UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







Amendment
No. 1




to




FORM
10-Q




QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D)


OF
THE SECURITIES EXCHANGE ACT OF 1934




For
the quarter ended September 30, 2008




Commission
File Number 0-51312




SHENGTAI PHARMACEUTICAL,
INC.


(Exact
name of small business issuer as specified in its charter)




DELAWARE
              
              54-2155579(State
      or other jurisdiction of
              
              (I.R.S.
      Employerincorporation
      or organization)
              
              Identification
      No.)





CHANGDA
ROAD EAST, DEVELOPMENT DISTRICT,


CHANGLE
COUNTY, SHANDONG,


PEOPLE’S REPUBLIC OF CHINA
262400


(Address
of principal executive offices)





011-86-536-6295802


(Issuer's
telephone number)




Indicate
by check mark 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  oNo o.




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





Large Accelerated Filer o
                Accelerated Filer  o
                Non-Accelerated Filer o
                Smaller Reporting Company þ(Do not check if a smaller
                  reporting company)





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




As of
October 31 , 2008, there were outstanding 19,094,805 shares of common stock, par
value $0.001 per share, of the registrant.




EXPLANATORY
NOTE





The
purpose of this Amendment No.1 to the Quarterly Report on Form 10-Q is to
respond to the SEC comments which requested that we amend certain disclosures
regarding our internal control, management’s disclosure and analysis,
consolidated statements of cash flows, notes to the consolidated financial
statements and other sections and certification exhibits. This Amendment does
not modify or update disclosures in the original 10-Q affected by subsequent
events.





SHENGTAI
PHARMACEUTICAL INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


AS OF
SEPTEMBER 30, 2008 AND JUNE 30, 2008




September 30,
                                                                            
                                                                            
                                                                            June 30,2008
                                                                            
                                                                            
                                                                            2008(Unaudited)ASSETSCURRENT
      ASSETS:Cash
                                                                            
                                                                            $
                                                                            1,621,671
                                                                            
                                                                            
                                                                            $
                                                                            3,405,606Restricted
      cash
                                                                            
                                                                            
                                                                            5,570,525
                                                                            
                                                                            
                                                                            
                                                                            6,763,500Accounts
      receivable, net of allowance for doubtful accounts of $486,406 and
      $440,701 as of September 30, 2008 and June 30, 2008,
      respectively
                                                                            
                                                                            
                                                                            5,189,101
                                                                            
                                                                            
                                                                            
                                                                            7,614,236Notes
      receivable
                                                                            
                                                                            
                                                                            822,513
                                                                            
                                                                            
                                                                            
                                                                            458,630Other
      receivables
                                                                            
                                                                            
                                                                            699,333
                                                                            
                                                                            
                                                                            
                                                                            691,215Inventories
                                                                            
                                                                            
                                                                            4,626,569
                                                                            
                                                                            
                                                                            
                                                                            5,039,278Prepayments
                                                                            
                                                                            
                                                                            195,058
                                                                            
                                                                            
                                                                            
                                                                            310,381Loan
      to related party
                                                                            
                                                                            
                                                                            438,900
                                                                            
                                                                            
                                                                            
                                                                            -Total
      current assets
                                                                            
                                                                            
                                                                            19,163,670
                                                                            
                                                                            
                                                                            
                                                                            24,282,846PLANT
      AND EQUIPMENT, net
                                                                            
                                                                            
                                                                            72,326,330
                                                                            
                                                                            
                                                                            
                                                                            69,943,021OTHER
      ASSETS:Investment
      in Changle Shengshi Redian Co., Ltd.
                                                                            
                                                                            
                                                                            3,620,009
                                                                            
                                                                            
                                                                            
                                                                            3,607,912Loan
      to related party - non-current
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            437,700Intangible
      assets - land use right, net of accumulated amortization
                                                                            
                                                                            
                                                                            3,037,480
                                                                            
                                                                            
                                                                            
                                                                            3,042,183Total
      other assets
                                                                            
                                                                            
                                                                            6,657,489
                                                                            
                                                                            
                                                                            
                                                                            7,087,795Total
    assets
                                                                            
                                                                            $
                                                                            98,147,489
                                                                            
                                                                            
                                                                            $
                                                                            101,313,662LIABILITIES AND SHAREHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                                                            
                                                                            $
                                                                            7,662,624
                                                                            
                                                                            
                                                                            $
                                                                            7,669,728Accounts
      payable - related parties
                                                                            
                                                                            
                                                                            534,740
                                                                            
                                                                            
                                                                            
                                                                            714,776Notes
      payable - banks
                                                                            
                                                                            
                                                                            8,543,920
                                                                            
                                                                            
                                                                            
                                                                            10,942,500Short
      term loans
                                                                            
                                                                            
                                                                            21,740,180
                                                                            
                                                                            
                                                                            
                                                                            22,658,270Accrued
      liabilities
                                                                            
                                                                            
                                                                            303,357
                                                                            
                                                                            
                                                                            
                                                                            261,187Other
      payable
                                                                            
                                                                            
                                                                            2,361,874
                                                                            
                                                                            
                                                                            
                                                                            2,146,108Employee
      loans
                                                                            
                                                                            
                                                                            1,294,292
                                                                            
                                                                            
                                                                            
                                                                            1,382,287Employee
      loan - officer
                                                                            
                                                                            
                                                                            53,738
                                                                            
                                                                            
                                                                            
                                                                            53,605Third
      party loan
                                                                            
                                                                            
                                                                            362,521
                                                                            
                                                                            
                                                                            
                                                                            640,228Customer
      deposit
                                                                            
                                                                            
                                                                            1,412,531
                                                                            
                                                                            
                                                                            
                                                                            804,323Taxes
      payable
                                                                            
                                                                            
                                                                            3,902,402
                                                                            
                                                                            
                                                                            
                                                                            4,631,252Total
      current liabilities
                                                                            
                                                                            
                                                                            48,172,179
                                                                            
                                                                            
                                                                            
                                                                            51,904,264LONG
      TERM LIABILITIES:Other
      payable - noncurrent
                                                                            
                                                                            
                                                                            2,267,020
                                                                            
                                                                            
                                                                            
                                                                            2,653,995Total
      long term liabilities
                                                                            
                                                                            
                                                                            2,267,020
                                                                            
                                                                            
                                                                            
                                                                            2,653,995Total
      liabilities
                                                                            
                                                                            
                                                                            50,439,199
                                                                            
                                                                            
                                                                            
                                                                            54,558,259COMMITMENTS
      AND CONTINGENCIES
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -SHAREHOLDERS'
      EQUITY:Preferred
      stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and
      outstanding
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            -Common
      stock, $0.001 par value, 100,000,000 shares authorized, 19,094,805 shares
      issued and outstanding as of September 30, 2008 and June 30, 2008,
      respectively
                                                                            
                                                                            
                                                                            19,095
                                                                            
                                                                            
                                                                            
                                                                            19,095Paid-in
      capital
                                                                            
                                                                            
                                                                            20,146,526
                                                                            
                                                                            
                                                                            
                                                                            19,987,708Statutory
      reserves
                                                                            
                                                                            
                                                                            2,894,902
                                                                            
                                                                            
                                                                            
                                                                            2,894,902Retained
      earnings
                                                                            
                                                                            
                                                                            19,766,373
                                                                            
                                                                            
                                                                            
                                                                            19,136,577Accumulated
      other comprehensive income
                                                                            
                                                                            
                                                                            4,881,394
                                                                            
                                                                            
                                                                            
                                                                            4,717,121Total
      shareholders' equity
                                                                            
                                                                            
                                                                            47,708,290
                                                                            
                                                                            
                                                                            
                                                                            46,755,403Total liabilities and
      shareholders' equity
                                                                            
                                                                            $
                                                                            98,147,489
                                                                            
                                                                            
                                                                            $
                                                                            101,313,662


2





SHENGTAI
PHARMACEUTICAL INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME


FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(UNAUDITED)




Three months endedSeptember 30,2008
                                          
                                          
                                          2007SALES
      REVENUE
                                          
                                          $
                                          18,123,728
                                          
                                          
                                          $
                                          19,373,069COST
      OF SALES
                                          
                                          
                                          14,931,187
                                          
                                          
                                          
                                          14,779,032GROSS
      PROFIT
                                          
                                          
                                          3,192,541
                                          
                                          
                                          
                                          4,594,037SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                                          
                                          
                                          2,429,790
                                          
                                          
                                          
                                          1,696,555INCOME
      FROM OPERATIONS
                                          
                                          
                                          762,751
                                          
                                          
                                          
                                          2,897,482OTHER
      INCOME (EXPENSE):Earnings
      on equity investment
                                          
                                          
                                          1,851
                                          
                                          
                                          
                                          148,779Other
      income
                                          
                                          
                                          11,869
                                          
                                          
                                          
                                          39,747Other
      expense
                                          
                                          
                                          (8,910
                                          )
                                          
                                          
                                          (177,349
                                          )Interest
      expense and other charges
                                          
                                          
                                          (21,839
                                          )
                                          
                                          
                                          (416,464
                                          )Interest
      income
                                          
                                          
                                          17,293
                                          
                                          
                                          
                                          66,161Other
      income (expense), net
                                          
                                          
                                          264
                                          
                                          
                                          
                                          (339,126
                                          )INCOME
      BEFORE PROVISION FOR INCOME TAXES
                                          
                                          
                                          763,015
                                          
                                          
                                          
                                          2,558,356PROVISION
      FOR INCOME TAXES
                                          
                                          
                                          133,219
                                          
                                          
                                          
                                          305,845NET
      INCOME
                                          
                                          
                                          629,796
                                          
                                          
                                          
                                          2,252,511OTHER
      COMPREHENSIVE INCOME:Foreign
      currency translation adjustments
                                          
                                          
                                          164,273
                                          
                                          
                                          
                                          445,097COMPREHENSIVE
      INCOME
                                          
                                          $
                                          794,069
                                          
                                          
                                          $
                                          2,697,608EARNINGS
      PER SHAREBasic
                                          
                                          $
                                          0.03
                                          
                                          
                                          $
                                          0.12Diluted
                                          
                                          $
                                          0.03
                                          
                                          
                                          $
                                          0.11WEIGHTED
      AVERAGE NUMBER OF SHARESBasic
                                          
                                          
                                          19,094,805
                                          
                                          
                                          
                                          18,875,000Diluted
                                          
                                          
                                          19,353,448
                                          
                                          
                                          
                                          19,697,359


3





SHENGTAI
PHARMACEUTICAL INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY




Retained earnings
                                    
                                    
                                    Accumulated
                                      otherCommon stock
                                    
                                    
                                    Paid-in
                                    
                                    
                                    Statutory
                                    
                                    
                                    
                                    
                                    
                                    comprehensiveShares
                                    
                                    
                                    Par value
                                    
                                    
                                    capital
                                    
                                    
                                    reserves
                                    
                                    
                                    Unrestricted
                                    
                                    
                                    income
                                    
                                    
                                    TotalsBALANCE,
      June 30, 2007
                                    
                                    
                                    18,875,000
                                    
                                    
                                    $
                                    18,875
                                    
                                    
                                    $
                                    19,163,549
                                    
                                    
                                    $
                                    1,735,484
                                    
                                    
                                    $
                                    9,885,670
                                    
                                    
                                    $
                                    826,998
                                    
                                    
                                    $
                                    31,630,576Net
      income
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,252,511
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,252,511Foreign
      currency translation adjustments
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    445,097
                                    
                                    
                                    
                                    445,097BALANCE,
      September 30, 2007 (Unaudited)
                                    
                                    
                                    18,875,000
                                    
                                    
                                    $
                                    18,875
                                    
                                    
                                    $
                                    19,163,549
                                    
                                    
                                    $
                                    1,735,484
                                    
                                    
                                    $
                                    12,138,181
                                    
                                    
                                    $
                                    1,272,095
                                    
                                    
                                    $
                                    34,328,184Exercised
      warrants
                                    
                                    
                                    219,805
                                    
                                    
                                    
                                    220
                                    
                                    
                                    
                                    506,523
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    506,743Option
      issued to employees
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    317,636
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    317,636Net
      income
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    8,157,814
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    8,157,814Transferred
      to statutory reserve
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,159,418
                                    
                                    
                                    
                                    (1,159,418
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    -Foreign
      currency translation adjustments
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    3,445,026
                                    
                                    
                                    
                                    3,445,026BALANCE,
      June 30, 2008
                                    
                                    
                                    19,094,805
                                    
                                    
                                    $
                                    19,095
                                    
                                    
                                    $
                                    19,987,708
                                    
                                    
                                    $
                                    2,894,902
                                    
                                    
                                    $
                                    19,136,577
                                    
                                    
                                    $
                                    4,717,121
                                    
                                    
                                    $
                                    46,755,403Option
      issued to employees
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    158,818
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    158,818Net
      income
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    629,796
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    629,796Foreign
      currency translation adjustments
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    164,273
                                    
                                    
                                    
                                    164,273BALANCE,
      September 30, 2008 (Unaudited)
                                    
                                    
                                    19,094,805
                                    
                                    
                                    $
                                    19,095
                                    
                                    
                                    $
                                    20,146,526
                                    
                                    
                                    $
                                    2,894,902
                                    
                                    
                                    $
                                    19,766,373
                                    
                                    
                                    $
                                    4,881,394
                                    
                                    
                                    $
                                    47,708,290


4





SHENGTAI
PHARMACEUTICAL INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(UNAUDITED)




2008
                                                          
                                                          
                                                          2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                                                          
                                                          $
                                                          629,796
                                                          
                                                          
                                                          $
                                                          2,252,511Adjustments
      to reconcile net income to cash provided by operating
      activities:Depreciation
                                                          
                                                          
                                                          951,659
                                                          
                                                          
                                                          
                                                          686,653Amortization
                                                          
                                                          
                                                          13,051
                                                          
                                                          
                                                          
                                                          11,809Allowance
      for bad debts
                                                          
                                                          
                                                          226,911
                                                          
                                                          
                                                          
                                                          -Loss
      on disposal of land use right
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          5,903Share
      based compensation to employees
                                                          
                                                          
                                                          158,818
                                                          
                                                          
                                                          
                                                          -Earnings
      on equity investment
                                                          
                                                          
                                                          (2,207
                                                          )
                                                          
                                                          
                                                          (148,779
                                                          )Change
      in operating assets and liabilities:Accounts
      receivable
                                                          
                                                          
                                                          2,220,604
                                                          
                                                          
                                                          
                                                          (516,885
                                                          )Notes
      receivable
                                                          
                                                          
                                                          (685,757
                                                          )
                                                          
                                                          
                                                          (860,590
                                                          )Other
      receivables
                                                          
                                                          
                                                          (10,957
                                                          )
                                                          
                                                          
                                                          479,437Inventories
                                                          
                                                          
                                                          426,788
                                                          
                                                          
                                                          
                                                          778,620Prepayments
                                                          
                                                          
                                                          175,061
                                                          
                                                          
                                                          
                                                          33,913Deferred
      assets
                                                          
                                                          
                                                          (58,966
                                                          )
                                                          
                                                          
                                                          -Accounts
      payable
                                                          
                                                          
                                                          (1,069,660
                                                          )
                                                          
                                                          
                                                          (1,529,592
                                                          )Accounts
      payable - related parties
                                                          
                                                          
                                                          (727,816
                                                          )
                                                          
                                                          
                                                          31,921Accrued
      liabilities
                                                          
                                                          
                                                          535,069
                                                          
                                                          
                                                          
                                                          (77,963
                                                          )Other
      payable
                                                          
                                                          
                                                          (184,454
                                                          )
                                                          
                                                          
                                                          (110,003
                                                          )Customer
      deposit
                                                          
                                                          
                                                          606,375
                                                          
                                                          
                                                          
                                                          1,192,497Taxes
      payable
                                                          
                                                          
                                                          (742,003
                                                          )
                                                          
                                                          
                                                          643,363Net cash provided by operating
      activities
                                                          
                                                          
                                                          2,462,312
                                                          
                                                          
                                                          
                                                          2,872,815CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of plant and equipment
                                                          
                                                          
                                                          (1,723,339
                                                          )
                                                          
                                                          
                                                          (2,489,638
                                                          )Acquisition
      of intangible assets
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (319,798
                                                          )Advances
      on plant and equipment purchase
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (2,076,530
                                                          )Repayments
      on loan to related party
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          1,510,151Loan
      to related party
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (34,668
                                                          )Net cash used in investing
      activities
                                                          
                                                          
                                                          (1,723,339
                                                          )
                                                          
                                                          
                                                          (3,410,483
                                                          )CASH
      FLOWS FROM FINANCING ACTIVITIES:Release
      of restricted cash
                                                          
                                                          
                                                          1,211,722
                                                          
                                                          
                                                          
                                                          3,046,580Borrowings
      on notes payable - banks
                                                          
                                                          
                                                          1,961,626
                                                          
                                                          
                                                          
                                                          1,324,600Payments
      on notes payable - banks
                                                          
                                                          
                                                          (4,391,700
                                                          )
                                                          
                                                          
                                                          (6,093,160
                                                          )Borrowings
      on short term loans
                                                          
                                                          
                                                          1,463,900
                                                          
                                                          
                                                          
                                                          887,482Payments
      on short term loans
                                                          
                                                          
                                                          (2,444,713
                                                          )
                                                          
                                                          
                                                          (3,616,158
                                                          )Borrowings
      on employee loans
                                                          
                                                          
                                                          201,287
                                                          
                                                          
                                                          
                                                          -Payments
      on employee loans
                                                          
                                                          
                                                          (293,128
                                                          )
                                                          
                                                          
                                                          (90,905
                                                          )Payments
      on third party loan
                                                          
                                                          
                                                          (279,634
                                                          )
                                                          
                                                          
                                                          -Net cash used in financing
      activities
                                                          
                                                          
                                                          (2,570,640
                                                          )
                                                          
                                                          
                                                          (4,541,561
                                                          )EFFECTS
      OF EXCHANGE RATE CHANGE IN CASH
                                                          
                                                          
                                                          47,732
                                                          
                                                          
                                                          
                                                          41,437DECREASE
      IN CASH
                                                          
                                                          
                                                          (1,783,935
                                                          )
                                                          
                                                          
                                                          (5,037,792
                                                          )CASH,
      beginning of period
                                                          
                                                          
                                                          3,405,606
                                                          
                                                          
                                                          
                                                          6,420,439CASH,
      end of period
                                                          
                                                          $
                                                          1,621,671
                                                          
                                                          
                                                          $
                                                          1,382,647SUPPLEMENTAL
      DISCLOSURECash
      paid for Interest, net of capitalized interest
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          406,325Cash
      paid for Income taxes
                                                          
                                                          $
                                                          731,950
                                                          
                                                          
                                                          
                                                          13,445Non-cash
      investing and financing activities -Acquisition
      of plant and equipment through advances on plant and and equipment
      purchase
                                                          
                                                          $
                                                          1,093,496
                                                          
                                                          
                                                          $
                                                          2,754,637Acquisition
      of plant and equipment in exchange for note receivable and other
      receivables
                                                          
                                                          $
                                                          327,638
                                                          
                                                          
                                                          $
                                                          -


5


SHENGTAI
PHARMACEUTICAL INC. AND SUBSIDIARIES


NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008


(UNAUDITED)




Note
1 - Organization background and principal activities





Shengtai
Pharmaceutical Inc, (the “Company”), formerly known as West Coast Car Company
was incorporated in March 2004 in the State of Delaware as West Coast Car
Company.





Shengtai
Holding, Inc. (“SHI” was incorporated in the state of New Jersey on February 27,
2006. The Company, through its Chinese subsidiary, Weifang Shengtai
Pharmaceutical Co., Ltd. (“Weifang Shengtai”), manufactures and distributes raw
drug materials (e.g., glucose, dehydrated glucose) and drug supplements (e.g.,
starch, dextrin, polyacrylic acid resin). The Company’s primary business
operations are conducted in the People’s Republic of China (“PRC”).





Weifang
Shengtai was established in Changle County, Weifang City, Shandong Province, PRC
on February 4, 1999. On May 26, 2007, Weifang Shengtai increased its registered
capital from $3,920,000 to $15,000,000. In May and June 2007, SHI contributed
$11,080,000 towards the additional registered capital. This transaction was
approved by the local branch of the MOC in Weifang City and the Company obtained
a new business license on July 16, 2007, for a term of 20 years.




Note
2 - Summary of significant accounting policies





The reporting
entity





The
consolidated financial statements of Shengtai Pharmaceutical Inc. and
Subsidiaries reflect the activities of the parent and its wholly-owned
subsidiaries SHI and Weifang Shengtai.





The
Company recorded all normal recurring adjustments considered necessary to give a
fair presentation of operating results for the periods presented. Interim
results are not necessarily indicative of results for a full year. The
information included in this Form 10-Q should be read in conjunction with
information included in the 2008 annual report filed on Form 10-K.





Basis of
presentation





The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
All material inter-company transactions and balances have been eliminated in the
consolidation.




Use of
estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. The significant estimates made in the
preparation of the Company’s consolidated financial statements relate to the
assessment of the fair value of share based compensation, and the collectability
of accounts receivable. Actual results could be materially different from these
estimates upon which the carrying values were based.


6





Foreign currency
translation





The
reporting currency of the Company is the US dollar. The Company uses the Chinese
Renminbi (“RMB”) as its functional currency. In accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 52, “Foreign Currency Translation,”
results of operations and cash flows are translated at average exchange rates
during the period, and assets and liabilities are translated at the unified
exchange rates at the balance sheet dates, and equity is translated at the
historical exchange rates. As a result, amounts related to assets and
liabilities reported on the statements of cash flows will not necessarily agree
with changes in the corresponding accounts on the balance sheets. Translation
adjustments resulting from this process are included in accumulated other
comprehensive income in the statements of shareholders’ equity. Translation
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in the
results of operations as incurred.





Translation
adjustments amounted to $4,881,394 and $4,717,121 as of September 30, 2008 and
June 30, 2008, respectively. Assets and liabilities were translated at 6.83 RMB
to $1.00 at September 30, 2008. The equity accounts were stated at their
historical rate. The average translation rates applied to income statement for
the three months ended September 30, 2008 and 2007 were 6.84 RMB and 7.55 RMB to
$1.00. Cash flows are also translated at average translation rates for the
period; therefore, amounts reported on the statement of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheet.





Revenue
recognition





The
Company recognizes revenue when the goods are delivered, title has passed,
pricing is fixed, and collection is reasonably assured. Sales revenue represents
the invoiced value of goods, net of value-added tax (“VAT”), and estimated
returns of product from customers. Most of the Company’s products sold in the
PRC are subject to a VAT rate of 17% of the gross sales price or at a rate
approved by the Chinese local government. This VAT may be offset by VAT paid by
the Company on raw materials and other materials included in the cost of
producing their finished products and certain freight expenses. We allow our
customers to return products only if our product is later determined by us to be
ineffective. Based on our historical experience over the past three years,
product returns have been insignificant throughout all of our product lines.
Therefore, we do not estimate deductions or allowance for sales returns. Sales
returns are taken against revenue when products are returned from customers.
Sales are presented net of any discounts given to customers.





Shipping and
handling





Shipping
and handling costs related to costs of goods sold are included in selling,
general and administrative expenses. Shipping and handling costs amounted to
$779,336 and $747,314 for the three months ended September 30, 2008 and 2007,
respectively.




Financial
instruments





SFAS 107,
“Disclosures about Fair Value of Financial Instruments” requires disclosure of
the fair value of financial instruments held by the Company. SFAS 107 defines
the fair value of financial instruments as the amount at which the instrument
could be exchanged in a current transaction between willing parties. The Company
considers the carrying amount of cash, accounts receivable, notes receivable,
other receivables,
prepayments, accounts payable, other payables, accrued liabilities, customer
deposits, taxes payable, and loans to approximate their fair values because of
the short period of time between the origination of such instruments and their
expected realization and their current market rates of
interest.


7





On July
1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS
157”), which defines fair value, establishes a three-level valuation hierarchy
for disclosures of fair value measurement and enhances disclosures requirements
for fair value measures. The carrying amounts reported in the balance sheets for
current receivables and payables, including short term loans, qualify as
financial instruments and are a reasonable estimate of fair value because of the
short period of time between the origination of such instruments and their
expected realization and their current market rate of interest. The three levels
are defined as follow:





·
            Level
      1: inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.




·
            Level
      2: inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the assets or liability, either directly or indirectly, for
      substantially the full term of the financial
  instruments.




·
            Level
      3: inputs to the valuation methodology are unobservable and significant to
      the fair value.





The
Company did not identify any assets or liabilities that are required to be
presented on the balance sheet at fair value in accordance with SFAS
157.





Stock-based compensation





The
Company records stock-based compensation expense pursuant to SFAS 123R, “Share
Based Payment.” The Company estimates the fair value of the award using the
Black-Scholes option pricing model. Under SFAS 123R, the Company’s expected
volatility assumption is based on the historical volatility of Company’s stock.
The expected life assumption is primarily based on historical exercise patterns
and employee post-vesting termination behavior. The risk-free interest rate for
the expected term of the option is based on the U.S. Treasury yield curve in
effect at the time of grant.





Stock-based
compensation expense is recognized based on awards expected to vest, and there
were no estimated forfeitures as the Company has a short history of issuing
options. SFAS 123R requires forfeitures to be estimated at the time of grant and
revised in subsequent periods, if necessary, if actual forfeitures differ from
those estimates.





Earnings per
share





The
Company reports earnings per share in accordance with the provisions of SFAS No.
128 (“SFAS 128”), "Earnings Per Share." SFAS 128 requires presentation of basic
and diluted earnings per share in conjunction with the disclosure of the
methodology used in computing such earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average common shares outstanding during the
period. Diluted earnings per share takes into account the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised and converted into common stock.


8




The
following is a reconciliation of the basic and diluted earnings per
share:




Three months ended
                                  September 30,2008
                                
                                
                                2007(Unaudited)
                                
                                
                                (Unaudited)Net
      income for earnings per share
                                
                                $
                                629,796
                                
                                
                                $
                                2,252,511Weighted
      average shares used in basic computation
                                
                                
                                19,094,805
                                
                                
                                
                                18,875,000Diluted
      effect of warrants
                                
                                
                                258,643
                                
                                
                                
                                822,359Weighted
      average shares used in diluted computation
                                
                                
                                19,353,448
                                
                                
                                
                                19,697,359Earnings
      per shareBasic
                                
                                $
                                0.03
                                
                                
                                $
                                0.12Diluted
                                
                                $
                                0.03
                                
                                
                                $
                                0.11





At
September 30, 2008, 4,473,945 shares of outstanding warrants were included in
the three months ended September 30, 2008 calculation of diluted earnings per
share and 660,000 shares of outstanding stock options were excluded from the
diluted earnings per share calculation as they are anti-dilutive. At September
30, 2007, all outstanding warrants were included in the three months ended
September 30, 2007 calculation of diluted earnings per share.





Cash and cash
equivalents





The
Company considers all highly liquid investments with original maturities of
three months or less to be cash and cash equivalents.




Restricted
cash





The
Company through its bank agreements is required to keep certain amounts on
deposit that are subject to withdrawal restrictions. As of September 30, 2008
and June 30, 2008, these amounts totaled $5,570,525 and $6,763,500,
respectively.


9





In
accordance with the Escrow Agreement and the Share Purchase Agreement signed by
Shengtai Holding Inc., West Coast Car Company, Chinamerica Fund LP, and
Tri-State Title & Escrow, LLC (the “Escrow Agent”), the Company was required
to deposit with the Escrow Agent $5,500,000 immediately on the Closing Date of
the Share Purchase Agreement. This fund can only be disbursed until certain
criteria are met. As of September 30, 2008 and June 30, 2008, the amount not
disbursed was $201,305 and $198,000, respectively, and these are included in
restricted cash in the consolidated balance sheets.





Accounts
receivable





In the
normal course of business, the Company extends credit to its customers without
requiring collateral or other security interests.   Management reviews its
accounts receivables at each reporting period to provide for an allowance
against accounts receivable for an amount that could become uncollectible. This
review process may involve the identification of payment problems with specific
customers. The Company estimates this allowance based on the aging of the
accounts receivable, historical collection experience, and other relevant
factors, such as changes in the economy and the imposition of regulatory
requirements that can have an impact on the industry. These factors continuously
change, and can have an impact on collections and the Company’s estimation
process. These impacts may be material. Certain accounts receivable amounts are
charged off against allowances after designated period of collection efforts.
Subsequent cash recoveries are recognized as income in the period when they
occur.





The
activity in the allowance for doubtful accounts for trade accounts receivable is
as follows:




Three months
                        ended
                        September 30,
                        2008
                      
                      
                      Year ended
                        June 30, 2008(Unaudited)Beginning
      allowance for doubtful accounts
                      
                      $
                      440,701
                      
                      
                      $
                      431,178Additions
      charged to bad debt expense
                      
                      
                      226,911
                      
                      
                      
                      93,557Write-off
      charged against the allowance
                      
                      
                      (182,386
                      )
                      
                      
                      (129,130
                      )Foreign
      currency translation adjustments
                      
                      
                      1,180
                      
                      
                      
                      45,096Ending
      allowance for doubtful accounts
                      
                      $
                      486,406
                      
                      
                      $
                      440,701




Concentrations of
risk





The
Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, and by the general state
of the PRC's economy. The Company's operations in the PRC are subject to
specific considerations and significant risks not typically associated with
companies in North America and Western Europe. These include risks associated
with, among others, the political, economic and legal environments and foreign
currency exchange. The Company's results may be adversely affected by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation, among others.


10





Management
believes the credit risk on bank deposits is limited because the counterparties
are banks with high credit-ratings assigned by international credit-rating
agencies, or state-owned banks in China. Cash includes cash on hand and demand
deposits in accounts maintained with state-owned banks within the PRC and the
United States of America. The cash deposits in U.S. financial institutions
exceed the amounts insured by the U.S. government. Balances at financial
institutions or state owned banks within the PRC are not covered by insurance.
Non-performance by these institutions could expose the Company to losses for
amounts in excess of insured balances. At September 30, 2008 and June 30, 2008,
the Company’s bank balances exceeded government insured limits or not covered by
insurance by approximately $6,740,882 and $10,175,000, respectively. The Company
has not experienced, nor does it anticipate, nonperformance by these
institutions.





The
Company’s concentrations of credit risk are primarily in trade accounts
receivable and accounts payable. For the three months ended September 30, 2008
and 2007, there were no customers that individually comprised 10% or more of the
Company’s total revenues. For the three months ended September 30, 2008 and
2007, there were no vendors that individually accounted for over 10% or more of
the Company’s total purchases.





For
export sales, we frequently require significant down payments or letter of
credit by our customers prior to shipment. During the year, the Company
maintains export credit insurance to protect the Company against the risk that
the overseas customers may default on settlement.





The
following table summarizes financial information for the three months ended
September 30, 2008 and 2007, concerning the Company’s revenues based on
geographic area:





Revenue
                            
                            September 30,
                              2008
                            
                            September 30,
                              2007(Unaudited)
                            
                            (Unaudited)China
                            
                            
                            $
                            15,960,750
                            
                            
                            $
                            17,187,494International
                            
                            
                            
                            2,162,978
                            
                            
                            
                            2,185,575Total
                            
                            
                            $
                            18,123,728
                            
                            
                            $
                            19,373,069


11




Inventories





Inventories
are stated at the lower of cost (weighted average basis) or market and consist
of the following:




September 30,
                            2008
                          
                          
                          June 30,
                            2008(Unaudited)Raw
      materials
                          
                          $
                          1,160,192
                          
                          
                          $
                          1,409,577Work-in-progress
                          
                          
                          1,662,310
                          
                          
                          
                          1,688,161Finished
      goods
                          
                          
                          1,804,067
                          
                          
                          
                          1,941,540Total
                          
                          $
                          4,626,569
                          
                          
                          $
                          5,039,278





The
Company reviews its inventory periodically for possible obsolete goods or to
determine if any reserves are necessary. As of September 30, 2008, the Company
has determined that no reserves are necessary.





Prepayments





Prepayments
represent partial payments or deposits for inventory purchases.





Plant and
equipment





Plant and
equipment are stated at cost less accumulated depreciation. Additions and
improvements to property and equipment accounts are recorded at cost.
Maintenance, repairs, and minor renewals are charged directly to expense as
incurred. Major additions and betterments to property and equipment accounts are
capitalized. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets with 3% residual value.





Estimated
useful lives of the assets are as follows:





Estimated Useful LifeBuildings
                            
                            
                            5-20
                            
                            YearsMachinery
      and equipment
                            
                            
                            5-10
                            
                            YearsAutomobile
      facilities
                            
                            
                            5-10
                            
                            YearsElectronic
      equipment
                            
                            
                            5-7
                            
                            Years




12





Impairment of long-lived
assets





Long-lived
assets of the Company are reviewed periodically or more often if circumstances
dictate, to determine whether their carrying value has become impaired. The
Company considers assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations. The Company also re-evaluates the
periods of amortization to determine whether subsequent events and circumstances
warrant revised estimates of useful lives. As of September 30, 2008, the
Company expects these assets to be fully recoverable.





Investment in unconsolidated
affiliate





Equity
method investments are recorded at original cost and adjusted to recognize the
Company’s proportionate share of the investee’s net income or losses and
additional contributions made and distributions received. The Company recognizes
a loss if it is determined that other than temporary decline in the value of the
investment exists.





Intangible
assets





Intangible
assets are primarily comprised of land use rights. All land in the PRC is owned
by the Chinese government. However, the government grants “land use rights” for
terms ranging from 20 to 50 years. From March 2000 to June 2008, the Company
acquired various land use rights for approximately $3,291,000. The Company
amortizes the cost of land use rights over the usage terms using the
straight-line method.





Intangible
assets of the Company are reviewed at least annually, more often if
circumstances dictate, to determine whether their carrying value has become
impaired. The Company considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations. The Company
also re-evaluates the periods of amortization to determine whether subsequent
events and circumstances warrant revised estimates of useful lives. As of
September 30, 2008, the Company determined that there had been no impairment.
Total amortization expense for the three months ended September 30, 2008 and
2007 amounted to $ 13,051 and $11,809 respectively.





Income
taxes





The
Company accounts for income taxes in accordance with SFAS 109, “Accounting for
Income Taxes.” Under the asset and liability method as required by SFAS 109,
deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. Under SFAS 109, the effect on deferred
income taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is recognized if it is more
likely than not that some portion, or all of, a deferred tax asset will not be
realized. As of September 30, 2008 and June 30, 2008, the Company did not have
any deferred tax assets or liabilities, and as such, no valuation allowances
were recorded at September 30, 2008 and June 30, 2008.




In July
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48 (“FIN 48”), "Accounting for Uncertainty in Income Taxes -
an interpretation of FASB Statement No. 109," which clarifies the accounting and
disclosure for uncertain tax positions. This interpretation is effective for
fiscal years beginning after December 15, 2006, and the Company has implemented
this interpretation as of July 1, 2007. FIN 48 prescribes a recognition
threshold and measurement attribute for recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition.


13





Under FIN
48, evaluation of a tax position is a two-step process. The first step is to
determine whether it is more-likely-than-not that a tax position will be
sustained upon examination, including the resolution of any related appeals or
litigation based on the technical merits of that position. The second step is to
measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50 percent likely of being realized upon ultimate settlement. Tax positions that
previously failed to meet the more-likely-than-not recognition threshold should
be recognized in the first subsequent period in which the threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not
criteria should be de-recognized in the first subsequent financial reporting
period in which the threshold is no longer met.





The
adoption of FIN 48 at July 1, 2007, did not have a material effect on the
Company's consolidated financial statements.





The
Company’s operations are subject to income and transaction taxes in the United
States and in the PRC jurisdictions. Significant estimates and judgments are
required in determining the Company’s worldwide provision for income taxes. Some
of these estimates are based on interpretations of existing tax laws or
regulations, and as a result the ultimate amount of tax liability may be
uncertain. However, the Company does not anticipate any events that would lead
to changes to these uncertainties.





Value Added
Tax





Enterprises
or individuals who sell products, engage in repair and maintenance or import and
export goods in the PRC are subject to a value added tax in accordance with
Chinese laws. The standard value added tax rate is 17% of the gross sales price,
however, for the Company’s corn plumules products, the VAT rate is 13%. A credit
is available whereby VAT paid on the purchases of semi-finished products, raw
materials used in the production of the Company’s finished products, and payment
of freight expenses can be used to offset the VAT due on sales of the finished
products.





VAT on
sales and VAT on purchases amounted to $1,884,466 and $2,476,725 for the three
months ended September 30, 2008, and $2,860,229 and $2,432,415 for the three
months ended September 30, 2007, respectively. Sales and purchases are recorded
net of VAT collected and paid as the Company acts as an agent for the
government. VAT taxes are not impacted by the income tax holiday in the
PRC.





Guarantees





From time
to time, the Company guarantees the debt of others unrelated to the Company.
Pursuant to FIN 45, “Guarantor’s Accounting for and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness to Others,” the
Company must record guarantees at the fair value of the expected future
payments. However, the Company estimates that it will not be required to make
any payments under these guarantees based on the past experience and the
financial condition of the companies to which the guarantees were
made.


14




Recently issued accounting
pronouncements





In
February 2007, the FASB issued SFAS No. 159, (“SFAS 159”), “The Fair Value
Option for Financial Assets and Financials Liabilities — Including an Amendment
of FASB Statement No. 115.” This standard permits measurement of certain
financial assets and financial liabilities at fair value. If the fair value
option is elected, the unrealized gains and losses are reported in earnings at
each reporting date. Generally, the fair value option may be elected on an
instrument-by-instrument basis, as long as it is applied to the instrument in
its entirety. The fair value option election is irrevocable, unless a new
election date occurs. SFAS 159 requires prospective application and also
establishes certain additional presentation and disclosure requirements. The
standard is effective as of the beginning of the fiscal year that begins after
November 15, 2007. The Company adopted SFAS 159 on July 1, 2008. The
Company chose not to elect the option to measure the fair value of eligible
financial assets and liabilities.





In
December 2007, the Securities and Exchange Commission (“SEC”) issued Staff
Accounting Bulletin No. 110 (“SAB 110”). SAB 110 amends and replaces Question 6
of Section D.2 of Topic 14, Share-Based Paymentof the
Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14
expresses the views of the staff regarding the use of the “simplified” method in
developing an estimate of expected term of “plain vanilla” share options and
allows usage of the “simplified” method for share option grants prior to
December 31, 2007. SAB 110 allows public companies which do not have
historically sufficient experience to provide a reasonable estimate to continue
use of the “simplified” method for estimating the expected term of “plain
vanilla” share option grants after December 31, 2007. The Company currently uses
the “simplified” method to estimate the expected term for share option grants as
the Company does not have enough historical experience to provide a reasonable
estimate. The Company intends on using the “simplified” method until the Company
has enough historical experience to provide a reasonable estimate of expected
term in accordance with SAB 110. The Company adopted SAB 110 on January 1, 2008
which did not materially affect the company.





In
December 2007, the FASB issued SFAS 141(R) "Business Combinations". The
statement retains the purchase method of accounting for acquisitions, but
requires a number of changes, including changes in the way assets and
liabilities are recognized in the purchase accounting as well as requiring the
expensing of acquisition-related costs as incurred. Furthermore, SFAS 141R
provides guidance for recognizing and measuring the goodwill acquired in the
business combination and determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141R is effective for fiscal years beginning on
or after December 15, 2008. Earlier adoption is prohibited. The Company is
evaluating the impact, if any, that the adoption of this statement will have on
its consolidated results of operations or financial position.





In
December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling
Interests in Consolidated Financial Statements — An Amendment of ARB No. 51.”
SFAS 160 amends ARB No. 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It is intended to eliminate the diversity in practice regarding the
accounting for transactions between equity and noncontrolling interests by
requiring that they be treated as equity transactions. Further, it requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. SFAS 160 also
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation, requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated, requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of the
parent’s owners and the interests of the noncontrolling owners of a subsidiary,
among others. SFAS 160 is effective for fiscal years beginning on or after
December 15, 2008, with early adoption permitted, and it is to be
applied prospectively. SFAS 160 is must be applied prospectively as of the
beginning of the fiscal year in which it is initially applied, except for the
presentation and disclosure requirements, which must be applied retrospectively
for all periods presented. The Company has not yet evaluated the impact
that SFAS 160 will have on its consolidated financial position or results of
operations.


15




In March
2008, the FASB issued SFAS 161, "Disclosures about Derivative Instruments and
Hedging Activities." SFAS 161 is intended to improve financial reporting of
derivative instruments and hedging activities by requiring enhanced disclosures
to enable financial statement users to better understand the effects of
derivatives and hedging on an entity's financial position, financial performance
and cash flows. The provisions of SFAS 161 are effective for interim periods and
fiscal years beginning after November 15, 2008. The Company does not anticipate
that the adoption of SFAS 161 will have a material impact on its consolidated
results of operations or financial position.





In May
2008, the FASB issued SFAS 162, "The Hierarchy of Generally Accepted Accounting
Principles." SFAS 162 is intended to improve financial reporting by identifying
a consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements that are presented in conformity with
GAAP for nongovernmental entities. SFAS 162 is effective 60 days following the
SEC's approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles." The Company does not expect the adoption of
SFAS 162 will have a material impact on its consolidated results of operations
or financial position.





On May 9,
2008, the FASB issued FSP APB 14-1, "Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)." FSP APB 14-1 clarifies that convertible debt instruments that may
be settled in cash upon conversion (including partial cash settlement) are not
addressed by paragraph 12 of APB Opinion No. 14, "Accounting for Convertible
Debt and Debt Issued with Stock Purchase Warrants." Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity's
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. The Company has not yet evaluated the impact that FSP APB 14-1
will have on its consolidated results of operations or financial
position.





In June
2008, the FASB issued EITF 07-5 “Determining whether an Instrument (or Embedded
Feature) is indexed to an Entity’s Own Stock”. This Issue is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early application is not
permitted. Paragraph 11(a) of SFAS No 133 “Accounting for Derivatives and
Hedging Activities” (“SFAS 133”) specifies that a contract that would otherwise
meet the definition of a derivative but is both (a) indexed to the
Company’s own stock and (b) classified in stockholders’ equity in the
statement of financial position would not be considered a derivative financial
instrument. EITF 07-5 provides a new two-step model to be applied in determining
whether a financial instrument or an embedded feature is indexed to an issuer’s
own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope
exception. This standard triggers liability accounting on all options and
warrants exercisable at strike prices denominated in any currency other than the
functional currency of the operating entity in China (Renminbi). EITF 07-5 is
effective for fiscal years beginning after December 15, 2008. The Company is
currently evaluating the impact of adoption of EITF 07-5 on the Company’s
consolidated financial statements.





In June
2008, FASB issued EITF 08-4, “Transition Guidance for Conforming Changes to
Issue No. 98-5”. The objective of EITF 08-4 is to provide transition
guidance for conforming changes made to EITF No. 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios”, that result from EITF No. 00-27 “Application of
Issue No. 98-5 to Certain Convertible Instruments”, and SFAS 150, “Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity”. This Issue is effective for financial statements issued for fiscal
years ending after December 15, 2008. Early application is
permitted. Management is currently evaluating the impact of adoption of
EITF 08-4 on the accounting for the convertible notes and related warrants
transactions.


16





On
October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,” which clarifies
the application of SFAS 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not active. FSP
157-3 became effective on October 10, 2008, and its adoption did not have a
material impact on our financial position or results for the quarter ended
September 30, 2008.




Note
3 - Plant and equipment





Plant and
equipment consist of the following:





September 30,
                          2008
                        
                        
                        June 30,
                          2008(Unaudited)Buildings
                        
                        $
                        11,624,589
                        
                        
                        $
                        6,343,954Machinery
      and equipment
                        
                        
                        44,195,785
                        
                        
                        
                        37,239,847Automobile
      facilities
                        
                        
                        598,518
                        
                        
                        
                        562,039Electronic
      equipment
                        
                        
                        415,667
                        
                        
                        
                        368,550Construction
      in progress
                        
                        
                        27,417,909
                        
                        
                        
                        36,373,688Total
                        
                        
                        84,252,468
                        
                        
                        
                        80,888,078Accumulated
      depreciation
                        
                        
                        (11,926,138
                        )
                        
                        
                        (10,945,057
                        )Total
                        
                        $
                        72,326,330
                        
                        
                        $
                        69,943,021





Construction-in-progress
represents the costs incurred in connection with the construction of buildings
or new additions to the Company’s plant facilities. No depreciation is provided
for construction-in-progress until such time as the assets are completed and
placed into service. Depreciation expense for the three months ended September
30, 2008 and 2007 amounted to $951,659 and $686,653, respectively. Interest
costs totaling $701,621 and $230,656 was capitalized into
construction-in-progress for the three months ended September 30, 2008 and 2007,
respectively.




Note
4 - Investment in unconsolidated affiliate





On
September 16, 2003, the Company entered into a joint venture partnership with
Weifang City Investment Company and Changle Century Sun Paper Industry Co., Ltd,
and formed Changle Shengshi Redian Co., Ltd (“Changle Shengshi”). Changle
Shengshi was incorporated in Weifang City, Shandong Province, PRC. Changle
Shengshi’s principal activity is to produce and sell electricity and heat. The
Company accounts for this 20% investment under the equity method of
accounting.


17





Summarized
unaudited financial information of Changle Shengshi is as follows:





September
      30,
                  
                  
                  June
      30,2008
                  
                  
                  2008Current
      assets
                  
                  $
                  15,487,906
                  
                  
                  $
                  14,117,813Non-current
      assets
                  
                  
                  27,824,899
                  
                  
                  
                  27,231,806Total
      assets
                  
                  
                  43,312,805
                  
                  
                  
                  41,349,619Current
      liabilities
                  
                  
                  22,228,241
                  
                  
                  
                  20,333,700Non-current
      liabilities
                  
                  
                  2,984,520
                  
                  
                  
                  2,976,360Shareholders'
      equity
                  
                  
                  18,100,044
                  
                  
                  
                  18,039,559Total
      liabilities and shareholders' equity
                  
                  $
                  43,312,805
                  
                  
                  $
                  41,349,619





Summarized
financial information of Changle Shengshi for the three months ended September
30, 2008 and 2007 is as follows:





September 30,2008
                  
                  
                  2007Net
      sales
                  
                  $
                  10,394,563
                  
                  
                  $
                  7,171,525Gross
      profit
                  
                  $
                  360,394
                  
                  
                  $
                  2,167,691Income
      before taxes
                  
                  $
                  14,714
                  
                  
                  $
                  1,757,159Net
      income
                  
                  $
                  11,035
                  
                  
                  $
                  1,372,948Company
      share of income
                  
                  $
                  2,207
                  
                  
                  $
                  274,589Elimination
      of intercompany profit
                  
                  
                  356
                  
                  
                  
                  125,810Company’s
      share of net income
                  
                  $
                  1,851
                  
                  
                  $
                  148,779




18


Note
5 - Related party transactions





The
Company’s utilities are partially provided by Changle Shengshi (See Note 4). As
of September 30, 2008 and June 30, 2008, the Company’s accounts payable due to
Changle Shengshi was approximately $535,000 and $715,000, respectively, which
related to a portion of the Company’s utilities being provided by Changle
Shengshi. The utilities expense amounted to approximately $1,676,331 and
$2,068,766 for the three months ended September 30, 2008 and 2007,
respectively.





The
Company’s receivables from one loan contract with Changle Shengshi are as
follows:





September
      30,
                    2008
                  
                  
                  June
      30, 2008(Unaudited)Due
      on September 14, 2009, unsecured, 7.60% interest rate per
      annum
                  
                  $
                  438,900
                  
                  
                  $
                  437,700





Note
6 - Debt





Short term
loans





Short
term loans represent amounts due to various banks which are normally due within
one year, and these loans can be renewed with the banks. The Company’s short
term bank loans consisted of the following:





September 30,
                    2008
                    (Unaudited)
                  
                  
                  June 30, 2008Loan
      from Bank of China, due various dates from January 2009 to June 2009;
      monthly interest only payments; interest rates ranging from 7.47% to 8.96%
      per annum, guaranteed by an unrelated third party and secured by certain
      properties.
                  
                  $
                  13,693,680
                  
                  
                  $
                  13,656,240Loan
      from Industrial and Commercial Bank of China, due various dates from
      January 2009 to May 2009; monthly interest only payments; interest rates
      ranging from 7.47% to 8.96% per annum, guaranteed by an unrelated third
      party and secured by certain properties.
                  
                  $
                  2,926,000
                  
                  
                  $
                  3,895,530Loan
      from Agriculture Bank of China, due February 2009; monthly interest only
      payments; interest rate of 8.96% per annum, guaranteed by an unrelated
      third party and secured by certain properties
                  
                  $
                  2,194,500
                  
                  
                  $
                  2,188,500Loan
      from Commercial Bank, due June 2009; monthly interest-only payments;
      interest rate at 8.019% per annum, guaranteed by an unrelated third party,
      unsecured.
                  
                  $
                  1,463,000
                  
                  
                  $
                  1,459,000Loan
      from ShangHai PuFa Bank, due October 2008; monthly interest-only payments;
      interest rate of 8.384% per annum, guaranteed by an unrelated third party,
      unsecured.
                  
                  $
                  1,463,000
                  
                  
                  $
                  1,459,000Total
                  
                  $
                  21,740,180
                  
                  
                  $
                  22,658,270




19


The loans
are secured by buildings and improvements, machinery and equipment, and land use
rights with carrying values as follows:





September
      30,
                      2008Buildings
      and improvements
                    
                    $
                    4,649,817Machinery
      and equipment
                    
                    
                    4,161,709Land
      use rights
                    
                    
                    4,873,549Total
                    
                    $
                    13,685,075





Notes payable -
banks





Notes
payable represent amounts due to various banks which are normally due within one
year, and these notes can be renewed with the banks. The Company’s notes
payables consisted of the following:





September 30,
                    2008
                    (Unaudited)
                  
                  
                  June 30, 2008Bank
      of China, due November 2008, 0.05% transaction fee, restricted cash
      required 100% of loan amount, guaranteed by an unrelated third
      party.
                  
                  $
                  731,500
                  
                  
                  $
                  729,500Industrial
      and Commercial Bank of China, due in March 2009, 0.05% transaction fee,
      restricted cash required 50% of loan amount, guaranteed by an unrelated
      third party.
                  
                  
                  1,960,420
                  
                  
                  
                  4,377,000Shenzhen
      Development Bank, due in December 2008, 0.05% transaction fee, restricted
      cash required 50% of loan amount, guaranteed by an unrelated third
      party.
                  
                  
                  4,389,000
                  
                  
                  
                  4,377,000Shenzhen
      Development Bank, due in December 2008, 0.05% transaction fee, restricted
      cash required 100% of loan amount, guaranteed by an unrelated third
      party.
                  
                  
                  1,463,000
                  
                  
                  
                  1,459,000Total
                  
                  $
                  8,543,920
                  
                  
                  $
                  10,942,500





Employee
loans





From time
to time, the Company borrows monies from certain employees for cash flow
purposes of the Company. These loans do not require collateral and bear interest
at 7.2% for the first six months, and then 10.8% thereafter until the full
principal amounts are paid by the Company and the principal is due upon demand.
  Employee loans amounted to $1,294,292 and $1,382,287 as of September 30,
2008 and June 30, 2008, respectively. These loans are payable upon
demand.


20


Employee loan -
officer





From time
to time, the Company has borrowed monies from Qingtai Liu for cash flow purposes
of the Company. The loan does not require collateral and bears interest at 7.2%
for the first six months, and then 10.8% until the full principal amount is paid
by the Company and the principal is due upon demand. Employee loan from officer
amounted to $53,738 and $53,605 as of September 30, 2008 and June 30, 2008,
respectively. Interest expense was de minimis on this loan for the three months
ended September 30, 2008 and 2007, respectively.





Third party
loan





From time
to time, the Company borrowed money from an unrelated individual for use in
operations. The loan does not require collateral and bears interest at 7.2% for
the first six months, and then 10.8% until the full principal amount is paid by
the Company . The principal is due upon demand. Balance of the loan as of
September 30, 2008 and June 30, 2008 amounted to $362,521 and $640,228,
respectively.





Interest





Total
interest expense, net of capitalized interest, for the three months ended
September 30, 2008 and 2007 on all debt, amounted to $584,509 and $391,608,
respectively. Interest capitalized into construction-in-progress totaled
$701,621 and $230,656 for the three months ended September 30, 2008 and 2007,
respectively.





Note
7 - Income taxes





The
Company is governed by the Income Tax Law of the PRC concerning Foreign
Investment Enterprises (“FIEs”) and Foreign Enterprises and various local income
tax laws (the “Income Tax Laws”). Under the Income Tax Laws, FIEs are generally
subject to an effective income tax of 33% (30% state income taxes plus 3% local
income taxes) on income as reported in their statutory financial statements
after appropriate tax adjustments, unless the enterprise is located in specially
designated regions of cities for which more favorable effective tax rates apply.
Upon approval by the PRC tax authorities, FIEs scheduled to operate for a period
of 10 years or more and engaged in manufacturing and production may be exempt
from income taxes for up to two years, commencing with their first profitable
year of operations, after taking into account any losses brought forward from
prior years, and thereafter with a 50% exemption for the next three
years.





In
February 2004, the Company became a Sino-foreign joint venture. In August 2004,
the state government granted the Company income tax exemptions as follows: 100%
exemption for the first two years from September 2004 to August 2006, and 50%
exemption for years three to five from September 2006 to August 2009. In
addition, the Company is located in a Special Economic Zone and the PRC tax
authority has offered it with a special income tax rate of 24%. With the
approval of the local government, the Company is subject to income taxes at a
reduced rate of 12% from September 2006 to August 2009, after the two-year
exemption 24% for income taxes until its exemption and reduction periods expire
in August 2009.





Beginning
on January 1, 2008, the new Enterprise Income Tax (“EIT”) law replaced the
existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises
(“FIEs”).


21


The key
changes are:





a.
            The new standard EIT
      rate of 25% will
      replace the 33% rate currently applicable to both DES and FIEs, except for
      High Tech companies who pays a reduced rate of
  15%;





b.
            Companies established before
      March 16, 2007 will continue to enjoy tax holiday treatment approved by
      localgovernment for
      a grace period of the next 5 years or until the tax holiday term is
      completed, whichever is
sooner.





The
Company’s subsidiary, Weifang Shengtai was established before March 16, 2007,
and therefore is qualified to continue to be taxed at the reduced rate as
described above until the tax holiday term is completed. Starting on September
1, 2009, the Company will be subject to a 25% income tax rate pursuant to the
new income tax laws. During the three months ended September 30, 2008 and 2007,
the provision for income taxes was $133,219 and $305,845,
respectively.




The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the three months ended September 30:





2008
                                                        
                                                        2007(Unaudited)
                                                        
                                                        (Unaudited)U.S.
      Statutory rates
                                                        
                                                        
                                                        34.0
                                                        %
                                                        34.0
                                                        %Foreign
      income not recognized in USA
                                                        
                                                        
                                                        (34.0
                                                        )
                                                        (34.0
                                                        )China
      income taxes
                                                        
                                                        
                                                        25.0
                                                        
                                                        33.0China
      income tax exemption
                                                        
                                                        
                                                        (13.0
                                                        )
                                                        (21.0
                                                        )Other
      item (a)
                                                        
                                                        
                                                        5.5
                                                        
                                                        -Total
      provision for income taxes
                                                        
                                                        
                                                        17.5
                                                        %
                                                        12.0
                                                        %






The
estimated tax savings due to the tax exemption for the three months ended
September 30, 2008 and 2007 amounted to $174,934 and $535,229, respectively. The
net effect on basic earnings per share if the income tax had been applied would
decrease basic earnings per share for the three months ended September 30, 2008
and 2007 by $0.01 and $0.03, respectively. The net effect on diluted earnings
per share if the income tax had been applied would decrease diluted earnings per
share for the three months ended September 30, 2008 and 2007 by $0.01 and $0.03,
respectively.





22


Taxes
payable





Taxes
payable consisted of the following:




September30,
                    2008
                    (Unaudited)
                  
                  
                  June30,2008VAT
      payable
                  
                  $
                  1,542,042
                  
                  
                  $
                  3,049,000Individual
      income tax withheld
                  
                  
                  464
                  
                  
                  
                  767Income
      tax payable
                  
                  
                  924,077
                  
                  
                  
                  1,518,278Housing
      property tax payable
                  
                  
                  9,930
                  
                  
                  
                  9,903Others
                  
                  
                  1,425,889
                  
                  
                  
                  53,304Total
      taxes payable
                  
                  $
                  3,902,402
                  
                  
                  $
                  4,631,252





Note
8 - Commitments and Contingent liabilities





Guarantees





As of
September 30, 2008, the Company has guaranteed $7.3 million of short term loan
for unrelated party, Shandong Kuangji Group, Inc. (“Shandong Kuangji”). The
Company is obligated to perform under the guarantee if Shandong Kuangji fails to
pay principal and interest payments when due. The maximum potential amount of
future undiscounted payments under the guarantee is about $8.0 million
including accrued interest. The Company did not record a liability for the
guarantee because management believes Shandong Kuangji is current in its payment
obligations, and the likelihood of the Company having to make good on the
guarantee is remote.





Detail of
guarantee amount to the unrelated parties as of September 30, 2008 is as
follows:





Short
      TermCompany
                  
                  Bank LoansShandong
      Kuangji Group Inc.
                  
                  $
                  7,315,000Total
                  
                  $
                  7,315,000





Commitments





Capital
commitments outstanding as of September 30, 2008 were as follows:





Property and
                      EquipmentNine
      months ended June 30, 2009
                    
                    $
                    234,080Thereafter
                    
                    $
                    -


23


Litigation





In the
Company’s ordinary course of business, the Company may be subject to certain
legal proceedings. After review and consultation with the Company’s legal
counsel, management believes that the outcome of the legal matters will not have
a materially adverse effect on the consolidated results of operations or
consolidated financial position of the Company.





Note
9 - Shareholders’ equity





Warrants





In
connection with the Share Purchase Agreement, the 4,375,000 warrants (“Investor
Warrants”) carry an exercise price of $2.60 and a 5-year term. The Investor
Warrants are callable if the Company’s shares trade at or above $8.00 per share
for 20 consecutive trading days and underlying shares are registered for resale.
The Investor Warrants contain standard adjustment provisions upon stock
dividend, stock split, stock combination, recapitalization, and a change of
control transaction.





Also in
connection with the Share Purchase Agreement, the Company issued 218,750
warrants (“Placement Agent Warrants”) to Brill Securities, the Placement Agent.
These Placement Agent Warrants have the same terms as the Investor Warrants.
These warrants were issued on August 8, 2007.





Concurrent
with the offering related to the Share Purchase Agreement, the Company issued
75,000 warrants to Chinamerica Fund, LLP and 25,000 warrants to Jeff Jenson
(collectively as “Lead Investor Warrants”) to compensate Chinamerica Fund LLP as
the lead investor and for Jeff Jenson in assisting in providing the shell of
West Coast Car Company. These warrants have the same terms as the Investor
Warrants except with an exercise price of $0.01 per share. In June 2008, Jeff
Jenson exercised the 25,000 warrants issued to him.





All
Investor Warrants, Placement Agent Warrants, and Lead Investor Warrants meet the
conditions for equity classification pursuant to SFAS No. 133 “Accounting for
Derivatives” and EITF 00-19, “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company's Own Stock.” Therefore, these
warrants were classified as equity and accounted for as common stock issuance
cost.


24





Weighted
                        
                        AverageWarrants
                        
                        Warrants
                        
                        Average
                          Exercise
                        
                        RemainingOutstanding
                        
                        Exercisable
                        
                        Price
                        
                        Contractual
                          LifeOutstanding,
      June 30, 2007
                        
                        
                        4,475,000
                        
                        4,475,000
                        
                        $
                        2.54
                        
                        4.87Granted
                        
                        
                        218,750
                        
                        218,750
                        
                        
                        2.60
                        
                        5.00Forfeited
                        
                        
                        -
                        
                        -
                        
                        
                        -
                        
                        -Exercised
                        
                        
                        219,805
                        
                        219,805
                        
                        
                        2.31
                        
                        -Outstanding,
      June 30, 2008
                        
                        
                        4,473,945
                        
                        4,473,945
                        
                        $
                        2.54
                        
                        3.88Granted
                        
                        
                        -
                        
                        -
                        
                        
                        -
                        
                        -Forfeited
                        
                        
                        -
                        
                        -
                        
                        
                        -
                        
                        -Exercised
                        
                        
                        -
                        
                        -
                        
                        
                        -
                        
                        -Outstanding,
      September 30, 2008 (unaudited)
                        
                        
                        4,473,975
                        
                        4,473,945
                        
                        $
                        2.54
                        
                        3.63





Stock
options





On
January 4, 2008, the Company adopted “Shengtai Pharmaceutical, Inc. 2007 Stock
Incentive Plan” (the “Stock Incentive Plan”). The Company believes that such
awards better align the interests of its employee with those of its
shareholders. Option awards are generally granted with an exercise price equal
to the fair value of the Company’s stock at the date of grant.





On May
14, 2008, the Company granted 500,000 stock options and 160,000 non-qualified
stock options pursuant to the Stock Incentive Plan. All options have an exercise
price of $3.34, which is the closing price on the date of grant, and expire five
years after the date of grant. All options vest over a period of three years on
a quarterly basis from the date of grant.





The
Company uses the Black-Scholes option pricing model which was developed for use
in estimating the fair value of options. Option pricing models require the input
of highly complex and subjective variables including the expected life of
options granted and the Company’s expected stock price volatility over a period
equal to or greater than the expected life of the options. Because changes in
the subjective assumptions can materially affect the estimated value of the
Company’s employee stock options, it is management’s opinion that the
Black-Scholes option valuation model may not provide an accurate measure of
the fair value of the Company’s employee stock options. Although the fair value
of employee stock options is determined in accordance with SFAS 123R using an
option pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market
transaction.


25


The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:





Weighted
      average risk-free interest rate
                  
                  
                  3.22
                  %Expected
      term
                  
                  4
      yearsExpected
      volatility
                  
                  
                  146
                  %Expected
      dividend yield
                  
                  
                  0
                  %Weighted
      average grant-date fair value per option
                  
                  $
                  3.34





The
volatility of the Company’s common stock was estimated by management based on
the historical volatility; the risk free interest rate was based on Treasury
Constant Maturity Rates published by the U.S. Federal Reserve for periods
applicable to the estimated life of the options; and the expected dividend yield
was based on the current and expected dividend policy. The fair value of the
options was based on the Company’s common stock price on the date the options
were granted. SFAS 123R allows use of the “simplified” method to
determine the term when other information is not available. Because the
Company does not have sufficient applicable history of employee stock options
activity, the Company uses the simplified method to estimate the life of the
options by taking the sum of the vesting period and the contractual life and
then calculating the midpoint which is the estimated term of the
options.





The stock
option activity was as follows:





Options
                    outstanding
                  
                  
                  Weighted
                    Average
                    Exercise Price
                  
                  
                  Aggregate
                    Intrinsic ValueOutstanding,
      June 30, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Granted
                  
                  
                  660,000
                  
                  
                  $
                  3.34
                  
                  
                  $
                  -Forfeited
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding,
      June 30, 2008
                  
                  
                  660,000
                  
                  
                  $
                  3.34
                  
                  
                  $
                  -Granted
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Forfeited
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding,
      September 30, 2008
                  
                  
                  660,000
                  
                  
                  $
                  3.34
                  
                  
                  $
                  -




26


Following
is a summary of the status of options outstanding at September 30, 2008:





Outstanding Options
                    
                    
                    Exercisable OptionsAverage
                      Exercise Price
                    
                    Outstanding Options
                    
                    
                    Average Remaining
                      Contractual Life
                    
                    
                    Average
                      Exercise Price
                    
                    
                    Exercisable
                      Options$
                    3.34
                    
                    
                    660,000
                    
                    
                    
                    4.62
                    
                    
                    $
                    3.34
                    
                    
                    
                    —





Compensation
expense from stock options recognized for the three months ended September 30,
2008 was $158,818. There were no such
expenses recognized for the three months ended September 30, 2007.





Note
10 - Statutory reserves





The laws
and regulations of the People’s Republic of China required that before a
Sino-foreign cooperative joint venture enterprise distributes profits to its
partners, it must first satisfy all tax liabilities, provide for
losses in previous years, and make allocations, in proportions determined at the
discretion of the board of directors, after the statutory reserve. The statutory
reserves include the surplus reserve fund, and the enterprise fund. These
statutory reserves represent restricted retained earnings.





Surplus reserve
fund





The
Company is required to transfer 10% of its net income, as determined in
accordance with the PRC accounting rules and regulations, to a statutory surplus
reserve fund until such reserve balance reaches 50% of the Company’s registered
capital.





The
transfer to this reserve must be made before distribution of any dividends to
shareholders. For the three months ended September 30, 2008 and 2007, the
Company did not transfer any fund to this reserve. The surplus reserve fund is
non-distributable other than during liquidation and can be used to fund previous
years’ losses, if any, and may be utilized for business expansion or converted
into share capital by issuing new shares to existing shareholders in proportion
to their shareholding or by increasing the par value of the shares currently
held by them, provided that the remaining reserve balance after such issue is
not less than 25% of the registered capital.





Enterprise
fund





The
enterprise fund may be used to acquire fixed assets or to increase the working
capital to expend on production and operation of the business. No minimum
contribution is required and the Company has not made any contribution to this
fund.





Note
11 - Retirement benefit plans





Regulations
in the PRC require the Company to contribute to a defined contribution
retirement plan for the benefit of all permanent employees. The Company is
required to make contributions to the state retirement plan at 15% to 20% of the
monthly base salaries of all current permanent employees. The PRC government is
responsible for the administration and benefit liability to retired employees.
For the three months ended September 30, 2008 and 2007, the Company made
contributions in the amounts of $135,036 and $57,351, respectively to the
Company’s retirement plan.


27


Note
12 - Subsequent event





Short term
loans





In
October 2008, the Company borrowed $1,465,000 loan from Xingye Bank in Weifang,
due June 2009, monthly interest-only payments, interest rate at 7.9695% per
annum, secured by certain properties.





Notes
payable





In
October 2008, the Company borrowed $1,465,000 notes payable of from Industrial
and Commercial Bank of China, due in March 2009, 0.05% transaction fee,
restricted cash required 50% of loan amount, secured by certain
properties.





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





Forward
looking statements





The
following is a discussion and analysis of the results of operations of 
Shengtai Pharmaceutical, Inc. (the "Company") and should be read in
conjunction with our financial statements and related notes contained in this
Form 10-Q. This Form 10-Q contains forward looking statements that involve risks
and uncertainties. You can identify these statements by the use of
forward-looking words such as "may", "will", "expect", "anticipate", "estimate",
"believe", "continue", or other similar words. You should read statements that
contain these words carefully because they discuss our future expectations,
contain projections of our future results of operation or financial condition or
state other "forward-looking" information. We believe that it is important to
communicate our future expectations to our investors. However, there may be
events in the future that we are unable to accurately predict or control. Those
events as well as any cautionary language in this Form 10-Q provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. You should be aware that the occurrence of the events described in
this Form 10-Q could have a material adverse effect on our business, operating
results and financial condition. Actual results may differ materially from
current expectations.





Overview





We are,
through our wholly-owned subsidiary, Shengtai Holding Inc. and its wholly-owned
subsidiary in the People’s Republic of China (“PRC”), Weifang Shengtai
Pharmaceutical Co., Ltd, a leading manufacturer and supplier of pharmaceutical
grade glucose in the PRC. We are a market leader and preferred domestic supplier
of pharmaceutical grade glucose with about 40% market share in China. We also
manufacture glucose, cornstarch and other products for the food and
beverage industry for the Chinese market.





Our
cornstarch production facility, which has a maximum capacity to produce 240,000
metric tons of cornstarch per year, was fully completed at the end of October
2007. This facility is close to our glucose production plants.


28


During
the three months ended September 30, 2008, we produced a total of 32,076 metric
tons of cornstarch, of which 17,253 metric tons were used to satisfy our own
glucose production needs. The excess cornstarch was or will be then sold to
outside customers who are in the pharmaceutical, food and beverage, and
industrial industries. The cornstarch sales amounted to $5.181 million and
accounted for 28.59% of our total sales revenue for the three months ended
September 30, 2008.





Corn is
the principal raw material for our cornstarch. Since mid-2007 corn and other
food prices have been climbing at an annual inflation rate of 15% in China,
mostly due to the shortages of pork and grain and the development of alternative
energy industry. In order to maintain a stable corn price, the Chinese
government put restrictions to control the development of industrial use of
corn, such as the conversion of corn into ethanol. Also the Chinese government
has put its corn reserve into market to help to maintain the corn price. In
September corn prices increased at an annual rate of only 2%.





We
consider these government policies have had and will continue to have positive
effects on our operations. Management believes that stable corn prices will help
maintain the availability of our raw materials and tend to stabilize our gross
profit margin over time, although market and economic conditions may continue to
have negative effects on our operations. However, in the three months ended
September 30, 2008 our margin has fallen from 24% to 18%, as discussed
below. The principal raw material for glucose is cornstarch. By using the
cornstarch manufactured from our own cornstarch production facility, we can
ensure our glucose products’ quality and consistency. Also, because our
cornstarch manufacturing facility is located next to our glucose manufacturing
facilities, we are able to eliminate shipping costs and lower glucose products’
manufacturing costs.





At the
end of July 2008, we completed construction of a new glucose manufacturing
facility to boost our production capacity. At the end of September 2008, the
facility passed its GMP inspection. The facility has a production capacity of
120,000 tons, and with our pre-existing glucose manufacturing facility, we now
have the production capacity of a total 180,000 tons (if necessary, can be
easily expandable to a total of 210,000 tons). From October 2008, we are
commencing start up operations in the new facility in stages with small
amounts first and building up to larger quantities.





During
the three months ended September 30, 2008, we produced a total of 21,291 metric
tons of glucose, and our sales of pharmaceutical grade glucose and other glucose
products were $8.207 million, or 45.30% of our revenues.





In
addition to our pharmaceutical glucose and cornstarch series of products,
we also produce other products such asdextrin, corn embryo, fibers, protein
powders, and phytin, which are used for food, beverage and industrial
production. The sales revenues generated from these products were $4.730
million, and constituted approximately 26.1% of our total sales revenues for the
three months ended September 30, 2007.





Management
believes that better living standards in China should lead to higher consumption
of our pharmaceutical glucose products in the PRC, especially the Dextrose
Monohydrate Transfusion Solution. In March 2008, the Chinese government
announced its plan to give insurance coverage to more rural residents in
China. That is to say, more and more farmers in China can afford the
expense of healthcare. At the same time, despite the current deceleration in
growth, we believe that the continuing economic growth, the rising purchasing
power of domestic market, as well as the public awareness of quality health care
products, will resume as drivers in the demand for our pharmaceutical glucose
products.





We
believe that production capacity and product quality are key factors in
maintaining and improving our competitive position and enhancing our long
term competitiveness. As a result, we have been placing emphasis on (i) product
quality control, (ii) enhancement of operating efficiency and employee
competence, (iii) expansion of geographical coverage and diversification of
customer base, and (iv) expansion of our production
capacity.


29


Our rate
of quality output (output conforming to pharmaceutical-grade glucose product
specifications) is maintained at 100%. We have a three-tier quality control
system and a well equipped quality inspection center to ensure timely detection
and then reprocessing of non-conforming products.





At the
end of September 2008, the new glucose production facility passed its GMP
inspection, and our facilities and many of our products are fully certified for
GMP, ISO9002 and HACCP international quality standards, and globally certified
HALAL, KOSHER and IP GMO.





Our sales
network presently covers almost all provinces of mainland China except Tibet
Autonomous Region. We have four representative offices in Chengdu, Guangzhou,
Hangzhou and Nanchang to strengthen our domestic sales network. We believe that
these offices help us to better interact with our customers, reinforce our sales
force and improve our corporate image.





At the
same time, we have exported our products to over 70 countries, including Japan,
Singapore, Korea, Australia, Russia and India. For the three months ended
September 30, 2008, our international sales comprised approximately 11.7% of our
total sales revenues.





The
target customers of our company are drug makers, medical supply companies,
medical supply exporters and food and beverage companies.





We
constantly strive to broaden and diversify our customer base. We believe that a
broader customer base will mitigate our reliance on certain customers. We
believe a broader market for our products can increase demand for our products,
reduce our vulnerability to market changes, and provide additional areas of
growth in the future. For the three months ended September 30, 2008, our top ten
customers accounted for 35% for our total sales revenue.





Results
of Operations





The
following table sets forth our statements of operations for the three months
ended September 30, 2008 and 2007:





Three
Months Ended September 30, 2008 Compared with Three Months Ended September 30,
2007





The following table shows our
operating results for the three months ended September 30, 2007 and 2008.





Three months
                    ended
                    September 30,
                    2008
                  
                  Three months
                    ended
                    September 30,
                    2007Sales
      Revenue
                  
                  
                  18,123,728
                  
                  19,373,069Costs
      of Goods Sold
                  
                  
                  14,931,187
                  
                  14,779,032Gross
      Profit
                  
                  
                  3,192,541
                  
                  4,594,037Sales,
      General and Administrative Expenses
                  
                  
                  2,429,790
                  
                  1,696,555Operating
      Income
                  
                  
                  762,751
                  
                  2,897,482Other
      Net Income (Expense)
                  
                  
                  264
                  
                  (339,126
                  )Income
      before Income Taxes
                  
                  
                  763,015
                  
                  2,558,356Provision
      for Income Taxes
                  
                  
                  133,219
                  
                  305,845Net
      income
                  
                  
                  629,796
                  
                  2,252,511




30




The following table shows the
breakdown of production and sales by product categories, and between internal
use and external sales of cornstarch, for the three months ended September 30,
2007 and 2008.





Product
                                                                                                
                                                                                                Metric
      Tons
                                                                                                  Three months ended
                                                                                                  September
      30, 2008
                                                                                                
                                                                                                Metric
      Tons
                                                                                                  Three months ended
                                                                                                  September
      30, 2007
                                                                                                
                                                                                                
                                                                                                Sales
      Revenue (%)
                                                                                                  Three months ended
                                                                                                  September
      30, 2008
                                                                                                
                                                                                                
                                                                                                Sales
      Revenue (%)
                                                                                                  Three months ended
                                                                                                  September
      30, 2007Glucose
                                                                                                
                                                                                                21,291
                                                                                                
                                                                                                24,181
                                                                                                
                                                                                                $
                                                                                                8,207,000(45.3%)
                                                                                                
                                                                                                $
                                                                                                9,014,766(46.53%)Cornstarch-Internal
                                                                                                
                                                                                                17,253(53.8%)
                                                                                                
                                                                                                11,164(30%)Cornstarch-Sales
                                                                                                
                                                                                                14,823(46.1%)
                                                                                                
                                                                                                26,073(70%)
                                                                                                
                                                                                                $
                                                                                                5,181,000(28.59%)
                                                                                                
                                                                                                $
                                                                                                6,025,748(31.10%)Total
      Cornstarch
                                                                                                
                                                                                                32,076(100%)
                                                                                                
                                                                                                37,237(100%)Other
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                $
                                                                                                4,730,000(26.1%)
                                                                                                
                                                                                                $
                                                                                                4,256,379(21.97%)Total
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                $
                                                                                                18,123,728(100%)
                                                                                                
                                                                                                $
                                                                                                19,373,069(100%)





Overview





·
            Since mid-2007 corn prices have
      increased at an annual rate of 15%, until September 2008, when the
      increase was only at a rate of 2% per year, following the PRC
      government’s restrictions on industrial uses
      of corn and the introduction of the government strategic corn reserve into
      the market.


·
            After our new cornstarch plant
      was completed in October 2007 we increased our cornstarch production with
      the objectiveof
      producing our own cornstarch raw material for our increasing production
      capacity for pharmaceutical grade glucose. As our new glucose plant was
      only completed in July 2008 and is being put into service on a gradual
      basis, we have been producing more cornstarch than we could use and
      selling the excess to customers. In the fiscal year ended June 30, 2008 we
      used 37% of our cornstarch production as raw materials in our glucose
      production and sold the remaining 63% to customers. In the three months
      ended September 30, 2008, we used 53.8% of
      our cornstarch internally and sold 46.1% to
    customers.


·
            Demand for cornstarch plummeted
      in August and September 2008, as food prices dropped sharply amidst global
      financial turmoil. For example, pork prices dropped40% in those months. In addition
      our sales were adversely affected by PRC government restrictions on
      manufacturing and transportation during the Beijing Olympics in August,
      which were aimed at reducing pollution. The resulting excess inventories
      (producedat very high corn prices in the
      cost of goods) led to aggressive price-cutting in the cornstarch market,
      sharply reducing margins. Some cornstarch companies are stopping
      cornstarch production in this
market.


·
            Because we have the ability to
      raise or lower our production of cornstarch, in September we began to cut
      production to a level closer to our own internal needs. However, the
      combination of high corn prices built into our inventory and the much
      lower market prices
      led to a sharp reduction in our sales, profit margin and net income for
      the three months ended September 30,
  2008.


·
            Our objective in adjusting our
      cornstarch production is to improve our margins, as we ramp up glucose
      production in our new
  plant.


·
            We plan to produce cornstarch to
      supply our own increasing needs and will produce more for outside sales if
      future market prices of corn and cornstarch make it
      economic.


31


Sales
revenue for the three months ended September 30, 2008 was $18,123,728, a
decrease of $1,249,341, or 6.45% compared with the corresponding period in 2007.
The decrease in sales revenue resulted from the decrease of our domestic sales
of cornstarch and glucose. Our sales were impacted by government restrictions on
manufacturing and transportation during the Beijing Olympics in August and
sharply lower prices of cornstarch since August. However, Management believes
that cornstarch inventories are decreasing and will lead to higher prices in the
future. Management also believes that in the long run most of our cornstarch
products will be consumed internally to manufacture glucose.





Costs of
goods sold for the three months ended September 30, 2008 was $14,931,187, an
increase of $152,155, or 1.00% compared with the corresponding period in 2007.
The increase in cost of goods sold primarily resulted from increased corn prices
and decreased demand resulting in higher per unit costs.





Gross
profit for the three months ended September 30, 2008 was $3,192,541, a decrease
of $1,401,496, or 30.51% compared with the corresponding period in 2007. The
decrease in gross profits resulted from the decrease in sales and the increase
in cost of goods sold compared with the same period in 2007.





Gross
profit margin for the three months ended September 30, 2008 was 17.6%, a
decrease from 23.7% for the same period in 2007. The reasons for the decrease in
gross profit margin were because of lower sales, increased raw material costs,
lower production, and higher production cost per unit.





Selling,
General and Administrative expenses for the three months ended September 30,
2008 were $2,429,790, an increase of $733,235, or 43.22% compared with the
corresponding period in 2007. The increase in our Selling, General and
Administrative expenses was mainly the result of increased labor cost and
increased bad debt expenses and in our China operation, as well as more
administrative expenses, such as consulting fees, legal fees, audit fees, and
investor relations expenses as a reporting company. We incurred $158,818 in
non-cash stock option expenses for the three months ended September 30,
2008.





Net
income for the three months ended September 30, 2008 was $629,796, a decrease of
$1,622,715 or 72.04% compared with the corresponding period in 2007. The
decrease in net income was primarily due to the decrease in our sales volume,
the increase of cost of goods sold, and increased selling, general, and
administrative expenses.





Liquidity and Capital Resources





Operating
Activities





Three
Months Ended September 30, 2008 and 2007





Net cash
provided by operating activities for the three months ended September 30, 2008
was $2,462,312, a decrease of 14.3%, or $410,503, from $2,872,815 provided by
operating activities for the same period in 2007. The decrease in net cash
provided by operations was principally due to the decrease in net income and
payments of tax payable and accounts payable. Unless this recent unfavorable
trend moderates, we may need to seek outside financing in very challenging
financial market conditions. Notes receivable and other receivables are
classified as operating cash flows because these assets are used for operating
purposes. These assets are mainly used to purchase our raw materials and fund
our normal operations.


32


Investing
Activities





Three
Months Ended September 30, 2008 and 2007





Net cash
used in investing activities for the three months ended September 30, 2008 was
$1,723,339, a decrease of 49.5%, or $1,687,154 from $3,410,483 used in investing
activities for the same period in 2007. The decrease of net cash used in
investing activities resulted from capital expenditures for building our
cornstarch and glucose factories in fiscal year 2007. During the three months
ended September 30, 2007, most of the cash had been spent on the construction of
the new glucose manufacturing complex and the construction of a new dormitory.
Less capital expenditure was spent during the three months ended September 30,
2008. The new glucose manufacturing facility was completed in July 2008.
Management believes that we will have limited capital expenditures during the
balance of the fiscal 2009 year.





Financing
Activities





Three
Months Ended September 30, 2008 and 2007





Net cash
used in financing activities for the three months ended September 30, 2008 was
$2,570,640, a decrease of 43.4%, or $1,970,921 from $4,541,561 used in the
financing activities for the same period in fiscal 2007. The decrease of net
cash used in financing is mainly because the Company has more repayments of
notes payable and short term loans for the three months ended September 30, 2007
than for the three months ended September 30, 2008.





Loans





Other
than our private placement financing in 2007, we have financed our operations
primarily through bank loans and operating income. We had a total of $21,740,180
short term bank loans outstanding as of September 30 2008. The loans were
secured by our properties or guaranteed by unrelated third parties. The terms of
all these short term loans are for one year. We have never defaulted on any
of these loans.





We have
$2,267,020 non-current payables as of September 30 2008 and $2,653,995 as of
June 30, 2008.





Guarantees





We have
guaranteed certain borrowings of other unrelated third parties including short
term bank loans. The total guaranteed amounts were $7,315,000 as of September
30, 2008. The total amount of guarantees provided to us by unrelated third
parties is $13,693,680.





Future
cash commitments





The final
cost of our new glucose facility was approximately $32 million, out of which the
building accounted for approximately $10 million and machinery and equipment
approximately $22 million. We are commencing start up operations in the new
facility in stages with small amounts first and building up to larger
quantities.


33


We
estimate the need for $6 million to $10 million per year to run the new glucose
facilities at full capacity. However we are ramping up our production gradually,
so the exact amount required will be determined based on both   the market
demand of our products and the time needed for these facilities to run at full
capacity. We will carefully review our financial condition and consider
financing either with the cash internally generated, bank loans, or with
additional equity.





Critical
Accounting Policies and Estimates





We have
disclosed in the notes to our financial statements those accounting policies
that we consider to be significant in determining our results of operations and
our financial position which are incorporating by reference herein. We believe
that the following reflect the more critical accounting policies that currently
affect our financial condition and results of operations.





Revenue
recognition





We
utilize the accrual method of accounting. Revenue is recognized when the
products are delivered, title has passed, and collectibility is reasonably
assured. Sales revenue represents the invoiced value of goods, net of
value-added tax (VAT).





Use
of estimates





In
preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting year. Significant estimates, required by
management, include the recoverability of long-lived assets and the valuation of
inventories. Actual results could differ from those estimates.





Accounts
Receivable





Accounts
receivable are stated at net realizable value. Any allowance for doubtful
accounts is established based on the management’s assessment of the
recoverability of accounts and other receivables. Management reviews our
accounts receivable on a regular basis to determine if the bad debt allowance is
adequate. An estimate for doubtful accounts is made when collection of the full
amount is no longer probable. Known bad debts are written off as
incurred.





Property
and equipment





Property
and equipment are stated at cost less accumulated depreciation. Depreciation is
computed using straight-line method with a 3% residual value over the estimated
useful lives of the assets.





Foreign
currency translation





Our
functional currency is Renminbi(or “RMB”). Foreign
currency transactions are translated at the applicable rates of exchange in
effect at the transaction dates. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are translated at the applicable
rates of exchange in effect at that date. Revenues and expenses are translated
at the average exchange rates in effect during the reporting period.


34


Translation
adjustments arising from the use of different exchange rates from period to
period are included as a component of stockholders’ equity as “Accumulated Other
Comprehensive Income”. Gains and losses resulting from foreign currency
translations are included in Accumulated Other Comprehensive
Income.





Recently issued accounting
pronouncements





Included
in the Notes to the Financial Statements.





Item
4. Controls and Procedure s





(a)
 Disclosure Controls and Procedures.





Mr.
Qingtai Liu, our Chief Executive Officer, and Ms. Yiru Melody Shi, our Chief
Financial Officer, evaluated the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, as of the end of the period covered by this
Report. Based on that evaluation, our officers concluded that due to the
material weaknesses in the internal control over financial reporting as
disclosed in the Section of “Management’s Report on Internal Control over
Financial Reporting,” in our annual report on Form 10-K for the year ended June
30, 2008, our disclosure controls and procedures were ineffective and are not
adequately designed to ensure that the information required to be disclosed by
us in the reports we submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the applicable
rules and forms and that such information was accumulated and communicated to
our chief executive officer and chief financial officer, in a manner that
allowed for timely decisions regarding required disclosure.





Changes
in Internal Control Over Financial Reporting





(b) No
change in our internal control over financial reporting has occurred during the
quarter ended September, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.




A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control systems are met.
Because of the inherent limitations in all control systems no evaluation of
controls can provide absolute assurance that all control issues, if any, within
a company have been detected. Such limitations include the fact that human
judgment in decision-making can be faulty and that breakdowns in internal
control can occur because of human failures, such as simple errors or mistakes
or intentional circumvention of the established process.





Other
Information





The
certifications of our Chief Executive Officer and Chief Financial Officer
attached as Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q
include, in paragraph 4 of such certifications, information concerning our
disclosure controls and procedures and internal controls over financial
reporting. Such certifications should be read in conjunction with the
information contained in this Item 4 for a more complete understanding of the
matters covered by such certifications.


35


PART II -
OTHER INFORMATION.





Item
1A. Risk Factors.





Our
failure to contribute to certain designated statutory reserve funds prevents us
for paying any dividends to our shareholders and this may adversely affect the
value of your investment.





Under the
PRC laws, Weifang Shengtai, a PRC wholly foreign -owned enterprise, is required
to set aside 10% of its net income each year to fund certain designated
statutory reserve funds until such reserve balance reaches 50% of its registered
capital.  50% of our registered capital is $7,502,998. Our designated
statutory reserve funds were $2,894,902 as of September 30, 2008. These
reserves are not distributable other than during liquidation and can be used to
fund previous years’ losses, if any, and may be utilized for business expansion
or converted into share capital by issuance of new shares to
existing shareholders in proportion to their shareholding or by increasing
the par value of the shares currently held by them, provided that the remaining
reserve balance after such issue is not less than 25% of the registered capital.
 As of September 30, 2008, Weifang Shengtai has not reached the required
contributions to make payment of any dividends to its shareholders until such
contributions have been made. We currently intend to retain all future earnings
for use in the operation and expansion of our business.  However, our
inability to pay dividends may adversely affect the market value of our common
stock.





Other
than the above, there are no material changes in our risk factors from those
disclosed in our Annual Report on Form 10-K filed with the SEC on September 29,
2008.





Item
6. Exhibits





(a)  
Exhibits





Exhibit
      No.
                    
                    Description31.1
                    
                    Certification
      pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Qingtai
      Liu*;31.2
                    
                    Certification
      pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e), as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Yiru Shi*
      ;32.1
                    
                    Certification
      pursuant to 18 U.S.C. 1350
**.


*Filed herewith.


** Filed
on November 13, 2008 with our original Form 10-Q.




36




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.





Shengtai
      Pharmaceutical, Inc.
                    (Registrant)Dated: August 7, 2009
                  /s/ Qingtai
      LiuQingtai
      LiuChief
      Executive OfficerDated:
      August 7, 2009
                  /s/ Yiru
      ShiYiru
      ShiChief
      Financial Officer





37