              
              —
              
              
              —
              
              
              —
              
              
              567,000Capital
                  contribution during the year
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Excess
                  in capital contribution
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  income for the year
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              1,336,717
              
              
              —
              
              
              1,336,717Other
                  comprehensive income/(loss)
              
              
              
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              617,128
              
              
              617,128**Balance
                  2005-9-30**
              
              
              **50,000,713**
              
              $
              5,000
              
              $
              8,226,033
              
              $
              45,804
              
              $
              3,644,524
              
              $
              425,847
              
              $
              12,347,208Capital
                  contribution during the year
              
              
              
              
              
              
              
              
              —
              
              
              
              
              
              
              
              
              
              
              
              —Net
                  income for the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,777,618
              
              
              
              
              
              3,777,618Other
                  comprehensive income/(loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              172,596
              
              
              172,596**Balance
                  2005-12-31**
              
              
              50,000,713
              
              $
              5,000
              
              $
              8,226,033
              
              $
              45,804
              
              $
              7,422,142
              
              $
              598,443
              
              $
              16,297,422
  F-6
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            to Table of Contents**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        1**  **ORGANIZATION/SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Basics
        of Presentation**
 
 The
        unaudited condensed consolidated financial statements of Synutra International,
        Inc. (the “Company”), have been prepared in accordance with generally accepted
        accounting principles for interim financial information and pursuant to the
        requirements for reporting on Form 10-QSB and Item 310(b) of Regulation S-B.
        Accordingly, they do not include all the information and footnotes required
        by
        accounting principles generally accepted in the United States of America
        for
        complete financial statements. However, such information reflects all
        adjustments (consisting solely of normal recurring adjustments), which are,
        in
        the opinion of management, necessary for a fair statement of results for
        the
        interim periods. Results shown for interim periods are not necessarily
        indicative of the results to be obtained for a full fiscal year. The condensed
        consolidated balance sheet information as of December 31, 2004 was derived
        from
        the audited consolidated financial statements. These interim financial
        statements should read in conjunction with that report.
 
 **Description
        of Business**
 
 The
        Company is a Delaware corporation that at December 31, 2005 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.
 
 **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Accounting
        method**
 
 The
        Company uses the accrual method of accounting for financial statement. The
        accrual method of accounting recognizes revenues when earned and expenses
        when
        incurred.
 
 **Principles
        of Consolidation**
 
 The
        consolidated financial statements as of December 31, 2005, the related
        consolidated statements of income for the three-month and nine-month periods
        ended December 31, 2005 and 2004, and the related consolidated statements
        of
        cash flows and stockholders’ equity statement for the nine-month periods ended
        December 31, 2005 and 2004 are unaudited. All significant inter-company balances
        and transactions have been eliminated in the consolidation.
 F-7
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            to Table of Contents**
 
 The
        following companies are consolidated for financial statement presentation:
 
 **Company**
              
              **Incorporation
                  Date**Qingdao
                  St. George Dairy Co. Ltd.
              
              September
                  2001Qingdao
                  Shengyuan Dairy Co. Ltd.
              
              January
                  1998Chabei
                  Shengyuan Dairy Co. Ltd.*
              
              February
                  2002Heilongjiang
                  Luobei Shengyuan Food Co. Ltd.
              
              April
                  2001Bei’an
                  Yipin Dairy Co. Ltd.
              
              June
                  2004Qingdao
                  Women and Children Nutrition Research Co. Ltd.
              
              April
                  2004Zhangjiakou
                  Shengyuan Co. Ltd.*
              
              March
                  2004
 
 *
              Chabei
                  Shengyuan and Zhangjiakou Shengyuan completed a merger as of August,
                  2005
                  and Zhangjiakou emerged as the surviving entity from the merger.
 
 **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 is 0 %,
        resulting in an aggregate tax rate of 24 %.
        The
        subsidiary will not be subject to local income tax prior to 20 03, 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 is 3 %,
        resulting in an aggregate tax rate of 33 %.
        The
        subsidiary will not be subject to local income tax prior to 20 05, The
        subsidiary’s first cumulative profit-making year was 2006 .
 
 Bei’an
        Yipin Dairy Co., Ltd. is under such preferential tax treatment until December
        31, 2009. Accordingly, the applicable enterprise income tax rate is 30 %
        and the
        local tax rate is 3 %,
        resulting in an aggregate tax rate of 33 %.
        The
        subsidiary will not be subject to local income tax prior to 20 04 .
        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 20 05 .
        The
        subsidiary’s first cumulative profit-making year was 2006 .
 
 Qingdao
        Women and Children Nutrition Reseaerch Co. Ltd is subject to 33% income
        tax.
  Tax
        Rates
        Schedule for various operating subsidiaries of the Company in China is as
        follows.
 
 
 F-8
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            to Table of Contents**
  **Foreign
        currency translation** -
        The
        reporting currency of the Company is U.S. dollars and the financial records
        are
        maintained and the financial statements are prepared in Renminbi (“RMB”).
        Transactions in other currencies are translated into the reporting currencies
        at
        exchange rates prevailing at the time of the transactions. Monetary assets
        and
        liabilities denominated in other currencies at the balance sheet date are
        re-translated at exchange rates prevailing at that date. Non-monetary assets
        and
        liabilities in other currencies are translated at historical rates. Exchange
        differences are recognized in the income statement in the period in which
        they
        arise. In recent months the RMB has been under growing pressure to appreciate
        against a basket of foreign currencies, including the USD. As of December
        31,
        2005, the exchange rate was approximately USD $1.00 to RMB 8.07, about a
        2.8%
        appreciation from the year end 2004 exchange rate of about 8.3 RMB yuan to
        1 US
        dollar.
 
 **Recently
        Issued Accounting Standards**
 
 In
        May
        2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial
        Instruments with Characteristics of both Liabilities and Equity,” which
        establishes standards for how an issuer classifies and measures certain
        financial instruments with characteristics of both liabilities and equity.
        It
        requires that an issuer classify a financial instrument that is within its
        scope
        as a liability (or an asset in some circumstances). This Statement is effective
        for financial instruments entered into or modified after May 31, 2003, and
        otherwise is effective at the beginning of the first interim period beginning
        after September 15, 2003. It is to be implemented by reporting the cumulative
        effect of a change in an accounting principle for financial instruments created
        before the issuance date of the Statement and still existing at the beginning
        of
        the interim period of adoption. Restatement is not permitted. This statement
        does not affect the Company.
 
 In
        December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS
        123R”). SFAS 123R revises FASB Statement No. 123 “Accounting for Stock-Based
        Compensation” and supersedes APB Opinion No. 25 “Accounting for Stock Issued to
        Employees”. SFAS 123R requires all public and non-public companies to measure
        and recognize compensation expense for all stock-based payments for services
        received at the grant-date fair value, with the cost recognized over the
        vesting
        period (or the requisite service period). SFAS 123R is effective for small
        business issuers for all interim periods beginning after December 15, 2005.
        As
        such, the Company is required to adopt these provisions at the beginning
        of the
        fiscal quarter ended September 30, 2006. Retroactive application of the
        provisions of SFAS 123R to the beginning of the fiscal year that includes
        the
        effective date is permitted, but not required. The Company is currently
        evaluating the impact of SFAS 123R on its financial statements.
 
 In
        May
        2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections
        -
        a replacement of APB Opinion No. 20 and FASB Statement No. 3" (“SFAS 154”). SFAS
        154 changes the requirements for the accounting for and reporting of a change
        in
        accounting principle. These requirements apply to all voluntary changes and
        changes required by an accounting pronouncement in the unusual instance that
        the
        pronouncement does not include specific transition provisions. SFAS 154 is
        effective for fiscal years beginning after December 15, 2005. As such, the
        Company is required to adopt these provisions at the beginning of the fiscal
        year ended December 31, 2006. The Company is currently evaluating the impact
        of
        SFAS 154 on its consolidated financial statements.
 F-9
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            to Table of Contents**
 
 **Intangible
        assets** -
        Intangible assets represent technology know-how. 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.
 
 **Trade
        receivables and allowance for bad debts** -
        The
        Company presents trade, net of allowances for doubtful accounts and returns,
        to
        ensure accounts receivable are not overstated due to uncollectible payments.
        Trade receivables generated from credit sales have general credit terms of
        45 to
        60 days. The allowances are calculated based on detailed review of certain
        individual customer accounts, historical rates and an estimation of the overall
        economic conditions affecting the Company's customer base. The Company reviews
        a
        customer's credit history before extending credit. If the financial condition
        of
        its customers were to deteriorate, resulting in an impairment of their ability
        to make payments, additional allowances may be required.
 
 **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.
 
 **Shipping
        and handling fees** -
        Shipping and handling fees are expensed as incurred and are classified as
        selling expenses.
 
 **Research
        and development expenses** -
        Research and development costs are classified as general and administrative
        expenses and are expensed as incurred.
 
 **Advertising
        costs** -
        Advertising costs are expensed as incurred and are classified as selling
        expenses.
 
 **Income
        taxes** -
        The
        Company accounts for income taxes under the provision of Statement of Financial
        Accounting Standards ("SFAS" No. 109), "Accounting for Income Taxes," whereby
        deferred income tax assets and liabilities are computed for differences between
        the financial statements and tax bases of assets and liabilities that will
        result in taxable or deductible amounts in the future, based on enacted tax
        laws
        and rates applicable to the periods in which the differences are expected
        to
        affect taxable income. Valuation allowances are established when necessary;
        to
        reduce deferred income tax assets to the amount expected to be
        realized.
 F-10
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            to Table of Contents**
  **NOTE
          2 - SUPPLEMENT OF FINANCIAL INFORMATION**
 
 **RELATED
        PARTY TRANSACTIONS**
 
 The
        following related party transactions occurred during the three months ended
        December 31, 2005 and March 31, 2005:
  A.
        Sales
        to related companies
  **Three
                  Months ended**
                **December
                  31,**
                **2005**
              
              **Year
                  ended**
                **March
                  31,**
                **2005**St.
                  Angel (Beijing Business Service)
              
              $
              410,054
              
              $
              323,837Beijing
                  Ao Naier Feed Stuff LLC
              
              
              —
              
              
              36Beijing
                  Ludin Xueyuan Trading Co. Ltd
              
              
              —
              
              
              270,075Total
              
              $
              410,054
              
              $
              593,948
 
 B.
        Other
        income to related companies
  **Three
                  Months ended**
                **December
                  31,**
                **2005**
              
              **Year
                  ended**
                **March
                  31,**
                **2005**Beijing
                  Kelqin Dairy Co. Ltd
              
              $
              —
              
              $
              384,118Sheng
                  Zhi Da Dairy Group Corporation
              
              
              90,168
              
              
              1,037,714Heilongjiang
                  Baoquanling Shen Yuan Dairy Co. Ltd
              
              
              1,143,581
              
              
              2,788,588Beijing
                  Honnete Dairy Corporation Ltd
              
              
              10,843,021
              
              
              —Beijing
                  Ao Naier Feed Stuff LLC
              
              
              —
              
              
              16,486Total
              
              $
              12,076,770
              
              $
              4,226,906
  C.
        Purchases from related companies
 
 **Three
                  Months ended**
                **December
                  31,**
                **2005**
              
              **Year
                  ended**
                **March
                  31,**
                **2005**Beijing
                  Kelqin Dairy Co. Ltd
              
              $
              510,971
              
              $
              904,075Sheng
                  Zhi Da Dairy Group Corporation
              
              
              1,141,249
              
              
              2,213,535Heilongjiang
                  Baoquanling Sheng Yuan Dairy Co. Ltd
              
              
              3,480,097
              
              
              7,246,611Beijing
                  Honnete Dairy Corporation Ltd
              
              
              3,061,772
              
              
              4,561,794Beijing
                  Sheng Long Media Co. Ltd
              
              
              —
              
              
              31,524Total
              
              $
              8,194,089
              
              $
              14,957,539
  **NOTE
        3 - COMMON STOCK**
 
 **The
        Share Exchange** -
        On July
        15, 2005, the Company issued 48,879,500 shares of its common stock in exchange
        for all of the issued and outstanding shares of Synutra, Inc., an Illinois
        corporation (“Synutra Illinois”) that owned all the registered capital of six
        companies organized under the laws of the People’s Republic of China (the
“Exchange”).
 
 As
        a
        result of this Exchange, Synutra Illinois became a wholly owned subsidiary
        of
        the Company.
 
 The
        Exchange occurred 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.
 F-11
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            to Table of Contents**
 
 Immediately
        prior to the Exchange, the Company had 2,638,713 outstanding shares of common
        stock and no outstanding shares of preferred stock. The Company’s Certificate of
        Incorporation provides for authorized capital of two hundred and seventy
        million
        shares (270,000,000) of which two hundred and fifty million (250,000,000)
        are
        $0.0001 par value common stock and twenty million (20,000,000) are $0.0001
        par
        value preferred stock. Prior to the Exchange, Thomas Braun, the sole director
        and officer of the Company, and his affiliates owned 2,200,000 shares of
        the
        Company common stock. Pursuant to the Exchange, the Company cancelled
        approximately 1,517,500 shares of common stock owned by Mr. Braun and his
        affiliates reducing their ownership to 682,500 shares, resulting in the total
        issued and outstanding shares of the Company common stock equaling 1,121,213
        shares.
 
 Pursuant
        to the Exchange, the Company issued 46,000,000 shares of its common stock
        in
        exchange for all of the outstanding capital stock of Synutra Illinois held
        by
        Beams Power Investment Limited and Strong Gold Finance Ltd., 2,844,500 shares
        were issued to various financial consultants and/or their designees and 35,000
        shares to a finder. Therefore, the total issued and outstanding shares of
        the
        Company’s common stock were 50,000,713 shares after giving effect to the
        Exchange.
 
 As
        a
        result of the Exchange, the stockholders of the Company immediately prior
        to the
        Exchange owned approximately 1,121,213 shares, or approximately 2% of the
        issued
        and outstanding shares of the Company’s common stock and the Company is now
        controlled by the former stockholders of Synutra Illinois.
 
 The
        Share
        Exchange Agreement was determined through arms’-length negotiations between the
        Company and Synutra Illinois.
 
 Immediately
        following the completion of the Exchange, all of the existing members of
        the
        Company’s board of directors and all of its executive officers resigned and new
        appointees were elected to the Company’s board of directors.
 
 On
        September 9, 2005, the Company changed its name to Synutra International,
        Inc.
 
 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.
  **NOTE 4
          - RESTATEMENT**
 
 The
          financial statements for the period ended December 31, 2005 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 period ended
          December
          31, 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 period prior to the merger. The effects on current liabilities,
          additional paid in capital, retained earnings, net income attributable
          to
          shareholders, earnings per share, and weighted average common shares outstanding
          are summarized as follows:
  Net
                    Income, Three Months Ended
                  Dec
                    31, 2005
                
                Net
                    Income, Nine Months Ended
                  Dec
                    31, 2005
                
                Current
                    Liabilities as of
                  Dec
                    31, 2005
                
                Share
                    Capital
                  as
                    of
                  Dec
                    31, 2005
                
                Additional
                    Paid In Capital as of
                  Dec
                    31, 2005
                
                Retained
                    Earnings as of
                  Dec
                    31, 2005As
                    previously stated
                
                $
                3,777,618
                
                $
                7,405,539
                
                $
                56,165,488
                
                $
                10,000
                
                $
                7,618,289
                
                $
                7,989,142Stock
                    compensation and recapitalization
                
                
                —
                
                
                ($567,000
                )
                $
                17,361
                
                
                -
                
                $
                549,639
                
                $
                (
                    567,000
                )Reclassification
                    from Share Capital to Additional Paid In Capital
                
                
                —
                
                
                —
                
                
                —
                
                
                ($5,000
                )
                $
                5,000
                
                
                —Reclassification
                    from Due to Related Parties to Additional Paid In Capital
                
                
                —
                
                
                —
                
                
                ($53,105
                )
                
                —
                
                
                53,105
                
                
                —Restated
                
                $
                3,777,618
                
                $
                6,838,539
                
                $
                56,129,744
                
                $
                5,000
                
                $
                8,226,033
                
                $
                7,422,142
 
 
 Three
                    Months Ended
                  Dec
                    31, 2005
                
                Three
                    Months Ended
                  Dec
                    31, 2004
                
                Nine
                    Months Ended
                  Dec
                    31, 2005
                
                Nine
                    Months Ended
                  Dec
                    31, 2004Earnings
                    per share as previously stated
                
                $
                0.08
                
                $
                0.01
                
                $
                0.16
                
                
                ($0.03
                )Earnings
                    restated
                
                $
                0.08
                
                $
                0.02
                
                $
                0.14
                
                
                ($0.03
                )Weighted
                    average common shares outstanding as previously stated
                
                
                50,000,713
                
                
                50,000,713
                
                
                50,000,713
                
                
                50,000,713Weighted
                    average common shares outstanding restated
                
                
                50,000,713
                
                
                46,000,000
                
                
                48,444,880
                
                
                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.
  F-12
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            to Table of Contents**
 
 **Item
        2.      Management Discussion and Analysis
        or Plan of Operation.**
 
 **Overview**
 
 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 and pregnant women and nursing mothers under
        the
        brand name of “Sheng Yuan”, and for adults under the brand name of “YiPin”.
        These two product lines contributed approximately 90% and 10%, respectively,
        to
        the Company’s 2004 revenue. In September 2005, Synutra launched a new rice
        cereal product line. As supplemental foods to infant and children formula
        products, management believes that rice cereal products possess significant
        growth potential. At the same time, Synutra also began to make and sell non-fat
        dry milk as well as anhydrous milk-fat. Synutra
        Illinois was incorporated in the State of Illinois in 2000. At that time,
        Synutra Illinois was wholly owned by companies controlled by Mr. Liang Zhang,
        Synutra’s Chairman of the Board and Chief Executive Officer. Mr. Zhang formed
        Synutra Illinois to become a holding company for the six companies in China
        that
        he and his affiliates controlled that have been engaged in the production,
        marketing, packaging and development of dairy based nutritional products
        for
        infants, children and adults beginning in 1998. Since the incorporation of
        Synutra Illinois in 2000, it has increased its investment in these subsidiaries
        and Mr. Zhang has transferred all of his and his affiliates’ ownership in the
        six companies directly to Synutra Illinois, which transfer was completed
        at the
        end of March 2005. Synutra Illinois currently owns 100% of the following
        subsidiaries:
 
 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.
 -13-
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            to Table of Contents**
  On
        July
        15, 2005, the Company issued 48,879,500 shares of its common stock in exchange
        for all of the issued and outstanding shares of Synutra Illinois (the
“Exchange”). As a result of this Exchange, Synutra Illinois became a wholly
        owned subsidiary of the Company. The Exchange occurred pursuant to a Share
        Exchange Agreement dated as of June 14, 2005 among the Company, Thomas Braun,
        Bearns Power Investment Limited, Strong Gold Finance Ltd and Synutra Illinois.
 
 Immediately
        prior to the Exchange, the Company had 2,638,713 outstanding shares of common
        stock and no outstanding shares of preferred stock. The Company’s Certificate of
        Incorporation provides for authorized capital of two hundred and seventy
        million
        shares (270,000,000) of which two hundred and fifty million (250,000,000)
        are
        $0.0001 par value common stock and twenty million (20,000,000) are $0.0001
        par
        value preferred stock. Prior to the Exchange, Thomas Braun, the sole director
        and officer of the Company, and his affiliates owned 2,200,000 shares of
        the
        Company common stock. Pursuant to the Exchange, the Company cancelled
        approximately 1,517,500 shares of common stock owned by Mr. Braun and his
        affiliates reducing their ownership to 682,500 shares, resulting in the total
        issued and outstanding shares of the Company common stock equaling 1,121,213
        shares.
 
 Pursuant
        to the Exchange, the Company issued 46,000,000 shares of its common stock
        in
        exchange for all of the outstanding capital stock of Synutra Illinois held
        by
        Beams Power Investment Limited and Strong Gold Finance Ltd., 2,844,500 shares
        were issued to various financial consultants and/or their designees and 35,000
        shares to a finder. Therefore, the total issued and outstanding shares of
        the
        Company’s common stock were 50,000,713 shares after giving effect to the
        Exchange.
 
 As
        a
        result of the Exchange, the stockholders of the Company immediately prior
        to the
        Exchange owned approximately 1,121,213 shares, or approximately 2% of the
        issued
        and outstanding shares of the Company’s common stock and the Company is now
        controlled by the former stockholders of Synutra Illinois.
 
 The
        Share
        Exchange Agreement was determined through arms’-length negotiations between the
        Company and Synutra Illinois.
 
 Immediately
        following the completion of the Exchange, all of the existing members of
        the
        Company’s board of directors and all of its executive officers resigned and new
        appointees were elected to the Company’s board of directors.
 
 On
        September 9, 2005 the Company changed its name to Synutra International,
        Inc.
        (OCTBB: 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.
 -14-
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            to Table of Contents**
 
 **CRITICAL
        ACCOUNTING POLICIES AND ESTIMATES**
 
 The
        Company prepares its financial statements in accordance with accounting
        principles generally accepted in the United States of America. The preparation
        of these financial statements requires the use of estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and the disclosure
        of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amount of revenues and expenses during the reporting period.
        Management periodically evaluates the estimates and judgments made. Management
        bases its estimates and judgments on historical experience and on various
        factors that are believed to be reasonable under the circumstances. Actual
        results may differ from these estimates as a result of different assumptions
        or
        conditions.
 
 The
        following critical accounting policies affect the more significant judgments
        and
        estimates used in the preparation of the Company’s financial statements.
 
 For
        certain of the Company's 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.
 
 The
        Company is exposed to the following risk factors:
 
 (i)
        Credit risks - The Company has policies in place to ensure that sales of
        products are made to customers with an appropriate credit history. The Company
        also has a concentration of credit risk due to geographic sales as a majority
        of
        its products are marketed and sold in the PRC.
 
 (ii)
        Liquidity risks - Prudent liquidity risk management implies maintaining
        sufficient cash, the availability of funding through an adequate amount of
        committed credit facilities and ability to close out market positions.
 
 (iii)
        Interest rate risk - The interest rate and terms of repayments of short-term
        and
        long-term bank borrowings are approximately 5% per annum. The Company's income
        and cash flows are substantially independent of changes in market interest
        rates. The Company has no significant interest-bearing assets. The Company's
        policy is to maintain all of its borrowings in fixed rate
        instruments.
 -15-
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  **Cash
        and cash equivalents** -
        The
        Company considers all highly liquid instruments purchased with an original
        maturity of three months or less to be cash equivalents.
 
 **Short
        Term Investments** -
        The
        Company has classified its short term investment as Available-for-Sale.
        Available-for-Sale securities are stated at fair value with unrealized gains
        and
        losses included as a separate component of stockholders’ equity. Realized gains
        and losses are included in income (expense). The cost of securities sold
        is
        based on the specific identification method.
 
 **Inventories** -
        Inventories are stated at the lower of cost or net realizable value, with
        cost
        computed on a weighted-average basis. Cost includes all costs of purchase,
        cost
        of conversion and other costs incurred in bringing the inventories to their
        present location and condition. 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.
 
 **Impairment
        of long-lived assets** -
        Long-lived assets, such as property, plant and equipment and other non-current
        assets, including intangible assets, are reviewed for impairment whenever
        events
        or changes in circumstances indicate that the carrying value of an asset
        may not
        be recoverable. An impairment loss is recognized when the estimated undiscounted
        cash flows associated with the asset or group of assets is less than their
        carrying value. If impairment exists, an adjustment is made to write the
        asset
        down to its fair value, and a loss is recorded as the difference between
        the
        carrying value and fair value. Fair values are determined based on quoted
        market
        values, discounted cash flows or internal and external appraisals, as
        applicable. Assets to be disposed of are carried at the lower of carrying
        value
        or estimated net realizable value.
  **RESULTS
        OF OPERATIONS**
 
 **Three
        Months Ended December 31, 2005 Compared to Three Months Ended December 31,
        2004.**
 -16-
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            to Table of Contents**
 
 **Sales**
 
 Sales
        increased by $13,415,029 or81.44% to $29,887,236 for the three months ended
        December 31, 2005 as compared to $16,472,207 for the three months ended December
        31, 2004.
 
 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 1,672 tons for the period
                  ended Dec
                  31, 2005, resulting in$7,894,852
                  increase of gross sales.
  b.
              The
                  average selling price also contributed to the increase of gross
                  sales. For
                  the period ended Dec 31, 2005, the average selling price increased
                  $514
                  per ton, resulting in an increase of $ 1,793,038 in gross sales.
  c.
              Sales
                  growth attributable to combined factor of the increase of the volume
                  and
                  the price was $859,373
  d.
              New
                  product launched contributed $2,867,765 in gross sales growth.
 
 In
        the
        three months ended December 31, 2005, the Company realized and earned close
        to
        98.6% of its total sales revenue of $29.9 million through its wholesale
        distributor networks and about 1.4% through the supermarket retailers. Of
        the
        total $16.5 million sales earned in the three months ended December 31,2004,
        about 98.5% was from distributors and about 1.5% from supermarket
        retailers.
 
 Sales
        increased due to greater market penetration as a result of various measures
        including changes made by management to incentive structures 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 bonuses with sales performance.
        The
        increase in sales also reflects the overall industry growth acceleration
        in the
        current year. Management estimates that the 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. Since September 2004, Synutra has
        launched entire lines of premium products and introduced new product packaging
        along with significant price increases.
 
 **Cost
        of Sales**
 
 Cost
        of
        sales for the three months ended December 31, 2005 increased to $13,869,681
        from
        $8,775,545 for the three months ended December 31, 2004. The increase in
        cost of
        sales 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. Due to a combination of sales volume increases
        and reductions in unit cost of sales, the cost of sales continued to decrease
        in
        the reporting period. New products accounted for a significant portion in
        the
        increase of the total cost of sales for the period.
 
 The
        increase of 1,672 tons sold of the traditional main products resulted in
        $4,205,971 increase of cost. The average cost per unit decreased by $340
        per
        metric ton, resulting in $1,184,717 cost reduction for the three months ended
        Sep 31, 2005. Additionally, the combined factor of production volume and
        reduction of unit cost led to $567,815 decline of cost of products sold.
        The
        launch of new products accounted for $2,640,697 in the total cost of sales
        for
        the three months ended Dec 31, 2005.
 
 **Gross
        Profit**
  Gross
        profit was $16,017,555 or 53.59% of sales for the three months ended December
        31, 2005.The sales of traditional main products mostly
        contributed $15,790,486 or
        98.5%
        of gross profits for the three months ended Dec 31, 2005. Such main products
        contributed $7,696,662
        or 100% gross profits for the three months ended Dec 31, 2004.
 
 With
        sales increasing in 2005 compared to 2004, the Company experienced an increase
        in both gross profit and gross margin, exceeding the gross margin target
        of 50%
        the management set for its operations for calendar year 2005. This increase
        was
        primarily a result of increased sales and gross margins at the same time.
        Due to
        implementation of targeted sales incentive programs, higher margin lines
        of
        products increased more, resulting in the increase in gross margin.
 
 
 **Selling
        Expenses**
 
 Selling
        expenses increased by $3,712,504 to $5,440,177 for the three months ended
        December 31, 2005, as compared to $1,727,673 for the three months ended December
        31, 2004. The increase in selling and distribution expenses in 2005 as compared
        to 2004 was a result of increased transportation and management expenses,
        in
        addition to increases in other major components of selling expenses such
        as
        wages, and supermarket expenses. The increase in average compensation to
        the
        sales force constitutes most of the increase in selling expenses.
 -17-
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 **Advertising
        and Sales Promotion**
  Advertising
        and sales promotion increased by $3,059,665 or 174.9% to $4,809,094for the
        three
        months ended December 31, 2005, as compared to $1,749,429 for the three months
        ended December 31, 2004 as a result of increased advertising and promotional
        activity expenses. The major components of advertising and sales promotion
        are
        placement of advertising with media outlets and points of sale and community
        promotional activities.
 
 **General
        and Administrative Expenses**
 
 General
        and administrative expenses increased by $247,922 or 24% to $1,281,265 for
        the
        three months ended December 31, 2005, as compared to $1,033,343 for the three
        months ended December 31, 2004, The major components of general and
        administrative expenses are wages, depreciation and management expenses.
 
 **Income
        from Operations**
 
 As
        a
        result of the aforementioned factors, income from operations was $4,487,018
        for
        the three months ended December 31, 2005, as compared to $3,186,217 for the
        three months ended December 31, 2004.
 
 **Other
        Income (Expense)**
 
 Other
        expense was   $64,834 for the three months ended December 31, 2005, as
        compared to income of $673,507 for the three months ended December 31, 2004.
 
 **Interest
        Expense**
 
 Interest
        expense was $299,429, for the three months ended December 31, 2005, as
        compared to $379,666 for the three months ended December 31, 2004.
 
 **Non-Operating
        Expense**
 
 Non-operating
        expense was $136,586 for the three months ended December 31, 2005, as compared
        to $70,093 for the three months ended December 31, 2004.
 
 **Provision
        for Income Taxes**
 
 The
        provision for income taxes, which is computed on a per subsidiary basis,
        was
        $208,552 and $18,875 for the three months ended December 31, 2005 and 2004,
        respectively. The difference in income tax provisions was due to election
        of
        preferential tax relief treatment periods for 2006 by Heilongjiang Luobei
        Shengyuan Dairy Co. Ltd and Zhangjiakou Shengyuan Dairy Co. Ltd as elaborated
        above.
 -18-
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 **Net
        Income**
  Net
        income for the three months ended December 31, 2005 increased by $2,950,229
        to
        $3,777,618 from $827,389 for the three months ended December 31, 2004 due
        to the
        factors discussed above.
 
 **Earnings
        per Share**
 
 Earnings
        per share were $0.08 for the three months ended December 31, 2005.
 
 **Nine
        Months Ended December 31, 2005 Compared to Nine Months Ended December 31,
        2004.**
 
 **Sales**
  Sales
        increased by $33,809,248 or 87.4% to $72,501,483 for the nine months ended
        December 31, 2005 as compared to $38,692,235 for the nine months ended December
        31, 2004.
 
 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 4,103 tons for the period
                  ended Dec
                  31, 2005, resulting in$17,326,044
                  increase of gross sales.
  b.
              The
                  average selling price also contributed to the increase of gross
                  sales. For
                  the period ended Dec 31, 2005, the average selling price increased
                  $854
                  per ton, resulting in an increase of $7,821,865 in gross sales.
  c.
              Sales
                  growth attributable to combined factor of the increase of the volume
                  and
                  the price was $3,502,563
  d.
              New
                  product launched contributed $5,158,775 in gross sales growth.
 
 In
        the
        nine months ended December 31, 2005, the Company realized and earned close
        to
        98.5% of its total sales revenue of $72.5 million through its wholesale
        distributor networks and about 1.5% through the supermarket retailers. Of
        the
        total $38.7 million sales earned in the nine months ended December 31,2004,
        about 98.4% was from distributors and about 1.6% from supermarket
        retailers.
 
 Sales
        increased due to greater market penetration as a result of various measures
        including changes made by management to incentive structures 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 bonuses with sales performance.
        The
        increase in sales also reflects the overall industry growth acceleration
        in the
        current year. Management estimates that the 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. Since September 2004, Synutra has
        launched entire lines of premium products and introduced new product packaging
        along with significant price increases.
 
 **Cost
        of Sales**
 
 Cost
        of
        sales for the nine months ended December 31, 2005 increased to $33,291,299
        from
        $20,203,921 for the nine months ended December 31, 2004. The increase in
        cost of
        sales was a result of increase in purchase of raw materials and other
        ingredients, as well as increases in processing expenses, all in proportion
        to
        the production volume increase. Due to a combination of sales volume increase
        and unit cost of sales reduction, the cost of sales continued to decrease
        in the
        reporting period. New products accounted for a significant portion of the
        increase in the total cost of sales for the period.
 
 The
        increase of 4,103 tons sold of the traditional main products resulted in
        $9,047,139 increase of cost. Additionally, the combined factor of production
        volume and reduction of unit cost led to $417,435 decline of cost of products
        sold. The launch of new products accounted for $4,457,674 in the total cost
        of
        sales for the nine months ended Dec 31, 2005.
 
 **Gross
        Profit**
 
 Gross
        profit was $39,210,184 or54.1% of sales for the nine months ended December
        31,
        2005. The sales of traditional main products mostly
        contributed $38,509,083 or
        98% of
        gross profits for the nine months ended Dec 31, 2005. Such main products
        contributed $18,488,314  or
        100%
        gross profits for the nine months ended Dec 31, 2004.
 
 With
        sales increasing in 2005 compared to 2004, the Company experienced an increase
        in both gross profit and gross margin, exceeding the gross margin target
        of 50%
        the management set for its operations for calendar year 2005. This increase
        was
        primarily a result of increased sales and gross margins at the same time.
        Due to
        implementation of targeted sales incentive programs, higher margin lines
        of
        products increased more, resulting in the increase in gross margin.
 -19-
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 **Selling
        Expenses**
 
 Selling
        expenses increased by $4,458,719 to $11,165,177 for the nine months ended
        December 31, 2005, as compared to $6,706,458 for the nine months ended December
        31, 2004. The increase in selling and distribution expenses in 2005 as compared
        to 2004 was a result of increased transportation and management expenses.
        The
        major components of selling expenses are wages, transportation, and supermarket
        expenses. The increase in average compensation to the sales force constitutes
        most of the increase in selling expenses.
 
 **Advertising
        and Sales Promotion**
 
 Advertising
        and sales promotion increased by $8,158,937 or100.66% to $16,264,655for the
        nine
        months ended December 31, 2005, as compared to $8,105,718 for the nine months
        ended December 31, 2004 as a result of increased promotional activity expenses.
        The major components of advertising and sales promotion are placement of
        advertising with media outlets and points of sale and community promotional
        activities.
 
 **General
        and Administrative Expenses**
 
 General
        and administrative expenses increased by $1,990,426 or 89.83% to $4,206,155
        for
        the nine months ended December 31, 2005, as compared to $2,215,729 for the
        nine
        months ended December 31, 2004, as a result of increased consulting and advisory
        service expenses. The major components of general and administrative expenses
        are wages, depreciation and management expenses.
 
 **Income
        from Operations**
 
 As
        a
        result of the aforementioned factors, income from operations was $7,352,666
        for
        the nine months ended December 31, 2005, as compared to $852,139 for the
        nine
        months ended December 31, 2004.
 
 **Other
        Income (Expense)**
 
 Non-operating
        income was $1,602,388 for the nine months ended December 31, 2005, as compared
        to $636,546 for the nine months ended December 31, 2004. Non-operating income
        was generated through manufacturing of by-products such as anhydrous milk
        fat
        and non-fat dry milk, as well as private label manufacturing, including toll
        drying of formulated powder products or toll packaging.
 
 **Interest
        Expense**
 
 Interest
        expense was $1,585,976 for the nine months ended December 31, 2005, as compared
        to $940,042 for the nine months ended December 31, 2004.
 -20-
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            to Table of Contents**
 
 **Non-Operating
        Expense**
 
 Non-operating
        expense was $237,942 for the nine months ended December 31, 2005, as compared
        to
        $304,774 for the nine months ended December 31, 2004.
 
 **Provision
        for Income Taxes**
 
 The
        provision for income taxes, which is computed on a per subsidiary basis,
        was
        $513,551 and $56,669 for the nine months ended December 31, 2005 and 2004,
        respectively. The variance in income tax provisions are due to election of
        preferential tax relief treatment periods for 2006 by Heilongjiang Luobei
        Shengyuan Dairy Co. Ltd and Zhangjiakou Shengyuan Dairy Co. Ltd as elaborated
        above.
 
 **Net
        Income**
 
 The
        net
        income for the nine months ended December 31, 2005 increased by $8,287,015
        to a
        net income of $6,838,539 from a net loss of $1,448,476 for the nine months
        ended
        December 31, 2004 due to the factors discussed above.
 
 **Earnings
        per Share**
 
 Earnings
        per share were $0.14 for the nine months ended December 31, 2005.
 
 **Financial
        Condition - December 31, 2005:**
 
 **Liquidity
        and Capital Resources**
 
 **Operating**
 
 The
        Company’s operations generated cash resources of $11,138,525 for the nine months
        ended December 31, 2005 as compared to $5,599,572 of cash resources generated
        for the nine months ended December 31, 2004, primarily as a result of cash
        generated in 2005 from increased sales and decreases to accounts receivable.
        At
        December 31, 2005, the Company had cash and cash equivalents of $19,727,274
        as
        compared to cash and cash equivalents of $16,085,403 at March 31, 2005. The
        Company had a working capital deficit of $12,961,847 at December 31, 2005,
        as
        compared to a working capital deficit of $15,919,879 at March 31, 2005,
        reflecting a significant decrease in this aspect.
 
 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 are readily
        extended in revolving terms.
 
 Net
        accounts receivable decreased to $1,418,545 at December 31, 2005, as compared
        to
        $1,968,235   at March 31, 2005, a reduction of $549,690.   Accounts
        receivable went down at the end of the reporting period as compared to prior
        quarter and yearend while sales nearly doubled over the nine months period,
        as a
        result of implementation of cash-before-delivery payment terms with most
        of the
        Company’s distributors.
 
 Other
        receivables increased to $2,525,362 at December 31, 2005, as compared to
        $1,745,985 at March 31, 2005, as a result, in part, of expanded credit programs
        for dairy suppliers.
 
 Inventories
        increased to $11,479,627 at December 31, 2005, as compared to $6,757,021
        at
        March 31, 2005, an increase of $4,722,607 or70%, primarily as a result of
        increase in raw material purchases   and increase in finished product
        inventory in anticipation of the Chinese New Years holidays.
  Accounts
        Payable increased to $10,122,306 at December 31,2005, as compared to $4,966,997
        at March 31,2005, an increase of $5,155,309.
 
 The
        Company anticipates that its working capital resources are adequate to fund
        anticipated costs and expenses for the remainder of the fiscal year ending
        March
        31, 2006 with net cash provided by operating activities (or surplus from
        operating cash flow).
 
 There
        were no other non-cash transactions for the nine months ended December 31,
        2005.
 
 **Investing**
 
 During
        the nine months ended December 31, 2005, the Company utilized $6,871,404
        in
        investing activities, the major components of which were the acquisition
        of
        property and equipment of $993,492, investment in construction in progress
        of
        $5,814,694. During the nine months ended December 31, 2004, the Company utilized
        $13,546,945 in investing activities, the major components of which were the
        acquisition of property and equipment of $854,057, investment in construction
        in
        progress of $12,746,910.
 
 **Financing**
 
 During
        the nine months ended December 31, 2005, the Company   had a negative cash
        outflow of   $1,441,855 in financing activities, the major components of
        which were proceeds from bank loans of $165,821, and repayment of notes payable
        of $2,025,556. During the nine months ended December 31, 2005, the Company
        generated $10,270,460 in financing activities, the major components of which
        were proceeds from bank loans of $2,899,776 and proceeds from notes payable
        of
        $7,370,265.
 
 
 As
        of
        December 31, 2005, the Company does not have any material commitments for
        capital expenditures or have any transactions, obligations or relationships
        that
        could be considered off-balance sheet arrangements.
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 **Macroeconomic
        Conditions and Currency Matters**
 
 In
        the
        most recent decade, the Chinese economy has experienced sustained periods
        of
        rapid growth as well as occasional elevated rates of inflation or deflation,
        which in turn has resulted in the periodic adoption by the Chinese government
        of
        various corrective measures designed to regulate growth and stabilize consumer
        prices. The success of the Company depends in substantial part on the continued
        growth and development of the Chinese economy.
 
 Foreign
        operations are subject to certain risks inherent in conducting business abroad,
        including price and currency exchange controls, and fluctuations in the relative
        value of currencies. The RMB is not yet freely convertible into foreign
        currencies, and the ability to convert the RMB is subject to the availability
        of
        foreign currencies. The Company conducts virtually all of its business in
        China
        and, accordingly, the sale of its products is settled primarily in RMB. As
        a
        result, currency fluctuation of the RMB against the USD mainly affects the
        Company’s financial performance when measured in USD. In the event of a
        significant devaluation of the RMB against the USD, the Company’s numbers will
        likely appear proportionally lower than would otherwise, whereas a RMB currency
        appreciation will make these numbers appear larger as measured in USD.
 
 Although
        in the previous decade the RMB experienced significant devaluation against
        the
        USD, the RMB has remained fairly stable since then. In recent months, actually,
        the RMB has been under growing pressure to appreciate against a basket of
        foreign currencies, including the USD. As of December 31, 2005, the exchange
        rate was approximately USD $1.00 to RMB 8.07, about a 2.77% appreciation
        from
        the year end 2004 exchange rate of about 8.3 RMB yuan to 1 US dollar.
 
 **Quantitative
        and Qualitative Disclosures about Market Risk**
 
 The
        Company does not have any market risk with respect to such factors as commodity
        prices, equity prices, and other market changes that affect market risk
        sensitive investments. A 10 point basis change in the Company’s average debt
        interest rate would not have a material effect on the Company’s results of
        operations.
 
 With
        respect to foreign currency exchange rates, the Company does not believe
        that a
        devaluation or fluctuation of the RMB against the USD would have a detrimental
        effect on the Company’s operations, since the Company conducts virtually all of
        its business in China, and the sale of its products and the purchase of raw
        materials and services are settled in RMB. The effect of a devaluation or
        fluctuation of the RMB against the USD would affect the Company’s results of
        operations, financial position and cash flows, when presented in USD (based
        on a
        current exchange rate) as compared to RMB.
 
 As
        the
        Company’s debt obligations are primarily short-term in nature, with fixed
        interest rates, the Company does not have any risk from an increase in market
        interest rates. However, to the extent that the Company arranges new borrowings
        in the future, an increase in market interest rates would cause a commensurate
        increase in the interest expense related to such borrowings.
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  **PART
        II**
 **OTHER
        INFORMATION**
 
 **Exhibits**
 
 
 31.1  Certification
        pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 31.2  Certification
        pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 32.1  Certification
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 32.2  Certification
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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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.Dated:September
                  28, 2006
              /s/
                  Liang Zhang
                Name:Liang
                  Zhang
                Title:Chief
                  Executive Officer
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