UNITED STATES




SECURITIES AND EXCHANGE COMMISSION




Washington, D.C. 20549





FORM 10-Q





(Mark One)[X]

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended February 28, 2010





[   ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from _______ to _______





Commission file number: 333-144910





SINOBIOPHARMA, INC.(Exact name of small business issuer as specified in its charter)




Nevada
26-3002371(State or other jurisdiction of incorporation or organization)
(IRS Employer identification No.)




8 Zhong Tian Road


Nantong City, Jiangsu Province, the People’s Republic of China 226009


(Address of principal executive offices)





011- (86) 51-385328336


(Registrant’s telephone number, including area code)





Copies to:


Gregory Sichenzia, Esq.


Sichenzia Ross Friedman Ference LLP


61 Broadway, 32nd Floor


New York, New York 10006


Phone: (212) 930-9700


Fax: (212) 930-9725





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





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [   ]  No [   ]





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





Large accelerated filer [   ]
Accelerated filer [   ]Non-accelerated filer [   ]

(Do not check if a smaller reporting company)
Smaller reporting company [X]











Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes [   ]  No [X]




APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS DURING THE PRECEDING FIVE YEARS:





Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [   ]  No [   ]





APPLICABLE ONLY TO CORPORATE ISSUERS:





State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 117,587,608 shares of common stock, $.0001 par value, were outstanding as of April 13, 2010.


























ii





TABLE OF CONTENTS





PagePART IItem 1.
Financial Statements
1Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
20Item 3.
Quantitative and Qualitative Disclosures About Market Risk
23Item 4T.
Controls and Procedures
23PART IIItem 1.
Legal Proceedings
24Item 1A.
Risk Factors
24Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
24Item 3.
Defaults Upon Senior Securities
25Item 4.
(Removed and Reserved)
25Item 5.
Other Information
25Item 6.
Exhibits
25SIGNATURES
26





























iii





PART I – FINANCIAL INFORMATION


Item 1. Financial Statements





SINOBIOPHARMA, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS





February 28,


May 31,2010


2009(Unaudited)ASSETSCURRENT ASSETSCash and cash equivalents

$
790,142


$
891,132Accounts receivable, net


1,131,625



208,673Notes receivable


-



5,505Inventories


835,901



547,317Advance payments


210,730



39,825Other receivables


298,904


-Total Current Assets


3,267,302



1,692,452Advance payment for intangible assets to a shareholder


987,780



253,760Property, plant and equipment, net


2,772,304



2,691,258Intangible assets, net


4,387,849



1,318,973$
11,415,235


$
5,956,443LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIESAccounts payable

$
369,391


$
655,064Short-term bank loans


220,050



732,000Loans from government


1,420,569



1,844,193Amounts due to shareholder


256,725



1,169,032Advances from customers


102,946



136,755Amounts due to Related party


-



256,200Income taxes payable


97,136



-Other payables


290,297



386,368Total Current Liabilities


2,757,114



5,179,612Commitments and ContigenciesSTOCKHOLDERS' EQUITYCommon stock; $0.0001 par value; 2,500,000,000 shares  authorized; 117,587,608 shares issued and outstanding at  February 28, 2010 and 79,920,000 shares at May 31, 2009


11,759



7,992Additional paid-in capital


13,853,827



8,254,991Accumulated  deficit


(5,459,339
)


(7,711,278
)Accumulated other comprehensive income


251,874



225,126Total Stockholders' Equity


8,658,121



776,831$
11,415,235


$
5,956,443




See accompanying notes to the consolidated financial statements


1




SINOBIOPHARMA, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


(UNAUDITED)





Three Months Ended February 28,


Nine Months Ended  February 28,2010


2009


2010


2009SALES

$
1,993,412


$
813,326


$
5,424,647


$
2,715,702COST OF GOODS SOLD


380,799



221,015



1,128,803



900,211GROSS MARGIN


1,612,613



592,311



4,295,844



1,815,491OPERATING EXPENSESSelling expenses


144,956



116,148



394,309



283,483Research and development


30,683



27,352



317,396



157,771Depreciation and amortization


59,241



22,591



209,798



126,564General and administrative expenses


358,165



1,199,268



938,483



2,786,331593,045



1,365,359



1,859,986



3,354,149INCOME/(LOSS) FROM OPERATIONS


1,019,568



(773,048
)


2,435,858



(1,538,658
)OTHER INCOME/ (EXPENSES)Interest income


1,896



363



7,070



1,059Interest expense


(38,193
)


(53,544
)


(148,278
)


(181,017
)Other expenses


55,048



100,913



54,386



95,92418,751



47,732



(86,822
)


(84,034
)INCOME/(LOSS) BEFORE INCOME TAX EXPENSE


1,038,319



(725,316
)


2,349,036



(1,622,692
)INCOME TAX EXPENSE


(97,096
)

-



(97,096
)

-NET INCOME/(LOSS)


941,223



(725,316
)


2,251,940



(1,622,692
)OTHER COMPREHENSIVE  INCOME/(LOSS)Foreign Currency Translation Adjustment


5,209



4,438



26,748



12,279COMPREHENSIVE  INCOME /(LOSS)

$
946,432


$
(720,878
)

$
2,278,688


$
(1,610,413
)Earnings/ (loss) per share:Basic and diluted

$
0.01


$
(0.01
)

$
0.03


$
(0.02
)Weighted average shares used in computation:Basic and diluted


104,117,920



79,900,000



87,950,083



79,900,000




See accompanying notes to the consolidated financial statements


2





SINOBIOPHARMA, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)





Nine Months Ended Feb 28,2010


2009CASH FLOWS FROM OPERATING ACTIVITIESNet income/(loss)

$
2,251,940


$
(1,622,692
)Adjustments to reconcile net income/(loss) to net cash

provided by/(used in) operation activitiesDepreciation and amortization


318,412



226,739Loss on disposition of property and equipment


-



426Stock-based compensation


324,125



1,944,750Imputed interest expense on shareholders' loans


15,864



56,722Amortization of discount in interest expenses


68,235



105,311Common shares issued for consulting services


33,000



-Gain from discount of no-interest loans


(55,694
)


(96,364
)Changes in assets and liabilities:Notes receivable


5,600



-Accounts receivable, net


(920,879
)


(135,538
)Inventories


(264,843
)


12,992Advance payments


(170,993
)


-Other receivables


(297,856
)


(194,091
)Accounts payable


(286,315
)


(206,796
)Advance from customers


(34,120
)


(206,828
)Income taxes payable


97,096



-Other payables


(96,856
)


146,138Net Cash Provided by Operating Activities


986,716



30,769CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of property and equipment


(323,472
)


(138,320
)Advance payments for purchase of intangible assets


(731,317
)


-Net Cash Used in Investing Activities


(1,054,789
)


(138,320
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from bank loans


2,194,608



731,000Subscription received for issuing stock


-



20,000(Repayment) proceeds from shareholder loans


(651,694
)


162,694Repayment of bank loans


(3,148,381
)


(576,800
)Repayments of loans by related parties


-



5,712Proceeds from common stock issued


1,600,000



-Payment for common stock issuance costs


(15,000
)


-Net Cash (Used in)/Provided by Financing Activities


(20,467
)


342,606EFFECT OF FOREIGN CURRENCY FLUCTUATION ON CASH


(12,450
)


(1,171
)NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS


(100,990
)


233,884CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD


891,132



267,327CASH AND CASH EQUIVALENTS - ENDING OF PERIOD

$
790,142


$
501,211Supplemental cash flow information:Cash paid for interest expense

$
54,896


$
-Non-cash investing and financing activities100,000 common shares issued in exchange of consulting service received

$
33,000


$
-17,500,000 common shares issued in exchange of intangible assets

$
3,136,500


$
-4,234,275 common shares issued to settle debts

$
508,113


$
-




See accompanying notes to the consolidated financial statements


3





SINOBIOPHARMA, INC. AND SUBSIDIARIES


Notes to The Consolidated Financial Statements





1.  ORGANIZATION AND DESCRIPTION OF BUSINESS





Sinobiopharma, Inc. (the “Company”) was incorporated in the State of Nevada under the name of Buzz Media Ltd. on October 26, 2006. On November 8, 2006 the Company acquired all the issued and outstanding shares of Buzz Media Ltd. (“Buzz Nova Scotia”), a corporation incorporated in the province of Nova Scotia, Canada on October 26, 2006. The transaction was treated as an acquisition for accounting purposes. The consideration for the acquisition of Buzz Nova Scotia was 500 shares (on a post-forward stock split basis) of the Company valued at $0.10, the book value of the net assets of Buzz Nova Scotia, since the acquisition was from a related party.





On July 14, 2008 the Company’s President and majority shareholder sold all of her 62.5% interest in the Company, to an unrelated individual. On the same day, she resigned from all of her positions as officer and director of the Company and the purchaser was appointed the sole director and officer of the Company.





Effective July 29, 2008, the Company under its original name of Buzz Media, Ltd. incorporated a subsidiary, “Sinobiopharma, Inc.” with an investment of $0.001 and merged with it for the sole purpose of changing the name of the Company. As a result, the Company changed its name from “Buzz Media Ltd.” to “Sinobiopharma, Inc.”.





Effective July 29, 2008, the Company effected a fifty (50) for one (1) stock split of its authorized, issued and outstanding common stock. As a result, the Company’s authorized capital increased from 50,000,000 shares of common stock with a par value of $0.0001 to 2,500,000,000 shares of common stock with a par value of $0.0001. The Company’s issued and outstanding share capital increased as a result of the split from 2,000,010 shares of common stock to 100,000,500 shares of common stock. Share capital figures are presented in these financial statements giving retroactive effect to the stock split and accordingly all share capital figures are presented on a post-split basis as if the split had been affected upon inception.





On August 19, 2008, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Dongying Pharmaceutical Co, Limited (“Dongying BVI”), a company organized under the laws of the Territory of the British Virgin Islands, and all the shareholders of Dongying BVI, whereby the Company agreed to acquire 100% of the issued and outstanding shares of Dongying BVI through the issuance of approximately 40,000,000 shares of common stock of the Company in aggregate to the shareholders of Dongying BVI on a pro rata basis in accordance with each Dongying BVI shareholder’s percentage of ownership in Dongying BVI. The Share Exchange Agreement closed on September 22, 2008.





Concurrently with the closing of the Share Exchange Agreement, by a letter agreement entered into on September 8, 2008 between Dongying BVI and the Company’s majority shareholder, that shareholder agreed to cancel 60,100,500 shares of the 62,500,500 shares of common stock of the Company registered in his name within ten (10) days of the closing of the Share Exchange Agreement.  The 60,100,500 shares were cancelled on September 26, 2008. The share cancellation completed the reverse merger with Dongying BVI as a recapitalization of the Company such that voting control of the Company was obtained by the former stockholders of Dongying BVI. The net assets of Dongying BVI and the Company have been brought forward at their historical bases. The costs associated with the reverse merger were expensed as incurred.





Dongying BVI was incorporated under the laws of the British Virgin Islands on January 29, 2008. On May 13, 2008 Dongying BVI acquired a 100% interest in Big Global Limited (“Big Global”) from the sole shareholder of Dongying BVI for consideration of $1.00. The purpose of the transaction was the change of domicile to the British Virgin Islands.





4


Big Global was incorporated under the laws of Hong Kong on November 26, 2007. On December 10, 2007 Big Global acquired a 100% interest in Dong Ying (Jiangsu) Pharmaceuticals Co., Ltd. (“Dong Ying China”) from the sole shareholder of Big Global for consideration of $1.00. The purpose of the transaction was the change of domicile to Hong Kong. The acquisition was approved by the Chinese government in May 2008.





Dong Ying China was incorporated under the laws of the People’s Republic of China in 2003. Dong Ying China’s business is the development, manufacture and sale of pharmaceutical products in China. There are three product lines currently as of February 28, 2010 and several other potential products in various stages of research and development. The product lines currently commercialized are Cisatracurium Besylate, a skeletal muscle relaxant, Clindamycin Hydrochloride, an antibiotic for penicillin-allergic patients and Perindopril, a cardiovascular drug. Dong Ying China’s offices and manufacturing facility are in owned premises located on land used under license in Nantong, China and its research and development is carried out in Nanjing, China.





On August 20, 2008, the Company entered into a share purchase agreement (the “Share Purchase Agreement”) with the Company’s former majority shareholder, effective concurrently with the closing of the Share Exchange Agreement.  Pursuant to the Share Purchase Agreement, the former majority shareholder acquired all of the capital of Buzz Media, Ltd. (“Buzz Nova Scotia”), the wholly-owned subsidiary of the Company incorporated in the Province of Nova Scotia, Canada, in exchange for the payment of $10.00.





On July 10, 2009, the Company issued 100,000 shares at a price of $0.33 to Emissary Capital Group, LLC in accordance with the terms of the Financial Advisory and Independent Equity Research Consulting Agreement, dated June 24, 2009 entered into between the Company and Emissary Capital Group, LLC for the financial advisory and independent equity research consulting service the Company received from Emissary Group, LLC.


On December 18, 2009, the Company authorized its wholly-owned subsidiary Dong Ying China entered into three intellectual property transfer agreements with Meisu Jining Science and Technology (Nanjing) Limited Company for transfer of the approval certificates to engage in clinical trials for the drug Eplerenone and its tablet and capsule forms in China (‘Intellectual Property”).  As consideration for Intellectual Property to Dong Ying China, the Company issued an aggregate of 9,500,000 unregistered shares of the Company's common stock which at a price of $0.1870 per share and $1,776,500 was recorded to Meisu Jining Science and Technology (Nanjing) Limited Company on the same day. As a result of this transaction, Meisu Jining Science and Technology (Nanjing) Limited Company became the shareholder of the company 8%. (See Note 9 and 16).





On December 22, 2009, the Company authorized its wholly-owned subsidiary Dong Ying China entered into a patent transfer agreement with Lei Wang employee of  Dong Ying China and Lequn Huang, the Company's chief executive officer and director, for the transfer of a patent, "Composition for Lyophilized Powder of Atracurium," jointly owned by Mr. Wang and Mr. Huang. As consideration for the patent, the Company issued 8,000,000 unregistered shares of the Company's common stock on the same day which at a price of $0.17 per share and $1,360,000 was recorded, to Mr. Wang and agreed prior to issuance of the preferred stock to Mr. Huang, the Company shall: (i) undertake its commercially reasonable best efforts to seek shareholder, board, and relevant governmental approval to authorize a class of blank check preferred stock, and (ii) following the effectiveness of the authorization of blank check preferred stock, designate and issue such number of shares of preferred stock as to give Mr. Huang approximately 51% of the voting rights and 0% of the equity rights of the Company. Should the Company fail to obtain sufficient approval to authorize any preferred stock after having made commercially reasonable best efforts to do so, Mr. Huang waived his right to redress under the dispute settlement terms of the agreement. (See Note 9 and 16).




On January 15, 2010, Sinobiopharma, Inc. entered into a Subscription Agreement with certain accredited investors (collectively, the "Buyers") to sell to the Buyers an aggregate of 15,000,000 unregistered shares of common stock, par value $0.0001 of the Company, for an aggregate purchase price of $1,500,000. On January 15, 2010, the Company issued an aggregate of 15,000,000 unregistered shares to the Buyers in the private placement.




5




On January 11, 2010, the Company converted certain outstanding debt owed to its chief executive and financial officers into an aggregate of 5,067,608 unregistered shares of common stock of the Company. The Company's chief executive officer, Lequn Huang, was issued 4,234,275 unregistered shares of common stock for the outstanding $508,113 in loans owed to Mr. Huang, while the Company's chief financial officer, Xinjie Mu, was issued 833,333 shares of common stock for the outstanding $100,000 in loans due to Mr. Mu. Both conversions of debt to equity were converted at a price of $0.12 per share.




2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Change of Reporting Entity





As a result of the Share Exchange closed on September 22, 2008, the former Dongying BVI shareholders owned a majority of the common stock of the Company. The transaction was regarded as a reverse merger whereby Dongying BVI was considered to be the accounting acquirer as its shareholders retained control of the Company after the Share Exchange, although the Company is the legal parent company. As such, Dongying BVI (and its historical financial statements) is the continuing entity for financial reporting purpose. Financial Statements have been prepared as if Dongying BVI had always been the reporting company and then on the share exchange date, had changed its name and reorganized its capital stock.





Principles of Consolidation and Basis of Presentation





The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the financial statements of the Company and its subsidiaries. The accompanying  consolidated balance sheet as of February 28, 2010, consolidated statements of operations and comprehensive income and consolidated statement of cash flows for the three months and nine months ended February 28, 2010 include Sinobiopharma, Inc. and its directly owned subsidiaries, Dongying BVI, Big Global and Dong Ying China. The accompanying consolidated balance sheet as of May 31, 2009, consolidated statements of operations and comprehensive income and consolidated statement of cash flows for the three months and nine months ended February 28, 2009 consisted the following: the Company’s consolidated statements of operations and comprehensive income and consolidated statement of cash flows for the three months ended August 31, 2008 consist of the financial results of Dongying BVI and its directly owned subsidiaries, Big Global and Dong Ying China;  the Company’s consolidated statements of operations and comprehensive income and consolidated statement of cash flows for the six months ended February 28, 2009 consist of the financial results of Sinobiopharma, Inc. and its directly owned subsidiaries, Dongying BVI, Big Global and Dong Ying China.





All significant intercompany transactions and balances are eliminated on consolidation.





The accompanying consolidated financial statements as of February 28, 2010 and for the three months and nine months ended February 28, 2010 and 2009 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X applicable to smaller reporting companies. In the opinion of management, all adjustments necessary for a fair statement of the results for the interim periods have been made, and all adjustments are of a normal recurring nature (or a description of the nature and amount of any adjustments other than normal recurring adjustments).  The consolidated interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended May 31, 2009 that are included in the Company’s 2009 annual report on 10-K filed with the Securities and Exchange Commission.





6


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS





FASB Establishes Accounting Standards Codification




In June 2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB Accounting Standards Codification (“the Codification” or “ASC”) as the official single source of authoritative U.S. generally accepted accounting principles (“GAAP”). All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same topical structure in separate sections within the Codification.





Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.





The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for our second-quarter 2010 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification. In order to ease the transition to the Codification, we are providing the Codification cross-reference alongside the references to the standards issued and adopted prior to the adoption of the Codification.





In June 2009, the FASB issued the following standards:





•
SFAS No. 167, “Amendments to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities” (ASC Topic 810-10). This updated guidance requires an analysis to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity. It also requires an ongoing reassessment and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. This update is effective for our fiscal year beginning January 1, 2010 and we are currently evaluating the impact of adopting this update on our consolidated financial statements.•
SFAS No. 166, “Accounting for Transfers of Financial Assets”, (ASC Topic 810). This updated guidance removed the concept of a qualifying special-purpose entity and removed the exception from applying consolidation guidance to these entities. This update also clarified the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. ASC Topic 810 is effective for our fiscal year beginning on January 1, 2010. We are currently evaluating the impact of adopting this update on our consolidated financial statements.





In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (ASC Topic 855). This guidance is intended to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. It requires disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting this date, that is, whether this date represents the date the financial statements were issued or were available to be issued. This guidance was effective for our second quarter ended November 30, 2010.





Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-25





In September 2009, the FASB amended the FASB ASC Subtopic 605-25 which applies to multiple-deliverable revenue arrangements.  FASB ASC Subtopic 605-25 requires an entity to allocate revenue in a multiple-deliverable arrangement using vendor-specific objective evidence (“VSOE”), if it exists, otherwise third-party evidence of selling price (“TPE”). If neither VSOE nor TPE exists, the entity shall use its best estimate of the selling price for the deliverables.  As a result, the use of the residual method is eliminated and, instead, an entity is required to allocate revenue using the relative selling price method.  FASB ASC Subtopic 605-25 also expands disclosure requirements with respect to multiple-deliverable revenue arrangements. FASB ASC Subtopic 605-25 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Alternatively, an entity can elect to adopt the provisions of these issues on a retrospective basis. Management is currently evaluating the potential impact, if any, of adopting FASB ASC Subtopic 605-25 on the Company’s financial position and results of operations.


7


3. NOTES RECEIVALBE





Notes receivables of $nil as of February 28, 2010 and $5,505 as of May 31, 2009 represents bank acceptance notes the Company received from customers for sales of products. The notes are with maturity duration of 3 months, and are accepted by banks.





4. ACCOUNTS RECEIVABLE, NET





Accounts receivable consist of receivables for sales of product on credit. Accounts receivable as of  February 28, 2010 and May 31, 2009 was $1,131,625 and $208,673 respectively.





February 28, 2010

(Unaudited)

May 31, 2009Accounts receivables

$
1,131,625


$
241,010Allowance for doubtful accounts


-



(32,337
)$
1,131,625


$
208,673











Allowance for doubtful accounts movement for nine months ended February 28, 2010:





May 31, 2009


Provision


Reverse


Write-off


February 28, 2010Allowance for doubtful accounts

$
(32,337
)

$
-


$
16,814


$
15,523


$
-





5. INVENTORIES





Inventories at February 28, 2010 and May 31, 2009 consist of the following:





February 28, 2010

(Unaudited)


May 31,2009Raw materials

$
359,154


$
401,782Goods in process


337,500



-Finished goods


139,247



145,535$
835,901


$
547,317





6. ADVANCE PAYMENTS





Advance payments of $210,730 and $39,825 as of February 28, 2009 and May 31, 2009 represented payments in advance to suppliers of the Company’s raw materials.





8


7. ADVANCE PAYMENTS FOR INTANGIBLE ASSETS TO A SHAREHOLDER





Advance payment for intangible assets of $987,780 and $253,760 to a shareholder represent the prepayments to Meisu Jining Science and Technology (Nanjing) Limited Company for purchase of two technologies of new products manufacturing(“intellectual property”).  As of February 28, 2010, the Company has not obtained the technologies.





Meisu Jining Science and Technology (Nanjing) Limited Company was a related party prior this quarter which was formerly 25% owned by the Company’s CEO and shareholder Mr. Lequn Huang.  On February 22, 2010, Mr. Lequn Huang has sold his interest in Meisu Jining Science and Technology (Nanjing) Limited Company to a third party and was approved by Chinese Government.  And Meisu Jining Science and Technology (Nanjing) Limited Company then became a shareholder of the Company through the other Intellectual Property purchase transaction occurred in December 2009 . (See Note 9 and 16).





8. PROPERTY, PLANT AND EQUIPMENT, NET





Property, plant and equipment at February 28, 2010 and May 31, 2009 consist of the following:





February 28, 2010

(Unaudited)


May 31, 2009Buildings

$
1,990,207


$
1,990,207Land use rights


405,507



405,507Manufacturing equipment


909,920



769,317Office furniture and equipment


93,383



79,391Road and grounds


212,791



212,791Vehicles


146,450



10,011Leasehold improvements


31,201



-Software


2,132



-3,791,590



3,467,224Less: Accumulated depreciation


1,019,286



775,966$
2,772,304


$
2,691,258





Depreciation expense for the nine months ended February 28, 2010 and February 28, 2009 was $246, 334 and $181,130 respectively. Depreciation expense for the three months ended February 28, 2010 and February 28, 2009 was $80,113 and $57,199 respectively.





The Company’s land use right, road and grounds, and buildings with carrying value of $1,980,330 are pledged as collateral for the loan from the Agricultural Bank of China. (See Note 10).





9. INTANGIBLE ASSETS, NET





Intangible assets consist of the cost of patent, certificates for clinical trial, technology and licensed rights to manufacture the company’s products.





The patent and certificates for clinical trial are the additional intangible assets during current quarter.





The patent was purchased from Lei Wang and Lequn Huang by issuing 8,000,000 unregistered shares common stock at the price of $0.17 per share and preferred stock, respectively.





9


The certificates for clinical trial were purchased from Meisu Jining Science and Technology (Nanjing) Limited Company by issuing 9,500,000 unregistered shares common stock at a price of $0.187 per share. The acquiring clinical trial certificates are approved by the government  for the drug of Eplerenone, the Company does not intend to continue the R&D process of this drug internally after obtaining these certificates, but want to use them to exchange for other ready for production drugs or profit sharing with other company who complete the next stage development of this drug.





These unit prices per share of common stock issued in recording the cost of patent and certificates represents the estimated fair values of the Company’s unregistered common shares which were determined on the purchase day, December 18, 2009 and December 20, 2009, using the Black-Scholes Model with level 2 inputs. (See Note 16)





No cost is going to be recorded for the consideration of preferred stock which will be issued subsequently.  According to ASC 845-10-S99, transfers of nonmonetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the company's initial public offering normally should be recorded at the transferors' historical cost basis determined under GAAP.  The patent was internally developed by the shareholder, Lequn Huang, therefore, it had zero basis.





The patent has a useful life of 20 years starting from the date of application. There are 16.5 years of useful life remaining when the Company purchased patent. The certificates have useful life of 20 years but because they are not intentionally used in production, no amortization is needed. The technology and rights have an estimated useful life of 20 years. The amounts related to particular products are as follow:




February 28, 2010

(Unaudited)


May 31, 2009KuTai Patent

$
1,360,000


$
-Clinical Trial Certificates for Eplerenone


1,776,500



-Cisatracurium Besylate Technology


732,000



732,000Perindopril Technology


732,000



732,0004,600,500



1,464,000Less: Accumulated amortization


212,651



145,027$
4,387,849


$
1,318,973




As of February 28, 2009, the Company reviewed newly acquired intangible assets - KuTai Patent and Clinical Trial Certificates for Eplerenone for impairment. An independent appraiser was engaged to appraise the fair value of the above mentioned intagible assets, and no impairment was needed.




Amortization for the nine months ended February 28, 2010 and February 28, 2009 in the amount of $72, 078 and $45,609 is included in Depreciation and Amortization expense.





Amortization for the three months ended February 28, 2010 and February 28, 2009 in the amount of $33,638 and $14,964 is included in Depreciation and Amortization expense.





10. SHORT TERM BANK LOANS





The RMB1,500,000 ($220,050) short term bank loan as of February 28, 2010 represents the loan from the Agricultural Bank of China. On June 10, 2009 the Company received a loan in the amount of RMB 10,000,000 (approximately $1,462,000) from the Agricultural Bank of China. The loan bears interest at the rate of 5.31% per annum paid monthly. The loan is due for repayment in half on May 12, 2010 and June 9, 2010, respectively. The Company paid RMB5,000,000 (approximately $733,500) on November 13, 2009. On December 3, 2009, the Company borrowed RMB5,000,000 ($733,500) from the Agricultural Bank of China. The loan bears interest at the rate of 5.31% per annum paid monthly. The loan is due for repayment on November 25, 2010. On January 29, 2010, the Company paid RMB8,500,000 ($1,246,950) to the Agricultural Bank of China for the loan balance. The Company’s land use right, road and grounds and buildings with carrying value of $1,980,330 are pledged as collateral for this loan as of February 28, 2010.





As of May 31, 2009, the balance RMB5,000,000 ($732,000) represents loan from Bank of Communications and it has been repaid in full at June 8, 2009. The loan bears interest at the rate of 6.37% per annum paid monthly.





The interest expense from bank loan for the three months ended February 28, 2010 and 2009 was $20,467and $2,566; and for the nine months ended February 28, 2010 and 2009 was $64,206 and $17,401.


10


11. LOANS FROM GOVERNMENT





The Company has a loan from the Nantong Economic and Technology Development Zone Administration. The loan bears no interest. The original principal amount of the loan was RMB20million ($2,932,000 at the exchange rate applicable at February 28, 2010) and was due for repayment in full in March 2007. During 2007 the Company repaid RMB3,000,000($439,800 at the exchange rate applicable at February 28, 2010).  In December 2007 the Company was granted an extension of the due date to December 31, 2008. During the year ended December 31, 2008 the Company repaid RMB2,000,000 ($293,200 at the exchange rate applicable at February 28, 2010). On February 1, 2009 the Company repaid another RMB2,000,000 ($293,200 at the exchange rate applicable at February 28, 2010) and the Company was granted an extension to December 31, 2009 over the remainder of the loan RMB13,000,000 ($1,905,800 at the exchange rate applicable at February 28, 2010). The Company repaid RMB3,000,000 ($439,800 at the exchange rate applicable at February 28, 2010) in December 2009, and was granted an extension to December 31, 2010 over the remaining of the loan RMB10,000,000 ($1,466,000 at the exchange rate applicable at February 28, 2010).





Since the loan bears no interest, the obligation is carried at its net present value using interest rates equal to the prevailing Bank of China one-year rate at the time the loan was received (5.6% in 2004, applied in respect of the 2006 year) or the date the extension was effective (6.4% in March 2007, applied in respect of the 2007 and 2008 years, 5.6% in February, 2009, applied in respect of the 2009 year and 5.31% in February 2010, applied in respect of the 2010 year). Imputed loan interest expense included in the accounts for the three months ended as of February 28, 2010 and 2009 was $17,726 and $32,840; and for the nine months ended February 28, 2010 and 2009 was in the amount of $68,235 and $105,311which is determined as the amortization on the interest method basis of the discount over the remaining period to maturity of the loan.  Gain from discount of no-interest loans was $55,694 and $101,132 for the three months ended as of February 28, 2010 and 2009 respectively; and $55,694 and $96,364 for the nine months ended February 28, 2010 and 2009.





The present value of the total government loan was $1,420,569 as of February 28, 2010 and $1,844,193 as of May 31, 2009.





12. AMOUNTS DUE TO SHAREHOLDERS




Shareholder loans carry the value of $256,725 and $1,169,032 at February 28, 2010 and May 31, 2009. The February 28, 2010 balance represents the amount owed to Meisu Jining Science and Technology (Nanjing) Limited Company for a technology the Company purchased in October 2007. Meisu Jining Science and Technology (Nanjing) Limited Company has become a shareholder of the Company through the transaction of the intellectual property transfer at December 18, 2009 (See Note 16).




The loans of $1,169,032 at May 31, 2009 consisted of $102,521 due to Peter Chen, a former shareholder of the company, and $1,066,511 due to Mr. Lequan Huang, the majority shareholder of the Company. The loans do not bear interest and have no stated repayment terms.




On January 11, 2010, the Company converted outstanding debt owed to its chief executive and financial officers into an aggregate of 5,067,608 shares of common stock of the Company. The shareholder loans had the balance of $608,113 as of January 11, 2010. The amount includes $508,113 owed to Mr. Lequn Huang from prior borrowing and $100,000 owed to the chief financial officer, Xinjie Mu. Mr.Mu has transferred in $50,000 on December 14, 2009 and $50,000 on December 24, 2009 to the Company for the Company’s needs to pay off the expense in US currency. The Company's chief executive officer, Lequn Huang, was issued 4,234,275 shares of common stock for the outstanding $508,113 in loans owed to Mr. Huang, while the Company's chief financial officer, Xinjie Mu, was issued 833,333 shares of common stock for the outstanding $100,000 in loans due to Mr. Mu. Both conversions of debt to equity were converted at a price of $0.12 per share.




11


13. AMOUNTS DUE TO RELATED PARTY





$256,200 due to related party as of May 31, 2009, represents the payables to Meisu Jining Science and Technology (Nanjing) Limited Company (the “Meisu Jining”) for a technology the Company purchased in October 2007. The amount was reclassified to due to a shareholder as of February 28, 2010, since Meisu Jining became a shareholder of the Company through the transaction of the intellectual property transfer at December 18, 2009 (see Note. 12).





14. OTHER PAYABLES





$290,297 and $386,368 other payables as of February 28, 2010 and May 31, 2009, respectively, represent the deposits received from customers, payroll payables, accrued professional fees and VAT payables.





15. INCOME TAXES





The tax payables balance of $97,136 represents the income tax accrual of Dong Ying China for January and February 2010.





The Company’s operating subsidiary Dong Ying China enjoy a tax benefit of no enterprise income taxes for two years and half income tax for three years starting January 1, 2008 due to the Company’s wholly-owned foreign enterprises status. Starting January 1, 2010, the Company’s Chinese operations will be subject to enterprise income tax with half of tax rate for next three years. The Company’s applicable tax rate will be 11% for 2010, 12% for 2011 and 12.5% for 2012 as approved by the Nantong Economic and Technical Development Zone Office of State Administration of Taxation.




Income tax expense of $97,096 for the three months ended February 28, 2010 represents PRC current income taxes.




The Company is subject to United States income tax to the extent of its operations in the United States. The Company had no U.S. income tax expense in 2009 due to net losses.




The Company has a deferred tax asset on net operating losses of approximately $348,342 as of February 28, 2010. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those net operating losses are available. The Company considers projected future taxable income and tax planning strategies in making its assessment. At present, the Company does not have a sufficient operation in the United States to conclude that it is more-likely-than-not that the Company will be able to realize all of its tax benefits in the near future and therefore a valuation allowance of $ 348,342 was established for the full value of the deferred tax asset.





A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance. Should the Company start operation in the United States in future periods with supportable trend, the valuation allowance will be reversed accordingly.





16. COMMON STOCK





On July 10, 2009 the Company issued 100,000 common shares to Emissary Capital Group LLC in exchange of financial advisory and independent equity research consultation. The common stock par value is $0.0001 and the market price on July 10, 2009 as fair value is $0.33. No cash proceed will be paid to the Company for this issuance.





12


On December 18, 2009, the Company's wholly-owned subsidiary Dong Ying China entered into three intellectual property transfer agreements with Meisu Jining Science and Technology (Nanjing) Limited Company for transfer of the approval certificates to engage in clinical trials for the drug Epleronone and its tablet and capsule forms in China.  As consideration for Intellectual Property to Dong Ying, the Company issued an aggregate of 9,500,000 unregistered shares of the Company's common stock with fair value of the consideration was $1,776,500 on December 18, 2009 to Meisu Jining Science and Technology (Nanjing) Limited Company.





On December 22, 2009, the Company's wholly-owned subsidiary Dong Ying China entered into a patent transfer agreement with Lei Wang the employee of Dong Ying China and Lequn Huang, the Company's chief executive officer and director, for the transfer of a patent, "Composition for Lyophilized Powder of Atracurium," jointly owned by Mr. Wang and Mr. Huang. As consideration for the patent, the Company issued 8,000,000 unregistered shares of the Company's common stock, of which the value is determined at the market price of the date, to Mr. Wang and agreed prior to issuance of the preferred stock to Mr. Huang, the Company shall: (i) undertake its commercially reasonable best efforts to seek shareholder, board, and relevant governmental approval to authorize a class of blank check preferred stock, and (ii) following the effectiveness of the authorization of blank check preferred stock, designate and issue such number of shares of preferred stock as to give Mr. Huang approximately 51% of the voting rights and 0% of the equity rights of the Company. Should the Company fail to obtain sufficient approval to authorize any preferred stock after having made commercially reasonable best efforts to do so, Mr. Huang waived his right to redress under the dispute settlement terms of the agreement. The fair value of the consideration on December 22, 2009 was $1,360,000





The Company measures the fair value of the unregistered common shares and pure voting right preferred stock based on the assumptions that market participants would use in pricing the asset or liability and establishes a fair value hierarchy that ranks the inputs used to measure fair value by their reliability. The three levels of the fair value hierarchy are as follows:





Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities that a company has the ability to access at the measurement date.





Level 2—inputs other than quoted prices included within Level 1 that are observable for similar assets or liabilities, either directly or indirectly.





Level 3—unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.





The estimated fair values of the Company’s unregistered common shares and pure voting right preferred stock were determined at December 18, 2009 and December 20, 2009 using the Black-Scholes Model with level 2 inputs.





The following table sets forth, by level within the fair value hierarchy, the Company’s unregistered common shares and pure voting right preferred stock that were measured on a non-recurring basis at fair value as of December 18, 2009 and December 22, 2009.





Fair Value Measurements Using:Clinical Trial Certificates for Eplerenone

Quoted Prices in

Active Markets for

Identical Financial

Assets and Liabilities
Significant Other

Observable Inputs
Significant

Unobservable InputsDecember 18, 2009
Total
Level 1
Level 2
Level 3Equity at fair value:Unregistered common shares
$1,776,500
-
$1,776,500
-








13








Fair Value Measurements Using:KuTai Patent

Quoted Prices in

Active Markets for

Identical Financial

Assets and Liabilities
Significant Other

Observable Inputs
Significant

Unobservable InputsDecember 22, 2009
Total
Level 1
Level 2
Level 3Equity at fair value:Unregistered common shares and pure voting right preferred stock
$1,360,000
-
$1,360,000
-





Shares issued


Market price per share


Fair value price per unregistered share


Total amount of estimated fair valueKuTai Patent


8,000,000


$
0.2000


$
0.1700



1,360,000Clinical Trial Certificates for Eplerenone


9,500,000


$
0.2200


$
0.1870



1,776,500








The fair values of the unregistered common shares as of December 18, 2009 and December 22, 2009 was determined based on the Black-Scholes option pricing mode, because the shares issued to Meisu Jining Science and Technology (Nanjing) Limited Company at this transaction are non registered restricted shares, therefore their value is considered lower than the market share price and need to consider the discount of 15%. Key assumptions as following:





Unregistered common shares


Unregistered common sharesDecember 18, 2009


December 22, 2009Volatility:


56.00
%


56.00
%Risk-free interest rate:


1.17
%


1.17
%Dividend yield:


-



-Expected lives  (years):


0.50



0.50





On January 15, 2010, Sinobiopharma, Inc. entered into a Subscription Agreement with certain accredited investors (collectively, the "Buyers") to sell to the Buyers an aggregate of 15,000,000 unregistered shares of common stock, par value $0.0001 of the Company, for an aggregate purchase price of $1,500,000. On January 15, 2010, the Company issued an aggregate of 15,000,000 unregistered shares to the Buyers in the private placement.




On January 11, 2010, the Company converted certain outstanding debt owed to its chief executive and financial officers into an aggregate of 5,067,608 unregistered shares of common stock of the Company. The Company's chief executive officer, Lequn Huang, was issued 4,234,275 shares of common stock for the outstanding $508,113 in loans owed to Mr. Huang, while the Company's chief financial officer, Xinjie Mu, was issued 833,333 unregistered shares of common stock for the outstanding $100,000 in loans due to Mr. Mu. Both conversions of debt to equity were converted at a price of $0.12 per share.




14


17. STOCK-BASED COMPENSATION





On September 29, 2008, the Company adopted a stock option and incentive plan (the “2008 Stock Option and Incentive Plan”).  The 2008 Stock Option and Incentive Plan provides authorization to the Board of Directors to grant Stock Options and Incentives to a total number of shares of the Company’s common stock, not to exceed ten million (10,000,000) (post forward stock split) shares. The following option awards are part of this plan.





On September 29, 2008, the Company granted to certain directors, officers and consultants of the Company in aggregate 1,800,000 stock options having an exercise price of $1.80 per share and an expiry date of five years from the date of grant.  These stock options have vesting provisions of 10% on the date of grant and 10% on the last day of each month thereafter beginning on October 31, 2008.  The total vesting period is 9 months.





On October 2, 2008, the Company granted to certain mid-level managers of DongYing China in aggregate 500,000 stock options having an exercise price of $1.80 per share and an expiry date of five years from the date of grant.  These stock options have vesting provisions of 10% on the date of grant and 10% on the last day of each month thereafter beginning on October 31, 2008. The total vesting period is 9 months.





On October 22, 2008, the Company granted to a scientific consultant and advisory board member of the Company 225,000 stock options having an exercise price of $1.80 per share and an expiry date of five years from the date of grant.  These stock options have vesting provisions of 10% on the date of grant and 10% on the last day of each month thereafter beginning on October 31, 2008. The total vesting period is 9 months.





A summary of the Company’s stock option activities is presented below:





Number of

options


Weighted

average

exercise price

per share


Weighted

average grant-

date fair value

Per ShareOptions Outstanding,June 1, 2009- February 28, 2010


2,525,000


$
1.8


$
1.28





Compensation cost related to options was recognized as the related options vest. The vesting period was the requisite service period for each option holder. The stock-based compensation cost was $0 and $972,375 for the three months ended February 28, 2010 and 2009, and $324,125 and $1,944,750 for the nine months ended February 28, 2010 and 2009. As of February 28, 2010, all the outstanding options have vested as follows:





Vested options are as follows:





Number

outstanding

Total fair

value

Weighted average grant-

date fair value

per shareOptions vested,June 1, 2009
2,272,500

$
2,917,125

$
1.28Vesting
252,500


324,125


1.28February 28, 2010
2,525,000

$
3,241,250

$
1.28





15


If not previously exercised or canceled, options outstanding at February 28, 2010 will expire as follows:





Range of

Exercise Prices

Number


Weighted averageExpiry Date

High


Low

of Shares


exercise priceSeptember 29, 2013

$
1.80


$
1.80



1,800,000


$
1.80October 2, 2013

$
1.80


$
1.80



500,000


$
1.80October 22, 2013

$
1.80


$
1.80



225,000


$
1.80





The fair values of the options granted September 29, October 2 and October 22, 2008 were estimated at values of $1.25 per share, $1.42 per share and $1.25, respectively, using the Black-Scholes Option Pricing Model with the following weighted average assumptions:





Volatility:


88.3
%Risk-free interest rate:


2.30
%Dividend yield:


—Expected lives      (years):


5





Option-pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility.  Changes in the underlying assumptions can materially affect the fair value estimates and therefore, in management’s opinion, existing models do not necessarily provide reliable measure of the fair value of the Company’s stock options.





18.  EARNINGS/(LOSS) PER SHARE





The following table sets forth the computation of basic and diluted income per share for the period indicated:





Three months endedFebruary 28, 2010


February 28, 2009(Unaudited)


(Unaudited)Numerator used in basic net income per share:Net income/(loss)

$
941,223


$
(725,316
)Shares (denominator):Weighted average common shares outstanding


104,117,920



79,900,000Weighted average common shares outstanding used in computing diluted earnings/(loss) per ordinary share


104,117,920



79,900,000Earnings/(loss) per common share-basic

$
0.01


$
(0.01
)Earnings/(loss) per common share-diluted

$
0.01


$
(0.01
)





Nine months endedFebruary, 2010


February 28, 2009(Unaudited)


(Unaudited)Numerator used in basic net income per share:Net income/(loss)

$
2,251,940


$
(1,622,692
)Shares (denominator):Weighted average common shares outstanding


87,950,083



79,900,000Weighted average common shares outstanding used in computing diluted earnings/(loss) per ordinary share


87,950,083



79,900,000Earnings/(loss) per common share-basic

$
0.03


$
(0.02
)Earnings/(loss) per common share-diluted

$
0.03


$
(0.02
)





16


As of February 28, 2010, the Company had 2,525,000 common share equivalents outstanding that could potentially dilute basic income per share in the future, but which were excluded in the computation of diluted income per share in the periods presented, as their effect would have been anti-dilutive due to the fact that the weighted average exercise price per share of the stock option is higher than the weighted average market price per share of the common stock during the three months and nine months ended February 28, 2010.





19. RELATED PARTY TRANSACTIONS AND BALANCES





The Company purchased two intangible assets in prior year from Meisu Jining Science and Technology (Nanjing) Limited Company, previously 25% owned by the Company’s CEO and shareholder Mr. Lequn Huang; and Bio-Medical Research and Development Limited Company, previously 30% owned by Mr. Lequn Huang at prices to be negotiated at the time.  As of February 28, 2010, the cost of these two intangible assets is $732,000 for each. (See Note 9).





Addition of intangible assets





The patent and certificates for clinical trial are additional intangible assets. The patent was purchased from Lei Wang and Lequn Huang by issuing 8,000,000 unregistered shares common stock. The consideration is $1,360,000.The certificates for clinical trial were purchased from Meisu Jining Science and Technology (Nanjing) Limited Company by issuing 9,500,000 unregistered shares common stock. The consideration is $1,776,500. (See Note 9 and 16)





On February 22, 2010, Mr. Lequn Huang sold his interest in Meisu Jining Science and Technology (Nanjing) Limited Company to a third party. The transaction was approved by Chinese Government Agency and legally became effective on February 22, 2010. On January 12, 2010, Chinese Government Agency approved the application of transferring the legal representative of SUJI Bio-Medical Research and Development Limited Company from Mr. Lequn Huang to a third party. After these transactions, neither Mr. Lequn Huang nor any other person in the Company has any interest in Meisu Jining Science and Technology (Nanjing) Limited Company and SUJI Bio-Medical Research and Development Limited.





Meisu Jining became a shareholder of the Company through the transaction of the intellectual property transfer at December 18, 2009 (See Note 1).





Advance payment for intangible assets to shareholder





Advance payment for intangible assets of $987,780 and $253,760 to a shareholder as of February 28, 2010 and May 31, 2009 represent the prepayments to Meisu Jining Science and Technology (Nanjing) Limited Company.





The company has signed two contracts for purchase of intellectual property with Meisu Jining Science and Technology (Nanjing) Limited Company. One is signed in July 2008, the contract amount is $293,400 and as of February 28, 2010 the company prepaid $254,280.The other one is signed in July 2009, the contract amount is $733,500 and as of February 28, 2010, the company prepaid $733,500.(See Note 7)





Amounts due to shareholders





Shareholder loans carry the value of $256,725 and $1,169,032 at February 28, 2010 and May 31, 2009. The February 28, 2010 balance represents the amount owed to Meisu Jining Science and Technology (Nanjing) Limited Company for a technology the Company purchased in October 2007. Meisu Jining Science and Technology (Nanjing) Limited Company has become a shareholder of the Company through the transaction of the intellectual property transfer at December 18, 2009 (See Note 12 and 16).





On January 11, 2010, the Company converted outstanding debt owed to its chief executive and financial officers into an aggregate of 5,067,608 shares of common stock of the Company. The shareholder loans had the balance of $608,113 as of January 11, 2010. The amount includes $508,113 owed to Mr. Lequn Huang from prior borrowing and $100,000 owed to the chief financial officer, Xinjie Mu. Mr.Mu has transferred in $50,000 on December 14, 2009 and $50,000 on December 24, 2009 to the Company for the Company’s needs to pay off the expense in US currency. The Company's chief executive officer, Lequn Huang, was issued 4,234,275 shares of common stock for the outstanding $508,113 in loans owed to Mr. Huang, while the Company's chief financial officer, Xinjie Mu, was issued 833,333 shares of common stock for the outstanding $100,000 in loans due to Mr. Mu. Both conversions of debt to equity were converted at a price of $0.12 per share.


17


20. COMMITMENTS AND CONTINGENCIES





Commitment





In August 2009, the Company signed a technical support contract of Perindopril and Rocuronium with SUJI Bio-Medical Research and Development Limited Company for the total price of RMB8,000,00 ($1,172,800). As of February 28, 2010, the Company has paid RMB1,800,000 ($263,880) which has been expensed and is committed to pay the remaining of RMB6, 200,000 ($908,920) before Jan 2015.





Contingencies





On December 22, 2009, the Company entered into a patent transfer agreement with Lei Wang employee of Dong Ying China and Lequn Huang, the Company's chief executive officer and director, for the transfer of a patent, "Composition for Lyophilized Powder of Atracurium," jointly owned by Mr. Wang and Mr. Huang. As one of the consideration for the patent, the Company agreed prior to issuance of the preferred stock to Mr. Huang, the Company shall: (i) undertake its commercially reasonable best efforts to seek shareholder, board, and relevant governmental approval to authorize a class of blank check preferred stock, and (ii) following the effectiveness of the authorization of blank check preferred stock, designate and issue such number of shares of preferred stock as to give Mr. Huang approximately 51% of the voting rights and 0% of the equity rights of the Company. Should the Company fail to obtain sufficient approval to authorize any preferred stock after having made commercially reasonable best efforts to do so, Mr. Huang waived his right to redress under the dispute settlement terms of the agreement.





21. CONCENTRATIONS AND CREDIT RISK





At February 28, 2010 and May 31, 2009, the Company had a credit risk exposure of cash in banks of $790,142 and $891,132 respectively that is uninsured by the government authority. To limit exposure to credit risk relating to deposits, the Company primarily places cash deposits only with large financial institution in the PRC with acceptable credit rating.





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 as well as by the general state of the PRC’s economy. The business may be influenced 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.





(1)           Our main products include Clindamycin Hydrochloride and Cisatracurium Besylate which accounted for 100% of the Company’s total sales.





Three months ended February 28,2010

(Unaudited)


2009

(Unaudited)Amount of Sales


% of Total Sales


Amount of Sales


% of Total SalesClindamycin Hydrochloride 0.75g

$
10,355



0.5
%

$
20,436



2.5
%Clindamycin Hydrochloride 0.90g


18,770



1
%


48,552



6
%Cisatracurium Besylate 5mg


1,964,287



98.5
%


744,338



91.5
%Total

$
1,993,412



100
%

$
813,326



100
%





18





Nine months ended February 28,2010

(Unaudited)


2009

(Unaudited)Amount of Sales


% of Total Sales


Amount of Sales


% of Total SalesClindamycin Hydrochloride 0.75g

$
45,084



1
%

$
65,155



2
%Clindamycin Hydrochloride 0.90g


117,703



2
%


121,030



5
%Cisatracurium Besylate 5mg


5,261,860



96
%


2,529,517



93
%Total

$
5,424,647



100
%

$
2,715,702



100
%





(2)            Customers accounted for over 10% of the Company’s total sales are as follows:





Three months ended February 28,2010


2009(Unaudited)


(Unaudited)Amount of sales


% of Total Sales


Amount of sales


% of Total SalesCustomer A

$
572,949



29
%

$
214,682



26
%Customer B


394,349



20
%


36,337



4
%Total

$
967,298



49
%

$
251,019



30
%





Nine months ended February 28,2010


2009(Unaudited)


(Unaudited)Amount of sales


% of Total Sales


Amount of sales


% of Total SalesCustomer A

$
1,135,583



21
%

$
388,547



14
%Customer B


1,509,073



28
%


356,541



13
%Total

$
2,644,656



49
%

$
745,088



27
%





(3)   One supplier accounted for 46% ($630,107) and 41% ($545,661) of the Company’s total purchase for the nine months ended February 28, 2010 and February 28, 2009. The materials that the company is purchasing from that supplier are Tetrahydropapaverine Hydrocholide, DMPEA and Homoveratric acid which are in the fully competitive market and can easily be purchased from other suppliers.





22. RECLASSIFICATION





The financial statements for periods prior to February 28, 2010 have been reclassified to conform to the headings and classifications used in the February 28, 2010  financial statements which are mainly reflected in the account of advance payment for intangible assets and amounts due to related party.





23.  SUBSEQUENT EVENTS





On April 2, 2010, pursuant to the terms of the patent transfer agreement for "Composition for Lyophilized Powder of Atracurium” signed on December 22, 2009, the Company issued 1,000,000 shares of the Series A Preferred Stock (the "Preferred Stock") to Mr. Lequn Huang as consideration for the patent. The issuance of the Preferred Stock to Mr. Huang was exempt from registration under Section 4(2) of the Securities Act based upon our compliance with Regulation S as promulgated by the SEC under the Securities Act of 1933, as amended.





Effective March 29, 2010, the Company filed an Amended and Restated Articles of Incorporation, pursuant to which the Company changed its authorized capital stock to consist of 2,500,000,000 shares, consisting of 2,490,000,000 shares of common stock, $0.0001 par value and 10,000,000 shares of preferred stock, $0.0001 par value. On the same day, the Company filed a Certificate of Designation with the Secretary of State of Nevada whereby it designated 1,000,000 shares of preferred stock as Series A Preferred Stock, par value $.0001 per share. Each holder of the Series A Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Company and shall be entitled to 60 votes for each share of Series A Preferred Stock owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. Except as otherwise required by law, the holders of shares of Series A Preferred Stock shall vote together with the holders of common stock on all matters and shall not vote as a separate class.


19


Item 2. Management’s Discussion and Analysis or Plan of Operation




Cautionary Notice Regarding Forward-Looking Statements





In this quarterly report, references to “Sinobiopharma,” “SNBP,” “the Company,” “we,” “our,” “us,” and the Company’s wholly-owned subsidiary, “Dong Ying China,” refer to Sinobiopharma, Inc.





We make certain forward-looking statements in this report. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can”, “could,” “may,” “should,” “will,” “would,” and similar expressions. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. Indeed, it is likely that some of our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. You are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the SEC should be considered in evaluating forward-looking statements.





The nature of our business makes predicting the future trends of our revenue, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the following:






the effect of political, economic, and market conditions and geopolitical events;
legislative and regulatory changes that affect our business;
the availability of funds and working capital;
the actions and initiatives of current and potential competitors;
investor sentiment; and
our reputation.





We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.





The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this Report.





Overview





The Company, through its operating subsidiary Dong Ying China, is involved in the Chinese biopharmaceutical industry. We are engaged in the research, development, manufacture and marketing of biopharmaceutical products in China. The company has developed new methods for synthesis of active pharmaceutical ingredient (“API”) and innovative drug delivery (new formulation) that dramatically reduces the time and cost of drug development. Our current therapeutic focus is on anesthesia-assisted agents and cardiovascular drugs. Our R&D focus is new, innovative methods of synthesizing compounds more rapidly at lower cost, and/or improved drug formulation with enhanced usability.





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Results of Operations





The Company realized a net income of $941,223 for the three months ended February 28, 2010, as compared to a net loss of $725,316 for the three months ended February 28, 2009, and a net income of $2,251,940 for the nine months ended February 28, 2010, as compared to a net loss of $1,622,692 for the nine months ended February 28, 2009.





Sales and cost of goods sold





Sales increased 145% to $1,993,412 for the three months ended February 28, 2010, from $813,326 for the three months ended February 28, 2009.  Gross margin increased 172% to $1,612,613 (81% of sales) for the three months ended February 28, 2010, from $592,311 (73% of sales) for the three months ended February 28, 2009.





Sales increased 100% to $5,424,647 for the nine months ended February 28, 2010, from $2,715,702 for the nine months ended February 28, 2009.  Gross margin increased 137% to $4,295,844 (79% of sales) for the nine months ended February 28, 2010, from $1,815,491 (67% of sales) for the nine months ended February 28, 2009.





The increase in sales was due to the continuing growth in sales of Cisatracurium Besylate.  Sales of this product increased to $5,261,860 for the nine months ended February 28, 2010, from $2,529,517 for the nine months ended February 28, 2009, representing 96% of sales and 93% of sales for the nine months ended February 28, 2010, and February 28, 2009, respectively.  The improvement in gross margin is attributable to that, as volume increased, the unit production cost of Cisatracurium Besylate decreased. The improvement in gross margin is also attributable to an increase in the price of Cisatracurium Bestylate for the sales to certain distributors, because these distributors only provide potential customer contact information to us, while all the marketing effort, quantity and delivery term negotiation were conducted by ourselves. Since this distributor is GSP-licensed, the sales have to go through it first to get to the final customer.





Operating Expenses





The operating expenses for the three months ended February 28, 2010 were $593,045 representing a 57% decrease as compared to $1,365,359 for the three months ended February 28, 2009.  Operating expenses for the nine months ended February 28, 2010 were $1,859,986, a decrease of 45% as compared to $3,354,149 for the nine months ended February 28, 2009.





The decrease is primarily attributable to the decrease of $1,620,625 in the stock-based compensation of $324,125 for the nine months ended February 28, 2010, compared to $1,944,750 for the nine months ended February 28, 2009. The stock options have been fully vested and expensed as of August 31, 2009. There was no stock-based compensation expense for the three months ended February 28, 2010, as compared to $972,375 for the three months ended February 28, 2009.





Other income decreased $28,981 from $47,732 for the three months ended February 28, 2009 to $18,751 for the three months ended February 28, 2010, and other expenses increased $2,788 from $84,034 for the nine months ended February 28, 2009 to $86,822 for the nine months ended February 28, 2010.  The change was due to the change in the balance of the shareholder loan and government loan which resulted in the change in imputed interest expenses and imputed income.





Net income increased $1,666,539 from net loss of $725,316 for the three months ended February 28, 2009 to net income of $941,223 for the three months ended February 28, 2010. Net income increased $3,874,632 from net loss of $1,622,692 for the nine months ended February 28, 2009 to net income of $2,251,940 for the nine months ended February 28, 2010. The increase in net income was due to the increase in sales and decrease of the stock-based compensation expense.





Liquidity and Capital Resources





On January 15, 2010, the Company raised $1,500,000 capital through a private placement by selling to the investors an aggregate of 15,000,000 shares of common stock, par value $0.0001 of the Company, for an aggregate purchase price of $1,500,000. As of February 28, 2010, the Company has paid partial of the bank loan using the fund from the placement and reduced the bank loan balance to $220,050.





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The operations of Dong Ying China have generated profits for the nine months ended February 28, 2010. The Company had $790,142 in cash and the working capital became positive as of February 28, 2010. The profit generated from operation is sufficient to enable Dong Ying China to pay current debt due for repayment.  However, the Company plans to raise more capital through equity finance to provide cash to expand the business development, fund further drug product development and to launch new products. The Company is also working in developing markets to increase sales and positive cash flow of the existing products.





Net cash provided by the operating activities for the nine months ended February 28, 2010 was $986,716 compared to the net cash provided in the operating activities of $30,769 for the nine months ended February 28, 2009, an increase of $955,947. The increase is primarily attributable to the increase in net income of $3,874,632 which was offset by decrease in stock based compensation of $1,620,625, an increase in change in notes receivables and accounts receivables for the amount of $779,741 due to the increase in sales for the nine months ended February 28, 2010 compared to the nine months ended February 28, 2009, and a increase of $277,835 in the change of inventories due to our increased inventory storage to support our sales growth.





Net cash used in the investment activities for the nine months ended February 28, 2010 and 2009 was $1,054,789 and $138,320, respectively. The increase is primarily attributable to the deposit for the purchase of new technologies in the amount of $731,317. The Company has purchased $185,152 more fixed assets in the nine months period ended February 28, 2010 than in the same period of last year.





Net cash used in the financing activities for the nine months ended February 28, 2010 was $20,467 and net cash provided by the financing activities for the nine months ended February 28, 2009 was $342,606. During the nine months ended February 28, 2010, the Company borrowed $2,194,608 from banks compared to the borrowing of $731,000 in the nine months ended February 28, 2009. The company has also reduced the bank loans outstanding by $3,148,381 during the nine months ended February 28, 2010 compared to the payment of $576,800 during the nine months period ended February 28, 2009. The Company has raised $1,500,000 through a private placement and  borrowed $100,000 from Xinjie Mu, the CFO of the Company, during the nine months period ended February 28, 2010.





Short Term Loans





The RMB1,500,000 ($220,050) short term bank loan as of February 28, 2010 represents the loan from the Agricultural Bank of China. On June 10, 2009 the Company received a loan in the amount of RMB 10,000,000 (approximately $1,462,000) from the Agricultural Bank of China. The loan bears interest at the rate of 5.31% per annum paid monthly. The loan is due for repayment in half May 12, 2010 and June 9, 2010. The Company paid RMB5,000,000 (approximately $733,500) on November 13, 2009. On December 3, 2009, the Company borrowed an additional RMB5,000,000 (approximately $733,500) from the Agricultural Bank of China. The loan bears interest at the rate of 5.31% per annum paid monthly. The loan is due for repayment on November 25, 2010. On January 29, 2010, the Company has paid RMB8,500,000 (approximately $1,246,950) to the Agricultural Bank of China for the loan balance, with RMB1,500,000 ($220,050) remaining outstanding. The Company’s land use right, road and grounds and buildings with carrying value of $1,980,330 are pledged as collateral for this loan as of February 28, 2010.





On May 31, 2009, the balance RMB5,000,000($732,000) was loaned from Bank of Communications and it has been repaid in full as of June 8, 2009. The loan bore interest at the rate of 6.37% per annum paid monthly.





The interest expense from bank loan for the three months ended February 28, 2010 and 2009 was $20,467and $2,566; and for the nine months ended February 28, 2010 and 2009 was $ 64,206 and $17,401.





Long-Term Loan





The Company has a loan from the Nantong Economic and Technology Development Zone Administration. The loan bears no interest. The original principal amount of the loan was RMB20 million ($2,932,000 at the exchange rate applicable at February 28, 2010) and was due for repayment in full in March 2007. During 2007 the Company repaid RMB3,000,000 ($439,800 at the exchange rate applicable at February 28, 2010).  In December 2007 the Company was granted an extension of the due date to December 31, 2008. During the year ended December 31, 2008 the Company repaid RMB2,000,000 ($293,200 at the exchange rate applicable at February 28, 2010). On February 1, 2009 the Company repaid another RMB2,000,000 ($293,200 at the exchange rate applicable at February 28, 2010) and the Company was granted an extension to December 31, 2009 over the remainder of the loan RMB13,000,000 ($1,905,800 at the exchange rate applicable at February 28, 2010). The Company repaid RMB3,000,000 ($439,800 at the exchange rate applicable at February 28, 2010) in December 2009, and was granted an extension to December 31, 2010 over the remaining of the loan RMB10,000,000 ($1,466,000 at the exchange rate applicable at February 28, 2010).


22


Since the loan bears no interest, the obligation is carried at its net present value using interest rates equal to the prevailing Bank of China one-year rate at the time the loan was received (5.6% in 2004, applied in respect of the 2006 year) or the date the extension was effective (6.4% in March 2007, applied in respect of the 2007 and 2008 years, 5.6% in February, 2009, applied in respect of the 2009 year and 5.31% in February 2010, applied in respect of the 2010 year). Imputed loan interest expense included in the accounts for the three months ended as of February 28, 2010 and 2009 was $17,726 and $32,840; and for the nine months ended February 28, 2010 and 2009 was in the amount of $68,235 and $105,311which is determined as the amortization on the interest method basis of the discount over the remaining period to maturity of the loan.  Gain from discount of no-interest loans was $55,694 and $101,132 for the three months ended as of February 28, 2010 and 2009 respectively; and $55,694 and $96,364 for the nine months ended February 28, 2010 and 2009.




The present value of the total government loan was $1,420,569 as of February 28, 2010 and $1,844,193 as of May 31, 2009.





Shareholder Loans




Shareholder loans carry the value of $256,725 and $1,169,032 at February 28, 2010 and May 31, 2009. The February 28, 2010 balance represents the amount owned to Meisu Jining Science and Technology (Nanjing) Limited Company for a technology the Company purchased in October 2007. Meisu Jining Science and Technology (Nanjing) Limited Company has become the shareholder of the company through the transaction of the intellectual property transfer at December 18, 2009 (also see Note 16).




On January 11, 2010, the Company converted outstanding debt owed to its chief executive and financial officers into an aggregate of 5,067,608 shares of common stock of the Company. The shareholder loans had the balance of $608,113 as of January 11, 2010. This amount includes $508,113 owned to Mr. Lequn Huang from prior borrowing and $100,000 owed to the chief financial officer, Xinjie Mu. Mr.Mu has transferred in $50,000 on December 14, 2009 and $50,000 on December 24, 2009 to the Company for the Company’s needs to pay off the expense in US currency. The Company's chief executive officer, Lequn Huang, was issued 4,234,275 shares of common stock for the outstanding $508,113 in loans owed to Mr. Huang, while the Company's chief financial officer, Xinjie Mu, was issued 833,333 shares of common stock for the outstanding $100,000 in loans due to Mr. Mu. Both conversions of debt to equity were converted at a price of $0.12 per share.




The loan of $102,521 at May 31, 2009 is due to Peter Chen, a shareholder of the company, and the loan of $1,066,511 at May 31, 2009 is due to Mr. Lequan Huang, the majority shareholder of the Company. The loans do not bear interest and have no stated repayment terms.





Off-Balance Sheet Arrangements





None.





Item 3. Quantitative and Qualitative Disclosures about Market Risk.




N/A.




Item4(T). Controls and Procedures.





Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.





23





Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company’s management, including Lequn Huang, the Company’s Chief Executive Officer (“CEO”), and Xinjie Mu, the Company’s Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the nine months ended February 28, 2010. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  The Company’s CEO and CFO also concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports required to be filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.





Changes in internal controls




Our management, with the participation of our CEO and CFO, performed an evaluation as to whether any change in our internal controls over financial reporting occurred during the quarter ended February 28, 2010.  Based on that evaluation, our CEO and CFO concluded that no change occurred in the Company's internal controls over financial reporting during the quarter ended February 28, 2010 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.





PART II – OTHER INFORMATION




Item 1.Legal Proceedings.





To our knowledge, there is no material litigation pending or threatened against us.





Item 1A. Risk Factors.





Not applicable.





Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.





On December 22, 2009, the Company's wholly-owned subsidiary Dong Ying China entered into a patent transfer agreement with Lei Wang the employee of Dong Ying China and Lequn Huang, the Company's chief executive officer and director, for the transfer of a patent, "Composition for Lyophilized Powder of Atracurium," jointly owned by Mr. Wang and Mr. Huang. As consideration for the patent, the Company issued 8,000,000 unregistered shares of the Company's common stock, of which the value is determined at the market price of the date, to Mr. Wang and agreed prior to issuance of the preferred stock to Mr. Huang, the Company shall: (i) undertake its commercially reasonable best efforts to seek shareholder, board, and relevant governmental approval to authorize a class of blank check preferred stock, and (ii) following the effectiveness of the authorization of blank check preferred stock, designate and issue such number of shares of preferred stock as to give Mr. Huang approximately 51% of the voting rights and 0% of the equity rights of the Company. On April 2, 2010, pursuant to the patent transfer agreement, the Company issued Mr. Huang 1,000,000 shares of Series A Preferred Stock, par value $.0001 per share, such shares of Series A Preferred Stock carrying voting rights of 60 votes per share.





On January 15, 2010, the Company entered into a subscription agreement(the “Subscription Agreement”) with certain accredited investors (collectively, the “Buyers”) to sell to the Buyers an aggregate of 15,000,000 shares of common stock, par value $0.0001 of the Company, for an aggregate purchase price of $1,500,000. Pursuant to the Subscription Agreement, the Company issued an aggregate of 15,000,000 shares to the Buyers on the same date.





On January 11, 2010, the Company converted certain outstanding debt owed to its chief executive and financial officers into an aggregate of 5,067,608 shares of common stock of the Company.   The Company’s chief executive officer, Lequn Huang, was issued 4,234,275 shares of common stock for the outstanding $508,113 in loans owed to Mr. Huang, while the Company’s chief financial officer, Xinjie Mu, was issued 833,333 shares of common stock for the outstanding $100,000 in loans due to Mr. Mu.   Both conversions of debt to equity were converted at a price of $0.12 per share. The Company has no obligation to register the shares issued in this transaction.


24





The issuances of the common stock to the Buyers, Mr. Huang, Mr. Mu and Mr.Wang were exempt from registration under Section 4(2) of the Securities Act based upon our compliance with Regulation S as promulgated by the SEC under the Securities Act of 1933, as amended (the “Securities Act”).  Each of the Buyers, Mr. Huang, Mr. Mu and Mr. Wang acquired the Company’s common stock for investment purposes for his own respective accounts and not as a nominee or agent, and not with a view to the resale or distribution thereof, with the understanding that the common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption there from. Transfers of such shares were restricted by the Company in accordance with the requirements of the Securities Act.   Each of the Buyers, Mr. Huang, Mr. Mu and Mr. Wang was provided with access to our Securities and Exchange Commission filings.





Item 3. Defaults Upon Senior Securities.





To our knowledge, there are no material defaults upon senior securities.





Item 4. (Removed and Reserved)








Item 5. Other Information.





None.





Item 6. Exhibits.


(a) Exhibits





31.1

Certification Required Under Section 302 of Sarbanes-Oxley Act of 2002.31.2

Certification Required Under Section 302 of Sarbanes-Oxley Act of 2002.32.1

Certification Required Under Section 906 of Sarbanes-Oxley Act of 2002.32.2

Certification Required Under Section 906 of Sarbanes-Oxley Act of 2002.








25







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.








SINOBIOPHARMA, INC.Dated:   April 13, 2010
By:
/s/ Lequn HuangName: Lequn HuangTitle: President, CEO, Treasurer and Director








Dated:   April 13, 2010
By:
/s/ Xinjie MuName: Xinjie MuTitle: Chief Financial Officer and Director

















































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