**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





(Mark
      One)





x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934.





FOR
      THE
      QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007




o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934.





For
      the
      transition period from ____________ to ______________





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)





011-86-536-6295728


(Issuer's
      telephone number)




Indicate
      by check mark whether the issuer (1) filed all reports required to be filed
      by
      Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
      12 months (or for such shorter period that the registrant was required to file
      such reports), and (2) has been subject to such filing requirements for the
      past
      90 days. Yes x No o





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





Large
      accelerated filer o   Accelerated
      filer o   Non-accelerated
      filer x





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


Yes o No x











APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Sections 12, 13 or 15(d) of the Securities Act of 1934
      subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o





APPLICABLE
      ONLY TO CORPORATE SSUERS





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date: 18, 962,500 shares of Common Stock,
      $.001 par value, were outstanding as of November 9, 2007







**SHENGTAI
        PHARMACEUTICAL, INC.**
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2007 AND 2006**
 **(UNAUDITED)**
 
 **TABLE
        OF CONTENTS**
 
 **Page(s)**
 
 Consolidated
                  Balance Sheet as of September 30, 2007 and June 30, 2007
              1Consolidated
                  Statements of Income and Other Comprehensive Incomefor
                  the Three Months ended September 30, 2007 and 2006
              2Consolidated
                  Statements of Shareholders’ Equity
              3Consolidated
                  Statements of Cash Flowsfor
                  the Three Months ended September 30, 2007 and 2006
              4Notes
                  to Consolidated Financial Statements
              5





**PART
      I - FINANCIAL INFORMATION**




**Item
      1.**  **Financial
      Statements.**


SHENGTAI
                    PHARMACEUTICAL INC. AND SUBSIDIARIESCONSOLIDATED
                    BALANCE SHEETSAS
                    OF SEPTEMBER 30, 2007 AND JUNE 30,
                    2007
  September
                    30,
                
                June
                    30,2007
                
                2007(Unaudited)ASSETSCURRENT
                    ASSETS:Cash
                
                $
                1,382,647
                
                $
                6,420,439Restricted
                    cash
                
                
                2,634,400
                
                
                5,628,500Accounts
                    receivable, net of allowance for doubtful accounts of
                    $437,408and
                    $431,178 as of September 30, and June 30, 2007,
                    respectively
                
                
                6,384,033
                
                
                5,779,967Notes
                    receivable
                
                
                1,854,093
                
                
                984,675Other
                    receivables
                
                
                2,821,218
                
                
                3,484,484Other
                    receivables - related parties
                
                
                1,006,789
                
                
                2,491,656Other
                    receivables - shareholder
                
                
                1,282,378
                
                
                1,229,625Loan
                    to related party
                
                
                667,000
                
                
                657,500Inventories
                
                
                3,729,407
                
                
                4,449,267Prepayments
                
                
                108,250
                
                
                140,376Total
                    current assets
                
                
                21,870,215
                
                
                31,266,489PLANT
                    AND EQUIPMENT, net
                
                
                35,204,072
                
                
                30,178,074OTHER
                    ASSETS:Investment
                    in Changle Shengshi Redian Co., Ltd.
                
                
                2,990,876
                
                
                2,675,678Loan
                    to related party - non-current
                
                
                400,200
                
                
                394,500Prepayments
                    - non-current
                
                
                7,992,765
                
                
                7,429,371Intangible
                    assets - land use right, net of accumulated amortization
                
                
                2,146,489
                
                
                1,816,021Total
                    other assets
                
                
                13,530,330
                
                
                12,315,570Total
                    assets
                
                $
                70,604,617
                
                $
                73,760,133LIABILITIES
                    AND SHAREHOLDERS' EQUITYCURRENT
                    LIABILITIES:Accounts
                    payable
                
                $
                3,195,664
                
                $
                3,807,997Accounts
                    payable - related party
                
                
                1,122,569
                
                
                949,992Notes
                    payable - banks
                
                
                4,268,800
                
                
                8,942,000Short
                    term loans
                
                
                16,394,860
                
                
                18,870,250Accrued
                    liabilities
                
                
                183,695
                
                
                229,643Other
                    payable
                
                
                1,741,194
                
                
                1,526,903Employee
                    loans
                
                
                513,584
                
                
                596,516Third
                    party loan
                
                
                322,872
                
                
                318,274Customer
                    deposit
                
                
                2,008,691
                
                
                796,228Long
                    term loan - current maturity
                
                
                386,860
                
                
                381,350Taxes
                    payable
                
                
                2,726,465
                
                
                2,048,932Total
                    current liabilities
                
                
                32,865,254
                
                
                38,468,085LONG
                    TERM LIABILITIESOther
                    payable - noncurrent
                
                
                3,411,179
                
                
                3,661,472Total
                    long term liabilities
                
                
                3,411,179
                
                
                3,661,472Total
                    liabilities
                
                
                36,276,433
                
                
                42,129,557COMMITMENTS
                    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,18,875,000
                    and 18,875,000 shares issued and outstanding as ofSeptember
                    30, and June 30, 2007, respectively
                
                
                18,875
                
                
                18,875Paid-in
                    capital
                
                
                19,163,549
                
                
                19,163,549Statutory
                    reserves
                
                
                1,735,484
                
                
                1,735,484Retained
                    earnings
                
                
                12,138,181
                
                
                9,885,670Accumulated
                    other comprehensive income
                
                
                1,272,095
                
                
                826,998Total
                    shareholders' equity
                
                
                34,328,184
                
                
                31,630,576Total
                    liabilities and shareholders' equity
                
                $
                70,604,617
                
                $
                73,760,133
  The
          accompanying notes are an integral part of this
          statements.
 -1-
  SHENGTAI
                    PHARMACEUTICAL INC. AND SUBSIDIARIESCONSOLIDATED
                    STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOMEFOR
                    THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006(UNAUDITED)
  Three
                    months endedSeptember
                    30,2007
                
                2006SALES
                    REVENUE
                
                $
                19,373,069
                
                $
                10,599,321COST
                    OF SALES
                
                
                14,779,032
                
                
                8,159,877GROSS
                    PROFIT
                
                
                4,594,037
                
                
                2,439,444SELLING,
                    GENERAL AND ADMINISTRATIVE EXPENSES
                
                
                1,696,555
                
                
                971,868INCOME
                    FROM OPERATIONS
                
                
                2,897,482
                
                
                1,467,576OTHER
                    (EXPENSE) INCOME:Earnings
                    on equity investment
                
                
                148,779
                
                
                4,524Non-operating
                    income
                
                
                39,747
                
                
                58,794Non-operating
                    expense
                
                
                (177,349
                )
                
                -Interest
                    expense and other charges
                
                
                (416,464
                )
                
                (17,415
                )Interest
                    income
                
                
                66,161
                
                
                27,967Other
                    income (expense), net
                
                
                (339,126
                )
                
                73,870INCOME
                    BEFORE PROVISION FOR INCOME TAXES
                
                
                2,558,356
                
                
                1,541,446PROVISION
                    FOR INCOME TAXES
                
                
                305,845
                
                
                57,415NET
                    INCOME
                
                
                2,252,511
                
                
                1,484,031OTHER
                    COMPREHENSIVE INCOME:Foreign
                    currency translation adjustments
                
                
                445,097
                
                
                106,845COMPREHENSIVE
                    INCOME
                
                $
                2,697,608
                
                $
                1,590,876EARNINGS
                    PER SHAREBasic
                
                $
                0.12
                
                $
                0.15Diluted
                
                $
                0.11
                
                $
                0.15WEIGHTED
                    AVERAGE NUMBER OF SHARESBasic
                
                
                18,875,000
                
                
                10,125,000Diluted
                
                
                19,697,359
                
                
                10,125,000
  The
          accompanying notes are an integral part of this statements.
 -2-
  SHENGTAI
                    PHARMACEUTICAL INC. AND SUBSIDIARIESCONSOLIDATED
                    STATEMENTS OF SHAREHOLDERS' EQUITY
  Common
                      stock
                
                
                
                Capital
                
                Retained
                    earnings
                
                Accumulated
                    otherShares
                
                Par
                  value
                
                Paid-incapital
                
                contributionreceivable
                
                Statutory
                    reserves
                
                Unrestricted
                
                comprehensiveincome
                
                TotalsBALANCE,
                    June 30, 2006
                
                
                10,125,000
                
                $
                10,125
                
                $
                3,915,871
                
                $
                (1,925,996
                )
                $
                1,001,088
                
                $
                3,470,940
                
                $
                185,402
                
                $
                6,657,430Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,484,031
                
                
                
                
                
                1,484,031Foreign
                    currency translation adjustments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                106,845
                
                
                106,845BALANCE,
                    September 30, 2006 (Unaudited)
                
                
                10,125,000
                
                $
                10,125
                
                $
                3,915,871
                
                $
                (1,925,996
                )
                $
                1,001,088
                
                $
                4,954,971
                
                $
                292,247
                
                $
                8,248,306Issuance
                    of common stock
                
                
                8,750,000
                
                
                8,750
                
                
                15,247,678
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15,256,428Capital
                    contribution received
                
                
                
                
                
                
                
                
                
                
                
                1,925,996
                
                
                
                
                
                
                
                
                
                
                
                1,925,996Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,665,095
                
                
                
                
                
                5,665,095Adjustment
                    to statutory reserve
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                734,396
                
                
                (734,396
                )
                
                
                
                
                -Foreign
                    currency translation adjustments
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                534,751
                
                
                534,751BALANCE,
                    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
                
                $
                34,328,184
 The
          accompanying notes are an integral part of this statements.
 -3-
 SHENGTAI
                    PHARMACEUTICAL INC. AND SUBSIDIARIESCONSOLIDATED
                    STATEMENTS OF CASH FLOWSFOR
                    THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006(UNAUDITED)
  2007
                
                2006CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    income
                
                $
                2,252,511
                
                $
                1,484,031Adjustments
                    to reconcile net income to cashprovided
                    by (used in) operating activities:Depreciation
                
                
                686,653
                
                
                354,249Amortization
                
                
                11,809
                
                
                10,502Allowance
                    for bad debts
                
                
                -
                
                
                136,128Loss
                    on disposal of land use right
                
                
                5,903
                
                
                -Earnings
                    on equity investment
                
                
                (148,779
                )
                
                (4,524
                )Change
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                (516,885
                )
                
                (436,640
                )Notes
                    receivable
                
                
                (860,590
                )
                
                (375,932
                )Other
                    receivables
                
                
                479,437
                
                
                (129,626
                )Other
                    receivables - related party
                
                
                1,510,151
                
                
                -Other
                    receivables - shareholder
                
                
                (34,668
                )
                
                -Inventories
                
                
                778,620
                
                
                (283,529
                )Prepayments
                
                
                33,913
                
                
                (458,101
                )Prepayments
                    - related party
                
                
                -
                
                
                (437,828
                )Accounts
                    payable
                
                
                (1,529,592
                )
                
                267,953Accounts
                    payable - related party
                
                
                31,921
                
                
                (195,129
                )Accrued
                    liabilities
                
                
                (77,963
                )
                
                88,400Other
                    payable
                
                
                (110,003
                )
                
                65,193Customer
                    deposit
                
                
                1,192,497
                
                
                (13,240
                )Taxes
                    payable
                
                
                643,363
                
                
                (166,804
                )Net
                    cash provided by (used in) operating activities
                
                
                4,348,298
                
                
                (94,897
                )CASH
                    FLOWS FROM INVESTING ACTIVITIES:Acquisition
                    of equity investment
                
                
                -
                
                
                (912,332
                )Purchase
                    plant and equipment
                
                
                (19,671
                )
                
                (131,565
                )Additions
                    to construction in progress
                
                
                (2,469,967
                )
                
                (3,247,404
                )Acquisition
                    of land use right
                
                
                (314,500
                )
                
                -Purchase
                    of software program
                
                
                (5,298
                )
                
                -Advances
                    on plant and equipment purchase
                
                
                (2,076,530
                )
                
                (827,866
                )Net
                    cash used in investing activities
                
                
                (4,885,966
                )
                
                (5,119,167
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES:Decrease
                    in restricted cash
                
                
                3,046,580
                
                
                656,289Borrowings
                    on notes payable - banks
                
                
                1,324,600
                
                
                4,245,232Payments
                    on notes payable - banks
                
                
                (6,093,160
                )
                
                (5,529,920
                )Borrowings
                    on short term loans
                
                
                887,482
                
                
                7,754,456Payments
                    on short term loans
                
                
                (3,616,158
                )
                
                (842,056
                )Borrowings
                    on employee loans
                
                
                -
                
                
                17,595Payments
                    on employee loans
                
                
                (90,905
                )
                
                (164,641
                )Payments
                    on long term loans
                
                
                -
                
                
                (879,760
                )Net
                    cash (used in) provided by financing activities
                
                
                (4,541,561
                )
                
                5,257,195EFFECTS
                    OF EXCHANGE RATE CHANGE IN CASH
                
                
                41,437
                
                
                5,932(DECREASE)
                    INCREASE IN CASH
                
                
                (5,037,792
                )
                
                49,063CASH,
                    beginning of period
                
                
                6,420,439
                
                
                502,457CASH,
                    end of period
                
                $
                1,382,647
                
                $
                551,520
  The
          accompanying notes are an integral part of this statements.
  -4-
  SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (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. In the
        State
        of California, the Company has operated as West Coast Car Company d/b/a So
        Cal
        Car Company. The Company operated as a “traditional” pre-owned dealership,
        whereby it sought out vehicles from various sources, and then would sell
        the
        vehicles to the general public. Starting from 2007, the Company changed its
        business to acquiring, or merging with, an operating business.
 
 On
        May
        15, 2007, the Company entered into a share exchange agreement (the “Share
        Exchange Agreement”) with the shareholders of Shengtai Holding Inc. (“SHI”).
        Pursuant to the Share Exchange Agreement, Qingtai Liu and Chenghai Du,
        shareholders of all the issued and outstanding shares of common stock of
        SHI,
        exchanged all SHI’s common stock for 9,125,000 newly-issued shares of the
        Company. As a result of the Share Exchange Agreement and the Share Purchase
        Agreement, the Company acquired all of the outstanding capital stock of SHI.
        Because SHI owns 100% of Weifang Shengtai Pharmaceutical Co., Ltd (hereinafter
        known as “Weifang Shengtai”), Weifang Shengtai is now an indirect wholly-owned
        subsidiary of the Company. For
        accounting purposes, t he
        acquisition of SHI has been treated as a recapitalization of SHI with SHI
        as the
        acquirer. The historical financial statements prior to May 15, 2007 are those
        of
        SHI.
 
 In
        addition, on May 15, 2007, the Company entered into and consummated a share
        purchase agreement (the “Share Purchase Agreement”) with nineteen accredited
        investors (the “Purchasers”). Pursuant to the Share Purchase agreement, the
        Purchasers purchased from the Company an aggregate of 8,750,000 shares of
        common
        stock and 4,375,000 attached warrants for $2.00 per share (or an aggregate
        purchase price of $17,500,000) and for total net proceeds of $15,256,428.
        The
        exercise price of the warrants $2.60 per share and the term of the warrants
        is
        five years.
  In
        conjunction with this Share Purchase Agreement, Mr. Qingtai Liu, the controlling
        stockholder and chief executive officer, placed an aggregate 5,000,000 shares
        of
        common stock in an escrow account held with Tri-State Title & Escrow, LLC
        upon closing of the Share Purchase Agreement. Pursuant to the Share Purchase
        Agreement, one half of the escrowed shares are to be released to the Purchasers
        on a pro-rated basis if the audited consolidated financial statements of
        the
        Company prepared in accordance with US generally accepted accounting principles
        (GAAP) do not reflect at least after-tax net income of at least $7,000,000
        or
        fully diluted earnings per share of $0.33 for the fiscal year ended June
        30,
        2007; and if the audited consolidated financial statements of the Company
        prepared in accordance with US
        GAAP do not
        reflect at least an after-tax net income of $9,000,000 or fully diluted earnings
        per share of $0.43 for the fiscal year ending June 30, 2008, the second half
        of
        the escrow shares will be distributed on a pro-rated basis to the Purchasers.
        The Company determined that the threshold for the year ended June 30, 2007
        has
        been met.
 
 SHI was
        incorporated in the state of New Jersey on February 27, 2006. The Company,
        through its Chinese subsidiary, **** Weifang
        Shengtai, manufactures and distributes raw drug materials (glucose, dehydrate
        glucose) and drug supplements (starch, dextrin, polyacrylic acid
        resin).
  -5-
 
 SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)




Weifang
        Shengtai was established in Changle County, Weifang City, Shandong Province,
        People’s Republic of China on February 4, 1999. Mr. Qingtai Liu and his
        management team were the original shareholders.
 
 On
        December 25, 2003, Bio-One Corporation (referred to as “Bio-One”), a Nevada
        corporation signed a joint venture agreement with Weifang Shengtai. Pursuant
        to
        the Joint Venture Agreement, Bio-One acquired a 51% interest in Weifang Shengtai
        for $2,000,000 cash, to fund its share of the registered capital, and 2,090,000
        shares of Bio-One’s Series A preferred stock to the former shareholders of
        Weifang Shengtai. The business term was for 20 years with registered capital
        of
        $3,920,000. Bio-One paid its $2,000,000 contribution in 2004. The original
        shareholders contributed a total of $1,920,000 between 1999 and
        2004.
 
 On
        April
        19, 2006, pursuant to a shareholders’ resolution, 37 Chinese shareholders of
        Weifang Shengtai transferred their 17.95% interest in Weifang Shengtai to
        Mr.
        Qingtai Liu for RMB 5,628,880 ($703,610). On June 3, 2006, the equity exchange
        was approved by the local branch of the Ministry of Commerce (MOC) in
        Weifang.
 
 On
        June
        20, 2006, SHI signed an agreement to acquire a 100% ownership in Weifang
        Shengtai from Bio-One Corporation which owned a 51% interest in Weifang Shengtai
        and Mr. Qingtai Liu who owned the remaining 49% interest. Mr. Qingtai Liu,
        who
        is one of the founding shareholders of Weifang Shengtai, sold his 49% interest
        in Weifang Shengtai to SHI for RMB 15 million (approximately $1,925,996),
        this
        amount is paid in May 2007. Bio-One sold its 51% interest in Weifang Shengtai
        to
        SHI for $1,000,000 in cash and the return of 4,180,000 Series A preferred
        shares
        of Bio-One owned by Mr. Qingtai Liu. Weifang Shengtai became a wholly foreign
        owned entity or “WFOE” and obtained the approval of the local branch of the
        Ministry of Commerce (MOC) in the City of Weifang on June 21, 2006. The business
        term is 20 years starting on February 10, 2004 when Bio-One acquired its
        51% in
        Weifang Shengtai. The registered capital is RMB 32 million (approximately
        $3.92
        million). In accordance with laws governing foreign acquisitions of a Chinese
        registered company, SHI will be required to contribute $1,925,996 which required
        to be made within 1 year from the date of approval of the business license.
        As
        of June 30, 2007, this requirement has been met by SHI. As a result of this
        transaction, SHI exercised control over Weifang Shengtai.
 
 On
        May
        26, 2007, Weifang Shengtai increased its registered capital from $3,920,000
        to
        $15,000,000. The additional $1,108,000 registered capital was contributed
        by SHI
        in May and June of 2007. This transaction was approved by the local branch
        of
        the MOC in the City of Weifang and the Company obtained a new business license
        on July 16, 2007.
 
 **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 purchase of SHI has been accounted
        for as a reverse acquisition and a recapitalization. The assets and liabilities
        of SHI were transferred at historical cost under the equity structure of
        the
        Company due to the reverse acquisition on May 15, 2007. The consolidated
        financial statements have been presented as if the acquisition occurred at
        June
        30, 2006.
  -6-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 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.
 
 Foreign
        currency translation
 
 The
        reporting currency of the Company is the US dollar. The Company uses their
        local
        currency, Renminbi (RMB), as their functional currency. Results of operations
        and cash flow are translated at average exchange rates during the period,
        and
        assets and liabilities are translated at the unified exchange rate as quoted
        by
        the People’s Bank of China at the end of the period. Translation adjustments
        resulting from this process are included in accumulated other comprehensive
        income in the statement of shareholders’ equity. Transaction 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 $1,272,095 and $826,998 as of September 30, 2007
        and
        June 30, 2007, respectively. Assets and liabilities were translated at 7.50
        RMB
        and 7.60 RMB to $1.00 USD at September 30, 2007 and June 30, 2007, respectively.
        The equity accounts were stated at their historical rate. The average
        translation rates applied to income statement for the three months ended
        September 30, 2007 and 2006 were 7.55 RMB and 7.96 RMB to $1.00 USD. 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 and title has passed.
        Sales revenue represents the invoiced value of goods, net of a value-added
        tax
        (VAT). All of the Company’s products sold in the PRC are subject to a Chinese
        value-added tax at a 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 product and certain freight expenses.
 
 Shipping
        and handling
 
 Shipping
        and handling costs related to costs of goods sold are included in selling,
        general and administrative costs. Shipping and handling costs amounted to
        $747,314 and $596,353 for the three months ended September 30, 2007 and 2006,
        respectively.
 
 Use
        of
        estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles of the United States of America requires management
        to
        make estimates and assumptions that affect the amounts reported in the
        consolidated financial statements and accompanying notes. For example,
        management estimates potential losses on outstanding receivables. Management
        believes that the estimates utilized in preparing its financial statements
        are
        reasonable and prudent. Actual results could differ from these
        estimates.
  -7-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 Financial
        instruments
 
 Statement
        of Financial Accounting Standards No. 107 (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 payable, accrued liabilities, customer
        deposits, tax 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 rate of interest.
 
 Cash
        and concentration of risk
 
 Cash
        includes cash on hand and demand deposits in accounts maintained with
        state-owned banks within the People’s Republic of China and the United States of
        America. Certain f inancial
        instruments, which subject the Company to concentration of credit risk, consist
        of cash. The Company maintains cash balances at financial institutions which,
        from time to time, may exceed Federal Deposit Insurance Corporation insured
        limits for the banks located in the Unites States. Balances at financial
        institutions or state owned banks within the PRC are not covered by
        insurance. Total
        cash (including restricted cash balances) in banks at September 30, 2007
        and
        June 30, 2007 amounted to $4,107,062 and $12,129,924, respectively of which $100,000
        is covered by insurance. The
        Company has not experienced any losses in such accounts and believes it is
        not
        exposed to any risks on its cash in bank accounts.
 
 Earnings
        per share
 
 The
        Company reports earnings per share in accordance with the provisions of SFAS
        No.
        128, "Earnings Per Share." SFAS No. 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.
 
 The
        following is a reconciliation of the basic and diluted earnings per share
        computation for the thee months ended September 30, and June 30,
        2007:
 
 Three
                  months ended
                September
                  30,2007
              
              2006(Unaudited)
              
              (Unaudited)Net
                  income for earnings per share
              
              $
              2,252,511
              
              $
              1,484,031Weighted
                  average shares used in basic computation
              
              
              18,875,000
              
              
              10,125,000Diluted
                  effect of warrants
              
              
              822,359
              
              
              -Weighted
                  average shares used in diluted computation
              
              
              19,697,359
              
              
              10,125,000Earnings
                  per shareBasic
              
              $
              0.12
              
              $
              0.15Diluted
              
              $
              0.11
              
              $
              0.15
  -8-
 
 SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
  At
        September 30, 2007, all outstanding warrants were included in the three months
        ended September 30, 2007 calculation of diluted earnings per share.
 
 Restricted
        cash
 
 The
        Company through its bank agreements is required to keep certain amounts on
        deposit that are subject to withdrawal restrictions and these amounts are
        $2,634,400 and $5,628,500 as of September 30, 2007 and June 30, 2007,
        respectively.
 
 Under
        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, 2007, the amount not disbursed was $348,000 and this balance
        is
        classified under other receivables in the Company’s consolidated balance
        sheets.
 
 Accounts
        receivable
 
 The
        Company’s business operations are conducted in the People’s Republic of China.
        During the normal course of business, the Company extends unsecured credit
        to
        its customers. Accounts receivable, outstanding at September 30, 2007 and
        June
        30, 2007 amounted to $6,821,441 and $6,211,145, respectively. Management
        reviews
        its accounts receivable on a regular basis to determine if the allowance
        for
        doubtful accounts 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 against allowance for doubtful accounts when identified.
 
 The
        activity in the allowance for doubtful accounts for trade accounts receivable
        for the periods ended September 30, 2007 and June 30, 2007 is as
        follows:
 
 Three
                  months ended
              
              Year
                  endedSeptember
                  30,
                2007
              
              June
                  30,
                2007(Unaudited)Beginning,
                  allowance for doubtful accounts
              
              $
              431,178
              
              $
              357,970Additions
                  charged to bad debt expense
              
              
              -
              
              
              271,602Write-off
                  charged against the allowance
              
              
              -
              
              
              (217,838
              )Foreign
                  currency translation adjustments
              
              
              6,230
              
              
              19,444Ending,
                  allowance for doubtful accounts
              
              $
              437,408
              
              $
              431,178
  -9-
 
 SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
  Concentrations
        of risk
 
 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. The Company has never experienced any losses
        in such
        accounts and believes it is not exposed to any significant risks on its cash
        in
        bank accounts, either in the People’s Republic of China or in the United
        States.
 
 Our
        financial instruments that potentially expose us to concentrations of credit
        risk are primarily our trade accounts receivable. We conduct credit evaluations
        of our customers but generally have not required collateral or other security
        interests from our customers when we grant them credit. We make a provision
        for
        estimated uncollectible accounts based primarily on the age of the receivables
        but also when we identify potential payment problems with specific customers.
        For the three months ended September 30, 2007 and 2006, the top ten customers
        account for 36% and 33%, respectively, for our total sales. We have not had
        significant collections issues for receivables generated from sales of our
        products.
 
 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 oversea customers may default on settlement.
 
 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 the 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
        other
        things.
 
 Inventories
 
 Inventories
        are stated at the lower of cost or market using the weighted average basis
        and
        consists of the following:
  September
                  30,
                2007
              
              
              June
                  30,
                  2007(Unaudited)Raw
                  materials
              
              $
              658,830
              
              $
              2,297,901Work-in-progress
              
              
              800,400
              
              
              1,130,900Finished
                  goods
              
              
              2,270,177
              
              
              1,020,466Total
              
              $
              3,729,407
              
              $
              4,449,267
  -10-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
  The
        Company reviews its inventory periodically for possible obsolete goods or
        to
        determine if any reserves are necessary. As of September 30, 2007 and June
        30,
        2007, the Company has determined that no reserves are necessary.
 
 Plant
        and equipment
 
 Plant
        and
        equipment are stated at cost less accumulated depreciation. Depreciation
        is
        computed using the straight-line method over the estimated useful lives of
        the
        assets with 3% residual value. Depreciation expense for the three months
        ended
        September 30, 2007 and 2006 amounted to $686,653 and
        $354,249, respectively.
 
 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
 
 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.
 
 Maintenance,
        repairs and minor renewals are charged directly to expenses as incurred.
        Major
        additions and betterment to property and equipment are capitalized.
 
 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, 2007, the
        Company
        expects these assets to be fully recoverable.
 
 Plant
        and
        equipment consists of the following:
  September
                  30,
                2007
              
              June
                  30,
                  2007(Unaudited)Buildings
              
              $
              5,884,332
              
              $
              5,272,190Machinery
                  and equipment
              
              
              24,768,463
              
              
              22,257,978Automobile
                  facilities
              
              
              507,270
              
              
              487,319Electronic
                  equipment
              
              
              315,843
              
              
              307,391Construction
                  in progress
              
              
              11,726,039
              
              
              9,055,482Total
              
              
              43,201,947
              
              
              37,380,360Accumulated
                  depreciation
              
              
              7,997,875
              
              
              7,202,286Total
              
              $
              35,204,072
              
              $
              30,178,074
  -11-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 Interest
        costs totaling $230,656 and $157,654 was capitalized into construction in
        progress for the three months ended September 30, 2007 and 2006,
        respectively .
 
 Investment
        in Changle Shengshi Redian Co., Ltd.
 
 The
        Company entered into a joint venture partnership with Weifang City Investment
        Company and Changle Century Sun Paper Industry Co., Ltd on September 16,
        2003
        and formed Changle Shengshi Redian Co., Ltd (“Changle Shengshi”). Changle
        Shengshi was incorporated in Weifang City,
        Shandong Province, People’s Republic of China. Changle Shengshi’s principal
        activity is to produce and sell electricity and heat.
 
 On
        April
        12, 2005, the Company’s ownership percentage in Changle Shengshi was diluted
        from 30% to 20% as a result of an additional investment to Changle Shengshi
        by
        another party. The Company accounts for this investment under the equity
        method.
        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, additional contributions made and distributions received and
        amortization of basis differences. The Company recognizes a loss if it is
        determined that other than temporary decline in the value of the investment
        exists.
 
 Summarized
        financial information of Changle Shengshi is as follows:
 September
                    30,
                
                June
                    30,2007
                
                2007Current
                    assets
                
                $
                7,377,603
                
                $
                8,065,168Non-current
                    assets
                
                
                24,196,068
                
                
                23,027,549Total
                    assets
                
                
                31,573,671
                
                
                31,092,717Current
                    liabilities
                
                
                12,990,809
                
                
                14,137,526Non-current
                    liabilities
                
                
                3,628,480
                
                
                3,576,800Shareholders'
                    equity
                
                
                14,954,382
                
                
                13,378,391Total
                    liabilities and shareholders' equity
                
                $
                31,573,671
                
                $
                31,092,717
 -12-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
  Summarized
        financial information of Changle Shengshi for the years is as
        follows:
 
 September
                  30,2007
              
              2006Net
                  sales
              
              $
              7,171,525
              
              $
              2,458,810Gross
                  profit
              
              $
              2,167,691
              
              $
              383,201Income
                  before taxes
              
              $
              1,757,159
              
              $
              176,029Net
                  income
              
              $
              1,372,948
              
              $
              122,639Company
                  share of income
              
              $
              274,589
              
              $
              24,528Elimination
                  of intercompany profit
              
              
              125,810
              
              
              20,004Company’s
                  share of net income
              
              $
              148,779
              
              $
              4,524
 
 Intangible
        assets
 
 All
        land
        in the People’s Republic of China is owned by the government and cannot be sold
        to any individual or company. However, the government grants “land use rights.”
From March 2000 to June 2007, the Company acquired various land use rights
        for
        approximately $2,242,859. The Company obtained another land use right in
        July
        2007 for $314,500. The terms of the these land use rights range from 20 to
        50
        years. The Company amortizes the cost of the land use rights over their useful
        life using the straight-line method. At September 30, 2007 and June 30, 2007, accumulated
        amortization amounted to $107,606 and $96,299 ,
        respectively .
        Intangible assets, net of accumulated amortization, amounted to $2,146,489
        and
        $1,816,021 as of September 30, 2007 and June 30, 2007.
 
 On
        June
        30, 2007 the Company sold land use right at an auction due to relocation
        in one
        of the Company’s manufacturing plants. The net book value of the land use right
        sold amounted to $306,984. The gross proceeds from the sales of the land
        use
        right was $1,998,685. This balance has not been received as of September
        30,
        2007 and this
        balance is classified under other receivables in the Company’s consolidated
        balance sheets. As receivable balance is from local government, the Company
        determined there is no collectability issue.
 
 Intangible
        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, 2007, the
        Company
        expects these assets to be fully recoverable.
 
 Total
        amortization expense for the three months ended September 30, 2007 and 2006
        amounted to $11,809 and $10,502 respectively.
 
 Income
        taxes
 
 The
        Company reports income taxes under SFAS 109 which requires the recognition
        of
        deferred income tax liabilities and assets for the expected future tax
        consequences of temporary differences between income tax basis and financial
        reporting basis of assets and liabilities. Provision for income taxes consist
        of
        taxes currently due plus deferred taxes. There are no deferred tax amounts
        at
        September 30, 2007 and June 30, 2007.
 
 -13-
 
 SHENGTAI
            PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
            30, 2007
 (UNAUDITED)
 The
        charge for taxation is based on the results for the year as adjusted for
        items,
        which are non-assessable or disallowed. It is calculated using tax rates
        that
        have been enacted or substantively enacted by the balance sheet
        date.
 
 Deferred
        tax is accounted for using the balance sheet liability method in respect
        of
        temporary differences arising from differences between the carrying amount
        of
        assets and liabilities in the financial statements and the corresponding
        tax
        basis used in the computation of assessable tax profit. In principle, deferred
        tax liabilities are recognized for all taxable temporary differences, and
        deferred tax assets are recognized to the extent that it is probably that
        taxable profit will be available against which deductible temporary differences
        can be utilized.
 
 Deferred
        tax is calculated using tax rates that are expected to apply to the period
        when
        the asset is realized or the liability is settled. Deferred tax is charged
        or
        credited in the income statement, except when it is related to items credited
        or
        charged directly to equity, in which case the deferred tax is also dealt
        with in
        equity.
 
 Deferred
        tax assets and liabilities are offset when they related to income taxes levied
        by the same taxation authority and the Company intends to settle its current
        ax
        assets and liabilities on a net basis.
 
 The
        Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
        Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a
        benefit only if it is “more likely than not” that the tax position would be
        sustained in a tax examination, with a tax examination being presumed to
        occur.
        The amount recognized is the largest amount of tax benefit that is greater
        than
        50% likely of being realized on examination. For tax positions not meeting
        the
“more likely than not” test, no tax benefit is recorded. FIN 48 also provides
        guidance on derecognition, classification, interest and penalties, accounting
        in
        interim periods, disclosures, and transition. The adoption had no affect
        on the
        Company’s financial statements.
 
 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 value added tax standard rate is 17% of the gross sales
        price.
        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 product.
 
 VAT
        on
        sales and VAT on purchases amounted to $2,860,229 and $2,432,415 for the
        three
        months ended September 30, 2007, and $1,622,689 and $1,461,536 for the three
        months ended September 30, 2006, 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.
  -14-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 Guarantees
 
 From
        time
        to time, the Company guarantees the debt of others. Pursuant to Financial
        Accounting Standards Board Interpretation 45, “Guarantor’s Accounting for and
        Disclosure Requirements for Guarantees, Including Indirect Guarantees of
        Indebtedness to Others,” the Company records guarantees at the fair value of the
        expected future payments. Management estimates they will not be required
        to make
        any payments under these guarantees based on the past experience and the
        financial condition of the companies (See note 8).
 
 Recently
        issued accounting pronouncements
 
 In
        September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
        which
        addresses the measurement of fair value by companies when they are required
        to
        use a fair value measure for recognition or disclosure purposes under GAAP.
        SFAS
        No. 157 provides a common definition of fair value to be used throughout
        GAAP
        which is intended to make the measurement of fair value more consistent and
        comparable and improve disclosures about those measures. SFAS No. 157 will
        be
        effective for an entity's financial statements issued for fiscal years beginning
        after November 15, 2007. The Company is currently evaluating the effect SFAS
        No.
        157 will have on its consolidated financial statements.
 
 In
        February 2007, the Financial Accounting Standards Board (‘‘FASB’’) issued
        Statement of Financial Accounting Standards (‘‘SFAS’’) No. 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 No. 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 is currently evaluating the provisions
        of SFAS No. 159 to determine the potential impact, if any, the adoption will
        have on the Company’s financial statements.
 
 **Note
        3 - Supplemental disclosure of cash flow information**
 
 Income
        taxes paid for the three months ended September 30, 2007 and 2006 amounted
        to
        $13,445 and $32,314, respectively.
 
 Interest
        paid for the three months ended September 30, 2007 and 2006 amounted to $406,325
        and $135,371, respectively.
 
 Non-cash
        investing and financing activity
 
 During
        the three months ended September 30, 2007, plant and equipment and construction
        in progress acquired through non current prepayments and account payable
        amounted to $2,754,637.
  -15-
 
 SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
  **Note
        4 - Related party transactions**
 
 In
        connection with the Company’s purchase of Mr. Qingtai Liu’s 49% interest in
        Weifang Shengtai as described in Note 1, and the 17.95% ownership interest
        transfer transaction from the 37 Chinese original shareholders of Weifang
        Shengtai (“Original Shareholders”) to Mr. Qingtai Liu on April 19, 2006, Mr.
        Qingtai Liu has assumed the liabilities of the Original Shareholders’ capital
        contribution and is entitled to contribute this amount as capital contribution
        to the Company. As of September 30, 2007, the remaining balance to be
        contributed by Mr. Qingtai Liu amounted to $1,282,378. This balance will
        be
        repaid in cash or operating assets by December 31, 2007.
 
 The
        Company’s utilities are partially provided by Changle Shengshi, a related party,
        as described in Note 2 under the caption “Investment in Changle Shengshi Redian
        Co., Ltd”. The Company had a total of $1,122,569 and $949,992 of accounts
        payable due to Changle Shengshi at September 30, 2007 and June 30, 2007,
        respectively. The utilities expense amounted to $2,068,766 and $622,121 for
        the
        three months ended September 30, 2007 and 2006, respectively.
 
 The
        Company loaned money to Changle Shengshi and entered into two loan contracts
        as
        follows:
  September
                  30,
                2007
              
              June
                  30,
                  2007(Unaudited)Due
                  on November 19, 2007, unsecured, 7.95% interest rate per
                  annum
              
              $
              667,000
              
              $
              657,500Due
                  on September 14, 2009, unsecured, 7.6% interest rate per
                  annum
              
              
              400,200
              
              
              394,500$
              1,067,200
              
              $
              1,052,000
 
 The
        Company also loaned money to Changle Shengshi in June 2007, for temporary
        cash
        flow needs. This transaction is recurring in nature. The Company does not
        charge
        interest on these receivables and it is due on demand. As of June 30, 2007,
        total receivable due from Changle Shengshi was $1,499,207. This balance was
        repaid by Changle Shengshi in July 2007.
 
 For
        business convenience, the Company purchased starch from Shouguang Shengtai
        Starch Co. Ltd. (“Shouguang Shengtai”), of which Mr.
        Qingtai Liu, the Company’s chief executive officer, owns 40%. Since
        the
        Company initiated production of starch, no more purchases were made from
        Shouguang Shengtai. Prepayment balance is reclassified to other receivable
        -
        related party as the balance is to be refunded. Balance as of September 30,
        2007
        and June 30, 2007 was $1,006,789 and $992,449, respectively. Total related
        party
        purchases from Shouguang
        Shengtai for the
        three months ended September 30, 2007 and 2006 amounted to $0 and $4,875,107,
        respectively, which represents approximately 0% and 69% of the Company’s
        purchase of raw materials for the three months ended September 30, 2007 and
        2006, respectively.
  -16-
 
 SHENGTAI
        PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2007
 (UNAUDITED)
  The
        following table summarizes the Company’s other receivable - related parties
        balances as of September 30, 2007 and June 30, 2007 are as
        follows:
  September
                  30,
                2007
              
              June
                  30,
                  2007(Unaudited)Changle
                  Shengshi Redian Co., Ltd
              
              $
              -
              
              $
              1,499,207Shouguang
                  Shengtai Starch Co. Ltd
              
              
              1,006,789
              
              
              992,449$
              1,006,789
              
              $
              2,491,656
 
 **Note
        5 - Prepayments**
 
 Prepayments
        represent partial payments or deposits on inventory purchases and amounted
        to
        $108,250 and $140,376 as of September 30, 2007 and June 30, 2007,
        respectively.
 
 Prepayments
        - non-current represent partial payments or deposits on plant and equipment
        purchases and amounted to $7,992,765 and $7,429,371 as of September 30, 2007
        and
        June 30, 2007, respectively.
  -17-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 **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 follow ing:
  September
                  30,
                2007
              
              June
                    30,2007(Unaudited)Loan
                  from Bank of China, due various dates from October 2007 to June
                  2008.
                  Monthly interest only payments ranging from 7.313% to 7.668% per
                  annum,
                  guaranteed by unrelated third party and secured by
                  properties
              
              $
              10,405,200
              
              $
              10,993,400Loan
                  from Industrial and Commercial Bank of China, due various dates
                  from
                  November 2007 to August 2008 monthly interest only payments ranging
                  from
                  6.120% to 8.892% per annum, guaranteed by unrelated third party
                  and
                  secured by properties
              
              
              4,002,000
              
              
              3,945,000Loan
                  from Agriculture Bank of China, Due various dates from November
                  to
                  December of 2007. Monthly interest only payments ranging from 7.956%
                  to
                  8.568% per annum, Guaranteed by unrelated third party and secured
                  by
                  properties
              
              
              1,987,660
              
              
              1,959,350Loan
                  from Communication Bank, due July 2007. Monthly interest only payments
                  7.2% per annum, guaranteed by unrelated third party
              
              
              -
              
              
              1,972,500Total
              
              $
              16,394,860
              
              $
              18,870,250
 
 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,
                2007
              
              June
                  30,
                  2007(Unaudited)Bank
                  of China, due in October 2007, restricted cash required 50% of
                  loan
                  amount, guaranteed by unrelated third party
              
              $
              2,934,800
              
              $
              4,997,000Industrial
                  and Commercial Bank of China, due in February 2008, restricted
                  cash
                  required 50% of loan amount, guaranteed by unrelated third
                  party
              
              
              1,334,000
              
              
              3,945,000Total
              
              $
              4,268,800
              
              $
              8,942,000
  -18-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
  Employee
        loans
 
 The
        Company has borrowed monies from certain employees to fund the Company’s
        operations. The loans bear interest at 7.2% and the principal is due upon
        demand. Employee loans amounted to $513,584 and $596,516 as
        of
        September 30, 2007 and June 30, 2007, respectively.
 
 Third
        party loan
 
 The
        Company borrowed money from an unrelated individual for use in operations.
        The
        loan bears 7.2% interest and the principal is due upon demand. Balance of
        the
        loan as of September 30, 2007 and June 30, 2007 amounted to $322,872 and
        $318,274, respectively.
 
 Long
        term loan - current maturity
 
 Long
        term
        loan - current maturity represent amounts due to various banks and other
        outside
        parties which are normally due within one year consisted of the
        following:
  September
                  30,
                2007
              
              June
                    30,2007(Unaudited)Agricultural
                  Credit Union, interest at 7.84% per annum, due May 2008
              
              $
              386,860
              
              $
              381,350Total
              
              
              386,860
              
              
              381,350
 
 Current
        maturities for the next five years are follows:
 AmountJune
                    30, 2008
                
                $
                386,860Thereafter
                
                $
                -
  Total
        interest expense (net of capitalized interest) for the three months ended
        September 30, 2007 and 2006 on all debt amounted to $391,608 and $17,415,
        respectively. Interest capitalized into construction in progress totaled
        $230,656 and $157,654 for the three months ended September 30, 2007 and 2006,
        respectively .
  -19-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 **Note
        7 - Income taxes**
 
 The
        Company is governed by the Income Tax Law of the People’s Republic of China
        (PRC) concerning Foreign Investment Enterprises and Foreign Enterprises and
        various local income tax laws (the Income Tax Laws). Under the Income Tax
        Laws,
        foreign investment enterprises (FIE) generally are subject to an income tax
        at
        an effective rate 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, FIE's scheduled to operate for a period of 10 years
        or more
        and engaged in manufacturing and production may by exempt from income taxes
        for
        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 Company was granted by the state government for benefit of income tax
        exemption in first 2 years from September 2004 to August 2006 and 50% exemption
        for the third to fifth years from September 2006 to August 2008. In addition,
        the Company is located in a Special Economic Zone and the PRC tax authority
        has
        offered a special income tax rate of 24% for the company. With the approval
        of
        the local government, the Company is subject to income tax at a reduced rate
        of
        12% from September 2006 to August 2008 after the two-year 24% exemption for
        income taxes until its exemption and reduction periods expire in August 2008.
 
 Beginning
        January 1, 2008, the new Enterprise Income Tax (“EIT”) law will replace the
        existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises
        (“FIEs”).
 
 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 local government 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 enjoying the reduced tax rate as
        described above. Since the detailed guidelines of the new tax law is not
        publicized yet, the Company can not determined what the new tax rate will
        be
        applicable to the Company after the end of their respective tax holiday
        terms.
 
 During
        the three months ended September 30, 2007 and 2006, the provision for income
        taxes was $305,845 and $57,415, respectively.,
  -20-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 The
        following table reconciles the U.S. statutory rates to the Company’s effective
        tax rate for the years ended June 30:
 
 2007
              
              2006(Unaudited)
              
              (Unaudited)U.S.
                  Statutory rates
              
              
              34.0
              %
              
              34.0
              %Foreign
                  income not recognized in USA
              
              
              (34.0
              )
              
              (34.0
              )China
                  income taxes
              
              
              33.0
              
              
              33.0China
                  income tax exemption
              
              
              (21.0
              )
              
              (33.0
              )Total
                  provision for income taxes
              
              
              12.0
              %
              
              -
              %
  The
        estimated tax savings due to the tax exemption for the three months ended
        September 30, 2007 and 2006 amounted to $535,229 and $432,413, 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,
        2007
        and 2006 by $0.03 and $0.04, 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, 2007 and 2006 by $0.03 and
        $0.04,
        respectively.
 
 Taxes
        payable
 
 Taxes
        payable consisted of the following:
  September
                  30,
                2007
              
              June
                  30,
                  2007(Unaudited)VAT
                  payable
              
              $
              1,555,258
              
              $
              1,273,390Individual
                  income tax withheld
              
              
              1,258
              
              
              1,316Income
                  tax payable
              
              
              1,161,065
              
              
              764,827Housing
                  property tax payable
              
              
              7,085
              
              
              7,306Others
              
              
              1,799
              
              
              2,093Total
              
              $
              2,726,465
              
              $
              2,048,932
 
 **Note
        8 - Commitments and Contingent liabilities**
 
 Guarantees
 
 As
        of
        September 30, 2007, the Company has guaranteed $10.7 million of short term
        loan
        for unrelated parties. The Company would be obligated to perform under the
        guarantee if these parties failed to pay principal and interest payments
        to the
        lender when due. Including accrued interest, the maximum potential amount
        of
        future (undiscounted) payments under the guarantee would be $11.4 million.
        The
        company did not recognize a liability for the guarantee because the likelihood
        of that the Company will have to pay is remote. Detail of guarantee amount
        to
        the unrelated parties as of September 30, 2007 is as follows:
 Short
                      TermCompany
                  
                  Bank
                      LoansChang
                      Le Century Sun PaperIndustry
                      Co.
                  
                  $
                  8,030,680Shangdong
                      Kuangji Group Inc.
                  
                  
                  2,668,000Total
                  
                  $
                  10,698,680
  -21-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 **Note
        9 - Shareholders’ equity**
 
 On
        May
        15, 2007, the Company entered into and consummated a share purchase agreement
        (the “Share Purchase Agreement”) with nineteen accredited investors (the
“Purchasers”). Pursuant to the Share Purchase agreement, the Purchasers
        purchased from the Company an aggregate of 8,750,000 shares of common stock
        and
        4,375,000 attached warrants for $2.00 per share (or an aggregate purchase
        price
        of $17,500,000) and for total net proceeds of $15,256,428. The exercise price
        of
        the warrants $2.60 per share and the term of the warrants is five
        years. In
        connection with the offering, the Company paid a placement fee of 12% of
        the
        proceeds in cash.
 
 Warrants
 
 Concurrent
        with the private placement, the Company issued 4,375,000 warrants with an
        exercise price at $2.60 per share (“Investor Warrants”) to investors. These
        warrants issued to the new investors have a 5-year term and shall be callable
        by
        the Company if the Company’s shares trade at $8.00 for 20 consecutive trading
        days and underlying shares are registered for resale. The warrants contain
        a
        standard adjustment provisions upon stock dividend, stock split, stock
        combination, recapitalization and a change of control transaction.
 
 The
        Company also issued 218,750 warrants with exercise price at $2.60 (“Placement
        Agent Warrants”) to Brill Securities, inc., the exclusive placement agent. These
        warrants have the same terms as the Investor Warrants. These warrants were
        issued on August 8, 2007.
 
 In
        connection with the offering, the Company issued Chinamerica Fund, LP 75,000
        warrants and Jeff Jenson 25,000 warrants (collectively as “Lead Investor
        Warrants”) to compensate the former as lead investor and the latter in assisting
        in providing the shell of West Coast Car Company. These warrants have the
        same
        term as the Investor Warrant except with an exercise price of $0.01 per
        share.
 
 All
        Investor Warrants, Placement Agent warrants, and Lead Investor Warrants meet
        the
        conditions for equity classification pursuant to FAS 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 as common stock issuance
        cost.
  -22-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
  Warrants
                    Outsanding
                
                Warrants
                    Exercisable
                
                Weighted
                      Average
                        Exercise
                      Price
                
                Average
                      Remaining
                      Contractual
                        LifeOutstanding,
                    June 30, 2007
                
                
                4,475,000
                
                
                4,475,000
                
                $
                2.54
                
                
                4.63Granted
                
                
                218,750
                
                
                218,750
                
                
                2.60
                
                
                4.63Forfeited
                
                
                -
                
                
                -
                
                
                -
                
                
                -Exercised
                
                
                -
                
                
                -
                
                
                -
                
                
                -Outstanding,
                    September 30, 2007
                
                
                4,693,750
                
                
                4,693,750
                
                $
                2.54
                
                
                4.63
  **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, 2007 and 2006, 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 People’s Republic of China require the Company to contribute to a defined
        contribution retirement plan for the
        benefit of all permanent employees .
        All permanent employees are entitled to an annual pension equal to their basic salaries
        at
        retirement. The PRC government is responsible for the benefit liability to
        these
        retired employees. The Company is required to make contributions to the state
        retirement plan at 15% to 20% of the monthly basic salaries of the current
        employees. For
        the three
        months ended September
        30, 2007 and 2006, the Company made pension con tribution s
        in the
        amount of  $57,351
        and $43,854, respectively.
  -23-
 SHENGTAI
          PHARMACEUTICAL INC. AND SUBSIDIARIES
 
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2007
 (UNAUDITED)
 **Note
        12 - Revenue by geographic area**
 
 The
        following table summarized financial information for the three months ended
        September 30, 2007 and 2006 concerning the Company’s revenues based on
        geographic area:
 
 Revenue
              
              September
                  30, 2007
              
              September
                  30, 2006(Unaudited)
              
              (Unaudited)China
              
              $
              17,187,494
              
              $
              9,706,812International
              
              
              2,185,575
              
              
              892,509Total
              
              $
              19,373,069
              
              $
              10,599,321
 
 **Note
        13 - Subsequent event**
 
 On
        November 1, 2007, a warrant holder paid the Company $2.60 per share for a
        total
        of $227,500 and exercised 87,500 warrants into 87,500 shares of common
        stock.
  -24-




**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 also manufacture glucose and starch products for
      food and beverage industry for the Chinese market.





During
      the reporting period, our sales for pharmaceutical grade glucose and cornstarch
      products, especially dextrose monohydrate, continued to increase.





Our
      new
      cornstarch production facility, with the capacity to produce 240,000 tons of
      cornstarch a year, was almost completed as of September 30, 2007 and fully
      completed by the end of October 2007. This new complex is close to our
      existing glucose production plant and new glucose production complex that is
      currently under construction.





During
      the reporting period, we produced a total of 37,237 tons of cornstarch, of
      which
      11, 164 tons, or nearly 30% were used to satisfy our own glucose production
      needs. Excess cornstarch was then sold and constituted 31.2% of our total sales
      revenue for the reporting period.





Our
      new
      cornstarch production facility allows us to produce our own cornstarch and
      replace our suppliers of cornstarch. We are able to ensure the adequacy and
      quality of the cornstarch we use and also meet our increasing demand for quality
      cornstarch. Since cornstarch is produced on our premises, we are able to
      obliterate shipping costs to transport the cornstarch to our glucose production
      facility and operating costs, resulting in lower manufacturing
      costs.





-25-




In
      addition to our pharmaceutical glucose series of products, we also produce
      other non medicinal product lines of glucose and starch products such as
      industrial glucose, syrup, starch, dextrin, maltose and maltitol, which are
      used
      for food, beverage and industrial production.





During
      the reporting period, we expanded our manufacturing of Avermectins, which is
      a
      veterinary medicine derived from glucose.





At
      the
      end of June 2007, we set up a new product line to manufacture sodium gluconate.
      This non-corrosive, non-toxic and highly pure gluconate is gaining popularity
      as
      a chelating agent in the PRC and is widely used in pharmaceutical, construction
      and chemical industries.





The
      initial sales of sodium gluconate have been encouraging. Currently, sales of
      sodium gluconate constitute 3.1% of our total sales. Since
      we
      have only begun the production of sodium gluconate, we have insufficient
      meaningful statistics regarding its sales. We, however, anticipate that our
      gross profit margin will be between 25% and 30%, depending on our scale of
      production scale and our production efficiency.





Sodium
      gluconate is widely used as a retarder of cement in the construction industry.
      It efficiently prevents commercial cement from concreting and agglomerating
      during transportation. It is also used as a surface cleaning agent of steel,
      a
      professional cleaning agent of glass bottles, and an antiscale and corrosion
      inhibitor. Accordingly, we are targeting construction companies as our end
      customers since real estate construction is a booming sector in the PRC economy.




We
      believe that through manufacturing innovative products to meet market demand,
      we
      would be able to command better profit margins, diversify our product lines
      and
      minimize our operating risks.





We
      believe that better living standards would lead to higher consumption of our
      products in the PRC. It is our understanding that the robust and continuing
      economic growth, the rising purchasing power of domestic market, as well as
      the
      public awareness of quality health care products, are all drivers in the demand
      for our products. The strong growth in the PRC pharmaceutical industry will
      also
      help increase the selling prices of our major products, and enhance our revenues
      and increase our gross profit margins.





We
      believe that production capacity and product quality are key factors in
      entrenching our market leadership position and to accomplishing 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) new product development.





We
      also
      believe that improving our employees’ competency is important for our continued
      success and advancement. During the reporting period, we have successfully
      optimized our operations and sent 50 of our employees (comprising approximately
      6.5% of our workforce) for continued training and further education. We expect
      these employees to eventually assume mid to senior level managerial positions
      in
      our new glucose production complex.





Our
      production facilities have been fully certified CGMP-compliant (Good
      Manufacturing Practice for Drugs), ISO9002 and HACCP. The 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. Recently, local authorities carefully
      inspected our production lines and approved the quality of our equipment.




-26-




Our
      production lines are vertically integrated. Our production facilities are all
      inter-connected by an enclosed pipeline system to enhance overall production
      efficiency, minimize wastage of water and raw materials, and avoid production
      contamination. We are currently developing new production technology to recycle
      our waste water and byproducts. At the same time, we are improving overall
      production efficiency by analyzing and ameliorating inefficient production
      processes.





In
      December 2006, the Changle local government negotiated with us to surrender
      the
      land use right of our old factory in the downtown Changle for their municipal
      construction. The land we occupied was 27,396 square meters. We purchased a
      bigger parcel of land in Changle Economic and Technology Development Zone with
      85,880 square meters as described below.




After
      acquiring the land, we set out to develop it and build a new glucose production
      complex with an expected production capacity of 150,000 tons per year. We
      commenced construction in early July 2007 and anticipate that construction
      will
      be completed in the first half of calendar year 2008. The new facility will
      be
      used to produce pharmaceutical grade glucose and other value-added glucose
      products. We plan to equip this complex with state-of-the-art machinery and
      technology, and employ strict quality control standards over it. We have already
      ordered the machinery and equipment for the glucose production complex and
      are
      training our employees to run it.





Construction
      of the glucose production complex had been delayed by more than average rainfall
      this past summer and autumn but efforts are being made to meet the original
      completion schedule.





We
      continue to strengthen our domestic sales network, which presently covers 27
      of
      a total 31 provinces (or province equivalent administrative district) in the
      PRC. We have established representative offices in 7 provinces to fortify 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.
      Before the new glucose complex is put into use next year, the domestic market
      remains our focus and major customer base.





At
      the
      same time, we witnessed a modest increase of global sales during the reporting
      period. We have been successful in exporting more dextrose anhydrate and
      pharmaceutical grade oral glucose during the reporting period. Currently we
      export to customers in over sixty countries, and our international sales
      comprise approximately 11% of our total sales revenues.





We
      are
      however cautious about our expanding international sales. Our international
      marketing team would carefully analyze our profitability by considering the
      effects of the gradual appreciation of *Renminbi* against
      the U.S. dollar and production costs before committing to such
      transactions.





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, 2007, Shandong
      Kaixiang Biological Technology Co Ltd, our biggest customer, only accounted
      for
      7.56% of our total sales revenue. Our top ten customers accounted for only
      36%
      for our total sales for the three months ended September 30, 2007.





Our
      research and development team has been constantly striving to improve production
      techniques, and to develop new technologies and higher-value products such
      as
      Avermectins and sodium gluconate.





Management
      is not aware of any adverse trends that would materially affect our market
      and
      financial position. We will continue to identify and pursue innovative products
      and technology to our increase market share and optimize our cost structure.
      Barring unforeseen circumstances, we anticipate continued growth in our sales
      growth. Our ability to meet increased customer demand and stay profitable will
      however still depend on factors such as our production capacity and working
      capital.




-27-




**Results
      of Operations**





The
      following table sets forth our statements of operations for the three months
      ended September 30, 2007 and 2006:




**Three
      Months Ended September 30, 2007 Compared with Three Months Ended September
      30,
      2006**





*The
      following table shows our operating results for the three months ended September
      30, 2006 and 2007* .





**Three
                months**
              **ended**
              **September
                30,**
              **2007**
            
            **Three
                months**
              **ended**
              **September
                30,**
              **2006**Sales
                Revenue
            
            
            19,373,069
            
            
            10,599,321Costs
                of Goods Sold
            
            
            14,779,032
            
            
            8,159,877Gross
                Profit
            
            
            4,594,037
            
            
            2,439,444Sales,
                General and Administrative Expenses
            
            
            1,696,555
            
            
            971,868Operating
                Income
            
            
            2,897,482
            
            
            1,467,576Other
                Net Income (Expense)
            
            
            (339,126
            )
            
            73,870Income
                before Income Taxes
            
            
            2,558,356
            
            
            1,541,446Provision
                for Income Taxes
            
            
            305,845
            
            
            57,415Net
                income
            
            
            2,252,511
            
            
            1,484,031





Sales
      revenue for the three months ended September 30, 2007 was $19,373,069, an
      increase of $8,773,748, or 82.8% compared with the corresponding period in
      2006.
      This increase was mostly the result of the increase in sales of our glucose
      products and higher product prices. Production from the new cornstarch facility
      was also another factor. Sales of excess cornstarch produced from our cornstarch
      manufacturing facility to outside customers constituted 31.2% of our total
      sales
      for the reporting period. With sufficient supply of raw materials for
      production, sales of dextrose monohydrate and dextrose anhydrate increased
      20.1%
      and 1865.5% respectively for the three months ended September 30, 2007, as
      compared to the same period last year.





Costs
      of
      goods sold for the three months ended September 30, 2007 was $14,779,032, an
      increase of $6,619,155, or 81.1% compared with the corresponding period in
      2006.
      The increase in cost of goods sold is in tandem with the increase in sales
      of
      our products.





Gross
      profit for the three months ended September 30, 2007 was $4,594,037, an increase
      of $2,154,593, or 88.3% compared with the corresponding period in 2006. The
      reason for the increase in gross profit was mostly due to the economies of
      scale
      resulting from the expansion of our production output and enhanced operating
      efficiency. Although product cost increased as a result of price increases
      of
      corn and other raw materials, the selling price was higher than the price
      increase of corn, thus making our gross profit higher. Gross profit margin
      for
      the three months ended September 30, 2007 was 23.7%, a slight increase from
      23.0% for the same period in 2006. We not only produced sufficient cornstarch
      for our own production needs but also excess for sale to other customers. The
      profit margin for cornstarch is 9% and is much lower than the overall profit
      margin for our other products. Despite this, our gross profit margin for all
      our
      products was slightly increased due to the increase in sales of more profitable
      dextrose monohydrate, which has a gross profit margin of over 29%. We anticipate
      that our gross profit margin will gradually improve as we increase our glucose
      processing capacity and achieve greater economies of scale in the production
      of
      our new products in the coming months.





Selling,
      General and Administrative expenses for the three months ended September 30,
      2007 was $1,696,555, an increase of $724,687, or 74.6% compared with the
      corresponding period in 2006. The increase in our Selling, General and
      Administrative expenses was the result of the expansion of our production output
      and domestic sales network. We have also incurred additional administrative
      expenses, such as legal fees, audit fees, and investor relationship expenses as
      a reporting company. The higher worker insurance requirements and environment
      related expenditures were also the causes of higher general and administrative
      expenses.




-28-




Net
      income for the three months ended September 30, 2007 was $2,252,511, an increase
      of $768,480, or 51.8% compared with the corresponding period in 2006. Generally,
      the increase of net income was due to the increase in our product prices, sales
      volume and the introduction of new products.





**Liquidity
      and Capital Resources**





***Operating
      Activities***




**Three
      Months Ended September 30, 2007 and 2006**





Net
      cash
      provided by operating activities for the three months ended September 30, 2007
      was $4,348,297, an increase of $4,443,194 from $94,897 used in operating
      activities for the same period in 2006. The increase in net cash provided by
      operations was mostly due to the collection of other receivables and advances
      from customers.




***Investing
      Activities***





**Three
      Months Ended September 30, 2007 and 2006**





Net
      cash
      used in investing activities for the three months ended September 30, 2007
      was
      $4,885,965, compared to $5,119,167 for the same period in 2006. Most of the
      cash
      had been spent on the construction of the new glucose manufacturing complex,
      as
      well as some advances for the purchase of machinery and equipment for it. Before
      the facility is completed and put into operation next year, we expect to incur
      additional capital expenditure.





Our
      preliminary budget for constructing the new glucose complex is approximately
      $12
      million, without taking into account any appreciation of the *Renminbi* against
      the US dollar and increase in construction costs due to inflation from a robust
      PRC economy. After its completion, we anticipate the necessary working capital
      would be at least $6 million, based on the projected sales and ordinary business
      cycles. Besides considering loans from domestic banks to fund the construction
      of the new glucose complex, we may look to additional equity financing if the
      capital market is favorable to us in the next months.




***Financing
      Activities***




***Significant
      Events***





On
      May
      15, 2007, we completed, at a price of $2 per share, a private placement of
      8,750,000 shares and 4,375,000 attached five year warrants to purchase our
      common stock at an exercise price of $2.60 per share, as adjusted. We received
      net proceeds of $15,256,428 from that offering. Most of the proceeds have been
      used to repay our debts and fund investing activities as described
      above.




**Three
      Months Ended September 30, 2007 and 2006**




Net
      cash
      spent by financing activities for the three months ended September 30, 2007
      was
      $4,541,561, compared to $5,257,195 for the same period in fiscal 2006. We used
      part of the proceeds from equity financing to repay our outstanding debts,
      both
      long term notes and short term debts, especially those with high interest rates
      or with less favorable terms. By lowering the debt equity ratio, we believe
      we
      successfully prevented any potential financial distress and greatly enhanced
      our
      financial standing.




-29-




Besides
      our capital expenditure in building the new glucose manufacturing complex,
      as
      well as the acquisition of new plant and equipment for the newly built plant,
      we
      plan to upgrade our existing glucose production facility by replacing our old
      machinery to produce more “complex” glucose products such as anhydrous glucose
      transfusion, monohydrate glucose transfusion and oral glucose.





After
      the
      construction and the upgrade, we expect that at least 70% (up from 50%) of
      the
      cornstarch produced by the new cornstarch production plant will be used by
      us as
      raw material for the production of our glucose products. This upgrade will
      not
      only allow for increased production of higher grade glucose, but also facilitate
      the extension of our dextrose series of products. We anticipate that this will
      result in higher profit margins and bigger revenues.




**Loans**





Before
      the equity financing, our PRC operating subsidiary, Weifang Shengtai financed
      its operations and capital expenditure requirements primarily through bank
      loans
      and operating income. Weifang Shengtai had a total of $16,394, 860 and
      $18,870,250 short term bank loans outstanding as of September 30, and June
      30,
      2007, respectively. The loans were secured by Weifang Shengtai’s properties. The
      terms of all these short term loans were for one year. Weifang Shengtai has
      never defaulted on any of these loans.





Weifang
      Shengtai also has non-current payables, which are classified as long term
      liabilities, of $3,411,179 and $3,661,472 as of September 30, and June 30,
      2007,
      respectively.





The
      decrease of bank loans during the reporting period, for both short term and
      long
      term loans, is mostly due to the payoff of our loans with higher interest rate.
      We then renegotiated with the banks for loans with lower interest rate, based
      on
      our improved financial standing. Nevertheless, we expect that we will need
      additional capital to satisfy our construction costs and working capital to
      match the increased in production.





**Guarantees**





We
      have
      guaranteed certain borrowings of other unrelated third parties including short
      term bank loans. The total guaranteed amounts were $10,698,680 and $8,560,650
      as
      of September 30, and June 30, 2007.




**Future
      cash commitments**





We
      anticipate spending $12 million in the construction of the new glucose
      production complex and $2 million in the upgrading of our existing glucose
      manufacturing facility. We also estimate the need for $6 million as working
      capital to run these facilities. The exact amount will be determined based
      on
      both the market demand of our products and the time needed for these facilities
      to run at full capacity.





At
      the
      end of the reporting period, we accumulated a total capital outlay of
      approximately $8 million for the glucose manufacturing complex, including the
      cost for acquiring the land, construction and the purchase of new machinery
      and
      equipment. It is estimated that the upgrade of our existing glucose production
      facility would be completed in the first half of 2008. A portion of our capital
      requirements would be funded from the proceeds of our May 2007 private
      placement, and the remaining portion could be financed through bank loans.
      We
      are carefully reviewing our finances and may consider financing either with
      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.




-30-




***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
      Receivables***





Accounts
      receivables 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.





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.




**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk.**





*Credit
      Risk* .
      We are
      exposed to credit risk from our cash at bank, fixed deposits and account
      receivables. The credit risk on cash at bank and fixed deposits is limited
      because the counterparts are recognized financial institutions. Account
      receivables are subject to credit evaluations. We periodically record a
      provision for doubtful collections based on an evaluation of the collectibility
      of account receivables by assessing, among other factors, the customer’s
      willingness or ability to pay, repayment history, general economic conditions
      and our ongoing relationship with the customers.




*Country
      Risk.* Substantial
      portion of our business, assets and operations are located and conducted in
      the
      PRC. While the PRC’s economy has experienced significant growth in the past
      twenty years, growth has been uneven, both geographically and among various
      sectors of the economy. The PRC government has implemented various measures
      to
      encourage economic growth and guide the allocation of resources. Some of these
      measures benefit the overall economy of the PRC, but may also have a negative
      effect on us. For example, our operating results and financial condition may
      be
      adversely affected by government control over capital investments or changes
      in
      regulations applicable to us. If there are any changes in any policy by the
      PRC
      government and our business is negatively affected as a result, then our
      financial results, including our ability to generate revenues and profits,
      will
      also be negatively affected.




-31-




*Foreign
      Currency Risk.* Substantially
      all of our operations are conducted in the PRC. Our sales and purchases are
      conducted within the PRC in *Renminbi* .
      Conversion of *Renminbi* into
      foreign currencies is regulated by the People’s Bank of China through a unified
      floating exchange rate system. Although the PRC government has stated its
      intention to support the value of the *Renminbi* ,
      there
      can be no assurance that such exchange rate will not again become volatile
      or
      that the *Renminbi* will
      not
      devalue significantly against the U.S. dollar. Exchange rate fluctuations may
      adversely affect the value, in U.S. dollar terms, of our net assets and income
      derived from our operations in the PRC. In addition, the *Renminbi* is
      not
      freely convertible into foreign currency and all foreign exchange transactions
      must take place through authorized institutions.





**Item
      4. Controls and Procedure**





(a)
       Disclosure Controls and Procedures.





Mr.
      Qingtai Liu, our Chief Executive Officer and Mr. Yizhao Zhang, 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 our disclosure
      controls and procedures were effective and 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.





(b)  Changes
      in Internal Control over Financial Reporting





During
      the three months ended September 30, 2007, there has been no change in internal
      control over financial reporting 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.




-32-




PART
      II -
      OTHER INFORMATION.





**Item
      1.**  **Legal
      Proceedings.**





We
      know
      of no material, active, pending or threatened proceeding against us
      or our subsidiaries, nor are we, or any subsidiary, involved as a
      plaintiff or defendant in any material proceeding or pending
      litigation. ****





**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.  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 issue
        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.  Weifang Shengtai has not made the required
        contributions. As a result, Weifang Shengtai is unable 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
      28,
      2007.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





None.





**Item
      3.**  **Defaults
      on Senior Securities.**





Not
      Applicable.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





None.





**Item
      5.**  **Other
      Information.**





None.





**Item
      6. Exhibits**





(a)
            Exhibits





**Exhibit
                No.**
            
            **Description**31.1
            
            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 Yizhao
                Zhang;32.1
            
            Certification
                pursuant to 18 U.S.C. 1350.




-33-




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:
                November 13, 2007
            
            /s/ Qingtai
                LiuQingtai
                LiuChief
                Executive Officer




-34-