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~~quarterly period ~~from~~ended ~~_______~~August to31, ~~_______~~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~~October 1315, 2010.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	2016
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2318
Item 4T.	Controls and Procedures	23
Item 4.	Controls and Procedures	19
	PART II
Item 1.	Legal Proceedings	2419
Item 1A.	Risk Factors	2419
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2419
Item 3.	Defaults Upon Senior Securities	2519
Item 4.	(Removed and Reserved)	2519
Item 5.	Other Information	2519
Item 6.	Exhibits	2520
SIGNATURES		2621

~~iii~~1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SINOBIOPHARMA, INC. AND SUBSIDIARIES

SINOBIOPHARMA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	August 31, 2010			May 31, 2010
	(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,695,590		$	1,331,959
Notes receivable		292,528			274,148
Accounts receivable, net		476,733			670,662
Inventories, net		978,277			758,090
Advance payments		276,817			67,971
Other receivables		163,122			321,493
Available for sale securities		-			293,064
Total Current Assets		3,883,067			3,717,387

Advance payment to shareholder for intangible assets		991,147			985,760
Property, plant and equipment, net		3,280,992			2,912,983
Intangible assets, net		4,321,454			4,336,832
	$	12,476,660		$	11,952,962

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	305,796		$	419,707
Loans from government		1,010,915			1,145,726
Advance from customers		165,374			135,521
Income tax payable		128,070			155,397
Other payables		382,350			343,780
Total Current Liabilities		1,992,505			2,200,131

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value;10,000,000 shares authorized;		-
1,000,000 shares issued and outstanding at August 31, 2010 and May 31, 2010		100			100
Common stock; $0.0001 par value; 2,490,000,000 shares authorized; 117,587,608 shares issued and outstanding at August 31 and May 31, 2010		11,759			11,759
Additional paid-in capital		14,360,487			14,360,487
Accumulated deficit		(4,162,609	)		(4,847,707	)
Accumulated other comprehensive income		274,418			228,192
Total Stockholders' Equity		10,484,155			9,752,831
	$	12,476,660		$	11,952,962

~~CONSOLIDATED~~See ~~BALANCE~~notes ~~SHEETS~~ to the consolidated financial statements

	February 28,			May 31,
	2010			2009
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	790,142		$	891,132
Accounts receivable, net		1,131,625			208,673
Notes receivable		-			5,505
Inventories		835,901			547,317
Advance payments		210,730			39,825
Other receivables		298,904		-
Total Current Assets		3,267,302			1,692,452
Advance payment for intangible assets to a shareholder		987,780			253,760
Property, plant and equipment, net		2,772,304			2,691,258
Intangible assets, net		4,387,849			1,318,973
	$	11,415,235		$	5,956,443
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	369,391		$	655,064
Short-term bank loans		220,050			732,000
Loans from government		1,420,569			1,844,193
Amounts due to shareholder		256,725			1,169,032
Advances from customers		102,946			136,755
Amounts due to Related party		-			256,200
Income taxes payable		97,136			-
Other payables		290,297			386,368
Total Current Liabilities		2,757,114			5,179,612
Commitments and Contigencies
STOCKHOLDERS' EQUITY
Common 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			7,992
Additional paid-in capital		13,853,827			8,254,991
Accumulated deficit		(5,459,339	)		(7,711,278	)
Accumulated other comprehensive income		251,874			225,126
Total Stockholders' Equity		8,658,121			776,831
	$	11,415,235		$	5,956,443

See accompanying notes to the consolidated financial statements

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			2009
SALES	$	1,993,412		$	813,326		$	5,424,647		$	2,715,702
COST OF GOODS SOLD		380,799			221,015			1,128,803			900,211
GROSS MARGIN		1,612,613			592,311			4,295,844			1,815,491
OPERATING EXPENSES
Selling expenses		144,956			116,148			394,309			283,483
Research and development		30,683			27,352			317,396			157,771
Depreciation and amortization		59,241			22,591			209,798			126,564
General and administrative expenses		358,165			1,199,268			938,483			2,786,331
		593,045			1,365,359			1,859,986			3,354,149
INCOME/(LOSS) FROM OPERATIONS		1,019,568			(773,048	)		2,435,858			(1,538,658	)
OTHER INCOME/ (EXPENSES)
Interest income		1,896			363			7,070			1,059
Interest expense		(38,193	)		(53,544	)		(148,278	)		(181,017	)
Other expenses		55,048			100,913			54,386			95,924
		18,751			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			12,279
COMPREHENSIVE 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

SINOBIOPHARMA, INC. AND SUBSIDIARIES

SINOBIOPHARMA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

	Three months ended August 31,
	2010			2009

SALES	$	1,856,398		$	1,293,764
COST OF GOODS SOLD		427,205			330,841
GROSS MARGIN		1,429,193			962,923

OPERATING EXPENSES
Selling expenses		119,438			84,168
Research and development		243,493			64,302
Depreciation and amortization		65,552			110,041
General and administrative expenses		220,704			412,276
TOTAL OPERATING EXPENSES		649,187			670,787

INCOME FROM OPERATIONS		780,006			292,136

OTHER INCOME/(EXPENSES)
Interest income		1,031			1,852
Interest expenses		(14,920	)		(56,428	)
Other income/(expenses)		14,604			(393	)
TOTAL OTHER INCOME/ (EXPENSES)		715			(54,969	)

INCOME BEFORE INCOME TAX EXPENSE		780,721			237,167

INCOME TAX EXPENSE		(95,623	)		-

NET INCOME		685,098			237,167

OTHER COMPREHENSIVE INCOME:
Foreign Currency Translation Adjustment		46,226			16,554

COMPREHENSIVE INCOME	$	731,324		$	253,721

Earnings per share:
Basic and Diluted	$	0.01		$	0.00

Weighted average number of common shares outstanding – basic and diluted		117,587,608			79,977,609

~~CONSOLIDATED~~See ~~STATEMENTS~~notes OFto ~~CASH~~the ~~FLOWS~~consolidated financial statements

(UNAUDITED)

	Nine Months Ended Feb 28,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$	2,251,940		$	(1,622,692	)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operation activities
Depreciation and amortization		318,412			226,739
Loss on disposition of property and equipment		-			426
Stock-based compensation		324,125			1,944,750
Imputed interest expense on shareholders' loans		15,864			56,722
Amortization of discount in interest expenses		68,235			105,311
Common 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	)		12,992
Advance 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	)		146,138
Net Cash Provided by Operating Activities		986,716			30,769
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition 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 ACTIVITIES
Proceeds from bank loans		2,194,608			731,000
Subscription received for issuing stock		-			20,000
(Repayment) proceeds from shareholder loans		(651,694	)		162,694
Repayment of bank loans		(3,148,381	)		(576,800	)
Repayments of loans by related parties		-			5,712
Proceeds 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	)		342,606
EFFECT OF FOREIGN CURRENCY FLUCTUATION ON CASH		(12,450	)		(1,171	)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(100,990	)		233,884
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		891,132			267,327
CASH AND CASH EQUIVALENTS - ENDING OF PERIOD	$	790,142		$	501,211
Supplemental cash flow information:
Cash paid for interest expense	$	54,896		$	-
Non-cash investing and financing activities
100,000 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

SINOBIOPHARMA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three months ended August 31,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	685,098		$	237,167
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		123,400			110,041
Stock-based payments		-			33,000
Stock-based compensation		-			324,125
Imputed interest expense on shareholders' loans		-			10,845
Amortization of discount in interest expense		14,920			25,244
Gain from discount of non-interest government loan		(8,783	)		-
Gain from sales of available for sales securities		(1,764	)		-
Notes receivable		(16,905	)		-
Accounts receivable, net		197,863			(92,636	)
Inventories		(216,339	)		13,258
Advance payments		(208,758	)		(645,229	)
Other receivables		160,266			(142,670	)
Accounts payable		(116,363	)		(145,755	)
Advance from customers		29,152			23,833
Income tax payable		(28,215	)		-
Other payables		37,115			69,619
Net Cash Provided by/(Used in) Operating Activities		650,687			(179,158	)

CASH FLOWS FROM INVESTING ACTIVITIES
Sales of available for sales securities		296,564			-
Acquisition of property and equipment		(436,840	)		(125,924	)

Net Cash Used in Investing Activities		(140,276	)		(125,924	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of shareholder loans		-			(610,021	)
Proceeds from loans due to bank loan and government loan		-			1,461,408
Repayment of loans from bank loan and government loan		(147,400	)		(730,704	)

Net Cash (Used in)/Provided by Financing Activities		(147,400	)		120,683

EFFECT OF FOREIGN CURRENCY FLUCTUATIONON CASH		620			65,237
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		363,631			(119,162	)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR	$	1,331,959		$	891,132
CASH AND CASH EQUIVALENTS - ENDING OF YEAR	$	1,695,590		$	771,970

Supplemental cash flow information:
Cash paid for income taxes	$	123,839		$	-
Cash paid for interest expense	$	-		$	35,911
Non-cash investing and financing activities:
100,000 common shares issued in exchange for consulting services received	$	-		$	33,000

See notes to the consolidated financial statements

SINOBIOPHARMA, INC. AND SUBSIDIARIES

Notes to ~~The~~the Consolidated Financial Statements

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Sinobiopharma, Inc. (the “Company”) ~~was~~is ~~incorporated~~a infully ~~the~~integrated ~~State~~and ofhighly ~~Nevada~~innovative ~~under~~specialty ~~the~~biopharmaceutical ~~name~~company ofengaged ~~Buzz~~in ~~Media~~the ~~Ltd.~~research onand ~~October 26~~development, ~~2006.~~manufacture ~~On November 8, 2006 the Company acquired all the issued~~ and ~~outstanding~~marketing ~~shares~~ of ~~Buzz~~biopharmaceutical ~~Media~~products ~~Ltd. (“Buzz Nova Scotia”), a corporation incorporated~~ in ~~the province of Nova Scotia, Canada on October 26, 2006~~China. The ~~transaction~~Company's ~~was~~current ~~treated~~therapeutic asfocus anis ~~acquisition~~on ~~for~~anesthesia-assisted ~~accounting~~agents ~~purposes.~~and ~~The~~cardiovascular ~~consideration~~drugs. ~~for~~Sinobiopharma ~~the~~has ~~acquisition~~patented ofnew ~~Buzz~~methods ~~Nova~~for ~~Scotia~~synthesizing ~~was~~active ~~500~~pharmaceutical ~~shares~~ingredients (~~on a post-forward stock split basis~~API) ~~of the Company valued~~ at ~~$0.10,~~a ~~the~~lower ~~book~~cost ~~value~~and ofowns ~~the~~drug ~~net~~delivery ~~assets~~formulations ofthat ~~Buzz~~improve ~~Nova Scotia, since the acquisition was from a related party~~usability.

OnThe ~~July~~Company ~~14,~~was ~~2008~~incorporated in the ~~Company’s~~State ~~President~~of ~~and~~Nevada ~~majority~~under ~~shareholder~~the ~~sold~~name ~~all~~ of ~~her~~Buzz 62Media Ltd.5% ~~interest~~on inOctober 26, 2006. Effective July 29, 2008, the Company, tounder anits ~~unrelated~~original ~~individual~~name of Buzz Media, Ltd. Onincorporated ~~the~~a ~~same~~subsidiary, ~~day~~“Sinobiopharma, ~~she~~Inc.” ~~resigned~~with ~~from~~an ~~all~~investment of ~~her~~$0.001 ~~positions~~and asmerged ~~officer~~with ~~and~~it ~~director~~for the sole purpose of changing the ~~Company~~name ~~and~~of the ~~purchaser~~Company. ~~was~~As ~~appointed~~a result, the ~~sole~~Company ~~director~~changed ~~and~~its ~~officer~~name offrom ~~the~~“Buzz ~~Company~~Media Ltd.” to “Sinobiopharma, Inc.”.

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. After the cancellation, the shareholders of Sinobiopharma, Inc. owned 39,900,000 shares. 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.

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 (the “PRC”) in 2003. Dong Ying China’s business is the development, manufacture and sale of pharmaceutical products in China. There are ~~three~~two product lines currently as of ~~February~~August 2831, 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.

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~~Basis of ~~Reporting~~Presentation ~~Entity~~and Principles of Consolidation

AsThe aaccompanying unaudited ~~result~~consolidated financial statements of the ~~Share~~Company ~~Exchange~~have ~~closed~~been onprepared ~~September~~in ~~22,~~accordance ~~2008,~~with ~~the~~accounting ~~former~~principles ~~Dongying~~generally ~~BVI~~accepted ~~shareholders~~in ~~owned a majority of~~ the ~~common~~United ~~stock~~States of ~~the~~America ~~Company~~(“U.S. ~~The~~GAAP”) ~~transaction~~and ~~was~~include ~~regarded~~the asfinancial astatements ~~reverse~~of ~~merger~~the ~~whereby~~Company ~~Dongying~~and ~~BVI~~its ~~was~~subsidiaries. ~~considered~~The toaccompanying unaudited beconsolidated ~~the~~balance ~~accounting~~sheet ~~acquirer~~ as ~~its shareholders retained control~~ of ~~the~~August ~~Company~~31, ~~after the Share Exchange~~2010, ~~although~~consolidated ~~the~~statements ~~Company~~of isoperations ~~the~~and ~~legal~~comprehensive ~~parent~~income ~~company. As such, Dongying BVI (~~and ~~its~~consolidated ~~historical financial~~ statements) isof ~~the~~cash ~~continuing~~flows ~~entity~~ for ~~financial~~the ~~reporting~~three ~~purpose.~~months ~~Financial~~ended ~~Statements~~August ~~have~~31, ~~been~~2010 ~~prepared~~and as2009 ifinclude ~~Dongying~~Sinobiopharma, ~~BVI~~Inc. ~~had always been the reporting company~~ and ~~then~~its ondirectly ~~the~~owned ~~share~~subsidiaries, ~~exchange~~Dongying ~~date~~BVI, Big ~~had~~Global ~~changed its name~~ and ~~reorganized~~Dong ~~its~~Ying ~~capital stock~~China.

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 unaudited consolidated financial statements as of ~~February~~August 2831, 2010 and for the three months ~~and nine months~~ ended ~~February~~August 2831, 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~~2010 that are included in the Company’s ~~2009~~2010 annual report on 10-K filed with the Securities and Exchange Commission.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2010, the FASB ~~Establishes~~issued ~~Accounting~~ASU ~~Standards~~2010-13, ~~Codification~~Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Earlier application is permitted. The Company does not expect the provisions of ASU 2010-13 to have a material effect on the financial position, results of operations or cash flows of the Company.

InThe ~~June~~FASB ~~2009~~issued ASU 2010-17, Revenue Recognition - Milestone Method (Topic 605): Milestone Method of Revenue Recognition. This ASU codifies the ~~FASB~~consensus ~~issued~~reached ~~Accounting~~in ~~Standards~~EITF ~~Update~~Issue No. ~~2009~~ 08-019, “~~Generally~~Milestone ~~Accepted~~Method ~~Accounting~~of ~~Principles~~Revenue Recognition.” ~~(ASC~~The ~~Topic~~amendments ~~105)~~to ~~which~~the ~~establishes~~Codification ~~the~~provide ~~FASB~~guidance ~~Accounting~~on ~~Standards~~defining ~~Codification~~a ~~(“the~~milestone ~~Codification”~~and ordetermining ~~“ASC”)~~when asit ~~the~~may ~~official~~be ~~single~~appropriate ~~source~~to apply the milestone method of ~~authoritative~~revenue ~~U.S.~~recognition ~~generally~~for ~~accepted~~research ~~accounting~~or ~~principles~~development ~~(“GAAP”)~~transactions. ~~All~~Consideration ~~existing~~that ~~accounting~~is ~~standards~~contingent ~~are~~on ~~superseded.~~achievement ~~All~~of ~~other~~a ~~accounting~~milestone ~~guidance~~in ~~not~~its ~~included~~entirety may be recognized as revenue in the ~~Codification~~period ~~will~~in which the milestone is achieved only if the milestone is judged to meet certain criteria to be considered ~~non-authoritative~~substantive. ~~The~~Milestones ~~Codification~~should ~~also~~be ~~includes~~considered ~~all~~substantive ~~relevant~~in ~~Securities~~their entirety and ~~Exchange~~may ~~Commission~~not ~~(“SEC”)~~be ~~guidance~~bifurcated. ~~organized~~An ~~using~~arrangement ~~the~~may ~~same~~contain ~~topical~~both ~~structure~~substantive inand ~~separate~~nonsubstantive ~~sections~~milestones, ~~within~~and ~~the~~each ~~Codification~~milestone should be evaluated individually to determine if it is substantive.

~~Following~~ASU ~~the~~2010-17 ~~Codification,~~is ~~the~~effective ~~Board~~on ~~will~~a ~~not~~prospective ~~issue~~basis ~~new~~for ~~standards~~milestones achieved in ~~the~~fiscal ~~form~~years, ofand ~~Statements,~~interim ~~FASB~~periods ~~Staff~~within ~~Positions~~those years, beginning on or ~~Emerging~~after ~~Issues~~June ~~Task~~15, ~~Force~~2010. ~~Abstracts~~Early adoption is permitted. ~~Instead,~~If ita ~~will~~vendor ~~issue~~elects ~~Accounting~~early ~~Standards~~adoption ~~Updates~~and ~~(“ASU”)~~the ~~which~~period ~~will~~of ~~serve~~adoption tois ~~update~~not the ~~Codification~~beginning of the entity’s fiscal year, ~~provide~~the ~~background~~entity ~~information~~should ~~about~~apply 2010-17 retrospectively from the ~~guidance~~beginning ~~and~~of ~~provide~~the year of adoption. Vendors may also elect to adopt the ~~basis~~amendments in this ASU retrospectively for ~~conclusions~~all onprior periods. The Company does not expect the ~~changes~~provisions of ASU 2010-19 to have a material effect on the ~~Codification.~~financial position, results of operations or cash flows of the Company

~~The~~ASU ~~Codification~~2010-18, isReceivables ~~not~~(Topic ~~intended~~310): toEffect ~~change~~of ~~GAAP~~a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset, ~~but~~codifies itthe ~~will~~consensus ~~change~~reached in EITF Issue No. 09-I, “Effect of a Loan Modification When the ~~way~~Loan ~~GAAP~~Is isPart ~~organized~~of ~~and~~a ~~presented~~Pool That Is Accounted for as a Single Asset.” The amendments to the Codification isprovide ~~effective~~that modifications of loans that are accounted for ~~our~~within ~~second~~a pool under Subtopic 310-~~quarter~~30 ~~2010~~do ~~financial~~not ~~statements~~result ~~and~~in the ~~principal~~removal ~~impact~~of onthose ~~our~~loans ~~financial~~from ~~statements~~the ispool ~~limited~~even toif ~~disclosures~~the asmodification ~~all~~of ~~future~~those ~~references~~loans towould ~~authoritative~~otherwise ~~accounting~~be ~~literature~~considered a troubled debt restructuring. An entity will continue to be ~~referenced~~required into ~~accordance~~consider ~~with~~whether the ~~Codification.~~pool Inof ~~order~~assets toin ~~ease~~which the ~~transition~~loan tois ~~the~~included ~~Codification,~~is weimpaired ~~are~~if ~~providing~~expected cash flows for the ~~Codification~~pool ~~cross~~change. ASU 2010-~~reference~~18 ~~alongside~~does not affect the ~~references~~accounting tofor loans under the ~~standards~~scope ~~issued~~of ~~and~~Subtopic ~~adopted~~310-30 ~~prior~~that are not accounted for within pools. Loans accounted for individually under Subtopic 310-30 continue to ~~the~~be ~~adoption~~subject ofto the ~~Codification~~troubled debt restructuring accounting provisions within Subtopic 310-40.

~~In June 2009, the FASB issued the following standards:~~6

•

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.

ASU 2010-18 is effective prospectively for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. Early application is permitted. Upon initial adoption of ASU 2010-18, an entity may make a one-time election to terminate accounting for loans as a pool under Subtopic 310-30. This election may be applied on a pool-by-pool basis and does not preclude an entity from applying pool accounting to subsequent acquisitions of loans with credit deterioration. The Company does not expect the provisions of ASU 2010-18 to have a material effect on the financial position, results of operations or cash flows of the Company

In May ~~2009~~2010, the FASB issued ~~SFAS~~ASU ~~No. 165~~2010-19, ~~“Subsequent~~Foreign ~~Events”~~Currency (~~ASC~~ Topic ~~855~~830).: ~~This~~Foreign ~~guidance~~Currency isIssues: ~~intended~~Multiple toForeign ~~establish~~Currency ~~general~~Exchange ~~standards~~Rates. The ofamendments ~~accounting~~in ~~for~~this ~~and~~Update ~~disclosures~~are ofeffective ~~events~~as ~~that~~of ~~occur after~~ the ~~balance~~announcement ~~sheet~~ date ~~but~~of ~~before~~March ~~the~~18, ~~financial~~2010. ~~statements~~The ~~are~~Company ~~issued~~does ornot ~~are~~expect ~~available~~the toprovisions ~~be issued. It requires disclosure~~ of ~~the~~ASU ~~date~~2010-19 ~~through~~to ~~which~~have ana ~~entity~~material ~~has~~effect ~~evaluated~~on ~~subsequent events and~~ the ~~basis~~financial ~~for selecting this date~~position, ~~that~~results ~~is,~~of ~~whether~~operations ~~this~~or ~~date~~cash ~~represents~~flows ~~the~~of ~~date~~ the ~~financial statements were issued or were available to be issued~~Company. ~~This guidance was effective for our second quarter ended November 30, 2010.~~

~~Financial~~Other ~~Accounting~~accounting ~~Standards~~standards ~~Board~~that (“have been issued or proposed by FASB”) ~~Accounting~~that ~~Standards~~do ~~Codification~~not ~~(“ASC”)~~require ~~Subtopic~~adoption ~~605-25~~until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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.

3. NOTES RECEIVALBE

Notes receivables of $~~nil~~292,528 as of ~~February~~August 2831, 2010 and $5274,~~505~~148 as of May 31, ~~2009~~2010 represents bank acceptance notes the Company received from customers for sales of products. The notes are with maturity duration of 36 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~~ August 2831, 2010 and May 31, ~~2009~~2010 was $1476,~~131,625~~733 and $~~208~~670,~~673~~662 respectively.

	February 28, 2010 (Unaudited)			May 31, 2009
	August 31, 2010			May 31, 2010
Accounts receivables		$	1,131,625		$	241,010
	(Unaudited)
Allowance for doubtful accounts			-			(32,337	)
Accounts receivables		$	476,733		$	670,662
		$	1,131,625		$	208,673
Allowance for doubtful accounts			-			-
		$	476,733		$	670,662

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

		May 31, 2009				Provision				Reverse				Write-off				February 28, 2010
Allowance for doubtful accounts		$	(32,337	)		$	-			$	16,814			$	15,523			$	-

5. INVENTORIES

Inventories at ~~February~~August 2831, 2010 and May 31, ~~2009~~2010 consist of the following:

	February 28, 2010 (Unaudited)		May 31,2009
	August 31, 2010		May 31, 2010
Raw materials	$	359,154	$	401,782
	(Unaudited)
Goods in process		337,500		-
Raw materials	$	157,546	$	127,883
Finished goods		139,247		145,535
Goods in process		723,642		553,450
	$	835,901	$	547,317
Finished goods		97,089		76,757
	$	978,277	$	758,090

6. ADVANCE PAYMENTS

Advance payments of $~~210~~276,~~730~~817 and $3967,~~825~~971 as of ~~February~~August 2831, ~~2009~~2010 and May 31, ~~2009~~2010 represented payments in advance to suppliers of the Company’s raw materials.

87. SECURITIES AVAILABLE FOR SALE

7On May 17, 2010, the Company purchased a low risk short term financial product from China Agricultural Bank. ~~ADVANCE~~The ~~PAYMENTS~~maturity ~~FOR~~term ~~INTANGIBLE~~of ~~ASSETS~~this TOproduct Ais ~~SHAREHOLDER~~three months with no guarantee from the bank of repayment of the principle. The principle is $292,800, the fair value as of May 31, 2010 is $293,064, and the accumulated unrealized gain is $264 which is booked into accumulated other comprehensive income. As of August 31, 2010, the security has been sold and the proceeds of $296,564 have been transferred to the Company’s bank account. $1,764 was recognized as realized gain during the three months ended August 31, 2010.

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.7

~~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~~8. ADVANCE ~~Lequn~~PAYMENTS ~~Huang. On~~FOR ~~February~~INTANGIBLE ~~22,~~ASSETS ~~2010,~~TO ~~Mr.~~A 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).SHAREHOLDER

8Advance payment to a shareholder for intangible assets of $991,147 and $985,760 represent prepayments to the Meisu Jining Science and Technology (Nanjing) Limited Company for the purchase of two technologies for new product manufacturing (“intellectual property”). As ~~PROPERTY~~of August 31, ~~PLANT~~2010, ~~AND~~the ~~EQUIPMENT~~Company has not obtained the technologies. If these technologies cannot be delivered by the due date stipulated in the contracts, ~~NET~~the prepayment will be returned to the Company.

~~Property,~~Meisu ~~plant~~Jining Science and ~~equipment~~Technology at(Nanjing) Limited Company was a related party prior February 2822, 2010. The Company’s CEO and ~~May~~shareholder 31Mr. Lequn Huang owned 25%. On February 22, ~~2009~~2010, ~~consist~~Mr. Lequn Huang sold his interest in Meisu Jining Science and Technology (Nanjing) Limited Company to a third party which was approved by Chinese Government. Meisu Jining Science and Technology (Nanjing) Limited Company then became a shareholder of the ~~following:~~Company with 8% interest through another Intellectual Property purchase transaction (see Note 18) which occurred in December 2009.

	February 28, 2010 (Unaudited)		May 31, 2009
Buildings	$	1,990,207	$	1,990,207
Land use rights		405,507		405,507
Manufacturing equipment		909,920		769,317
Office furniture and equipment		93,383		79,391
Road and grounds		212,791		212,791
Vehicles		146,450		10,011
Leasehold improvements		31,201		-
Software		2,132		-
		3,791,590		3,467,224
Less: Accumulated depreciation		1,019,286		775,966
	$	2,772,304	$	2,691,258

9. PROPERTY, PLANT AND EQUIPMENT, NET

~~Depreciation expense for the nine months ended February 28~~Property, ~~2010~~plant and ~~February~~equipment ~~28,~~at ~~2009~~August ~~was $246~~31, ~~334~~2010 and ~~$181,130~~May ~~respectively. Depreciation expense for the three months ended February 28~~31, 2010 ~~and~~consist ~~February~~of ~~28,~~the ~~2009 was $80,113 and $57,199 respectively.~~following:

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).

	August 31, 2010		May 31, 2010
	(Unaudited)
Buildings	$	2,003,438	$	1,990,207
Land use rights		407,723		405,507
Manufacturing equipment		1,357,421		999,665
Office furniture and equipment		108,334		102,263
Road and grounds		213,954		212,791
Vehicles		146,969		146,171
Leasehold improvements		31,308		31,138
Software		2,139		2,127
Construction-in-process		205,843		129,052
		4,477,129		4,018,921
Less: accumulated depreciation		1,196,137		1,105,938
	$	3,280,992	$	2,912,983

9.Depreciation ~~INTANGIBLE~~expense ~~ASSETS~~for the three months ended August 31, ~~NET~~2010 and 2009 was $ 90,199 and $ 89,884, respectively.

10. 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.

The certificates for clinical trial were purchased from Meisu Jining Science and Technology (Nanjing) Limited Company by issuing 9,500,000 unregistered shares of common stock at a price of $0.187 per share. The acquiring clinical trial certificates were approved by the government for the drug Eplerenone, the Company does not intend to continue the R&D process of this drug internally since obtaining these certificates, but want to use them to exchange for other “ready for production” drugs or profit sharing with other companies who complete the next development stage of this drug. On July 26, 2010, Dong Ying China, entered into a Cooperation Agreement with Jiangsu LianHuan Pharmaceuticals Co., Ltd. (“LianHuan”) for the co-development, manufacture, and marketing of the drug Eplerenone. According to the Agreement, LianHuan shall be responsible for all fees and expenses incurred in the clinical trials. Following the completion of clinical trials, LianHuan and DongYing shall jointly complete and submit the drug production application. Once production approval for Eplerenone is obtained, LianHuan and DongYing shall jointly own the new drug production certificate for Eplerenone. LianHuan shall be responsible for the manufacture of Eplerenone and its tablet form, though Dong Ying China retains the option to produce Eplerenone capsules. The net profit from the sales of Eplerenone shall be apportioned as 60 percent to Dong Ying China and 40 percent to LianHuan.

The unit prices per share of common stock issued with respect to the patent and certificates represents the estimated fair values of the Company’s unregistered common shares which were determined on the purchase dates, December 18, 2009 and December 20, 2009, using the Black-Scholes Model with level 2 inputs (See Note 14).

No cost was recorded for the consideration of preferred stock which has been issued on April 2, 2010. 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 has a basis of zero.

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

	August 31, 2010									May 31, 2010
	(Unaudited)
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weight Average Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weight Average Useful Life
								(in years)									(in years)
KuTai Patent	$	1,364,635	$	(62,030	)	$	1,302,605		16.5	$	1,357,219	$	(41,128	)	$	1,316,091		16.5
Clinical Trial Certificates for Eplerenone		1,782,555		-			1,782,555				1,772,867		-			1,772,867
Cisatracurium Besylate Technology		736,000		(117,853	)		618,147		20		732,000		(108,063	)		623,937		20
Perindopril Technology		736,000		(117,853	)		618,147		20		732,000		(108,063	)		623,937		20
Total intangible assets	$	4,619,190	$	(297,736	)	$	4,321,454			$	4,594,086	$	(257,254	)	$	4,336,832

Amortization for the three months ended August 31, 2010 and August 31, 2009 in the amount of $40,482 and $20,157 is included in Depreciation and Amortization expense.

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, 2009
KuTai Patent	$	1,360,000	$	-
Clinical Trial Certificates for Eplerenone		1,776,500		-
Cisatracurium Besylate Technology		732,000		732,000
Perindopril Technology		732,000		732,000
		4,600,500		1,464,000
Less: 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.

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~~928,000 at the exchange rate applicable at ~~February~~May 2831, 2010) and was due for repayment in full in March 2007. During 2007 the Company repaid RMB3,000,000($439,~~800~~200 at the exchange rate applicable at ~~February~~May 2831, 2010). In December 2007 the Company was granted an extension ~~of the due date~~ to December 31, 2008. During the year ended December 31, 2008 the Company repaid RMB2,000,000 ($~~293~~292,~~200~~800 at the exchange rate applicable at ~~February~~May 2831, 2010). On February 1, 2009 the Company repaid another RMB2,000,000 ($~~293~~292,~~200~~800 at the exchange rate applicable at ~~February~~May 2831, 2010) and the Company was granted an extension to December 31, 2009 ~~over~~for the remainder of the loan of RMB13,000,000 ($1,~~905~~903,~~800~~200 at the exchange rate applicable at ~~February~~May 2831, 2010). The Company repaid RMB3,000,000 ($439,~~800~~200 at the exchange rate applicable at ~~February~~May 2831, 2010) in December 2009, and was granted ananother extension to December 31, 2010 ~~over~~for the remaining loan balance of RMB10,000,000 ($1,464,000 at the ~~loan~~exchange ~~RMB10~~rate applicable at May 31, 2010). On April 7, 2010, the Company repaid RMB1,000,000 ($146,400 at the exchange rate applicable at May 31, 2010). On May 6, 2010, the Company repaid RMB1,000,000 ($146,400 at the exchange rate applicable at May 31, 2010) leaving a remaining balance of RMB8,000,000 ($1,~~466~~171,200 at the exchange rate applicable at May 31, 2010). On August 31, 2010, the Company repaid RMB1,000,000 ($147,200 at the exchange rate applicable at ~~February~~August 2831, 2010) leaving a remaining balance of RMB7,000,000 ($1,030,400 at the exchange rate applicable at August 31, 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~~August 2831, 2010 and 2009 was $1714,~~726~~920 and $3225,~~840;~~244 ~~and~~which ~~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 nonon-interest loans was $558,~~694~~783 and $~~101,132~~0 for the three months ended as of ~~February~~August 2831, 2010 and 2009 ~~respectively; and $55~~,~~694~~ ~~and $96,364 for the nine months ended February 28, 2010 and 2009~~respectively.

The present value of the total government loan was $1,~~420~~010,~~569~~915 as of ~~February~~August 2831, 2010 and $1,~~844~~145,~~193~~726 as of May 31, ~~2009~~2010.

12. OTHER ~~AMOUNTS DUE TO SHAREHOLDERS~~PAYABLES

~~Shareholder~~Other ~~loans~~payables ~~carry the value~~ of $~~256~~382,~~725~~350 and $1343,~~169,032~~780 atas ~~February~~of 28August 31, 2010 and May 31, ~~2009.~~2010, ~~The February 28~~respectively, ~~2010~~represent ~~balance represents~~ the ~~amount~~deposits ~~owed~~received tofrom ~~Meisu~~customers, ~~Jining~~payroll ~~Science~~payables, ~~and~~accrued ~~Technology~~professional ~~(Nanjing)~~fees ~~Limited Company for a technology the Company purchased in October 2007. Meisu Jining Science~~ and ~~Technology~~VAT ~~(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)~~payables.

~~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~~13. INCOME ~~Lequan Huang, the majority shareholder of the Company. The loans do not bear interest and have no stated repayment terms.~~TAXES

~~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~~tax ~~loans~~payables ~~had the~~ balance of $~~608~~128,~~113~~070 ~~as of January 11, 2010. The amount includes $508,113 owed to Mr. Lequn Huang from prior borrowing~~ and $~~100~~155,~~000~~397 ~~owed~~represents to the ~~chief~~income ~~financial~~tax ~~officer,~~accrual ~~Xinjie~~of ~~Mu.~~Dong ~~Mr.Mu~~Ying ~~has~~China ~~transferred~~as inof ~~$50,000~~August ~~on December 14~~31, ~~2009~~2010 and ~~$50,000~~May ~~on December 24~~31, ~~2009 to the Company for the Company’s needs to pay off the expense in US currency. The Company's chief executive officer~~2010, ~~Lequn Huang, was issued 4,234,275 shares of common stock for the outstanding $508,113 in loans owed to Mr~~respectively. 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.

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 $9795,~~096~~623 for the three months ended ~~February~~August 2831, 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~~accrued no U.S. income tax expense infor ~~2009~~the three months ended August 31, 2010 due to net ~~losses~~loss.

The Company has a deferred tax asset on net operating losses of approximately $~~348~~251,~~342~~271 as of ~~February~~August 2831, 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~~251,~~342~~271 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~~10

~~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~~14. ~~The~~PERFERRED ~~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.~~STOCK

12Effective March 29, 2010, the Company filed 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 $0.0001 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.

OnAfter ~~December~~majority ~~18,~~shareholders’ ~~2009~~approval process, ~~the~~on ~~Company's~~April ~~wholly-owned~~2, ~~subsidiary~~2010, ~~Dong~~pursuant ~~Ying~~to ~~China~~the ~~entered~~terms ~~into~~of ~~three~~the ~~intellectual~~patent ~~property~~ transfer ~~agreements~~agreement ~~with~~for ~~Meisu~~"Composition ~~Jining~~for ~~Science~~Lyophilized ~~and~~Powder ~~Technology~~of ~~(Nanjing)~~Atracurium” ~~Limited~~signed ~~Company~~on ~~for~~December ~~transfer~~22, of2009 ~~the~~(as ~~approval~~mentioned ~~certificates~~in tonote ~~engage~~18), inthe ~~clinical~~Company ~~trials~~issued ~~for~~1,000,000 ~~the~~shares ~~drug~~of ~~Epleronone~~the ~~and~~Series ~~its~~A ~~tablet~~Preferred ~~and~~Stock ~~capsule~~(the ~~forms~~"Preferred inStock") ~~China~~to Mr. As Lequn Huang as consideration for ~~Intellectual~~the ~~Property~~patent. toThe ~~Dong~~issuance ~~Ying,~~of the ~~Company~~Preferred ~~issued~~Stock anto ~~aggregate~~Mr. ofHuang ~~9,500,000~~was ~~unregistered~~exempt ~~shares~~from ofregistration ~~the~~under ~~Company's~~Section ~~common~~4(2) ~~stock~~of ~~with~~the ~~fair~~Securities ~~value~~Act ofbased ~~the~~upon ~~consideration~~our ~~was~~compliance ~~$1,776,500~~with onRegulation ~~December~~S ~~18,~~as ~~2009~~promulgated toby ~~Meisu~~the ~~Jining~~SEC ~~Science~~under ~~and~~the ~~Technology~~Securities ~~(Nanjing)~~Act ~~Limited~~of ~~Company~~1933, as amended.

On15. ~~December 22, 2009, the Company's wholly~~STOCK-~~owned~~BASED 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 $1,360,000COMPENSATION

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

		Fair Value Measurements Using:
KuTai Patent		Quoted Prices in Active Markets for Identical Financial Assets and Liabilities	Significant Other Observable Inputs	Significant Unobservable Inputs
December 22, 2009	Total	Level 1	Level 2	Level 3
Equity 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 value
KuTai Patent		8,000,000	$	0.2000	$	0.1700		1,360,000
Clinical 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 shares
	December 18, 2009			December 22, 2009
Volatility:		56.00	%		56.00	%
Risk-free interest rate:		1.17	%		1.17	%
Dividend yield:		-			-
Expected lives (years):		0.50			0.50

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.

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 inan aggregate of 500,000 stock options ~~having~~with an exercise price of $1.80 per share and an ~~expiry~~expiration 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~~expiration 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 Share
Options Outstanding,
June 1, 2009- February 28, 2010		2,525,000	$	1.8	$	1.28
May 31, 2010 and August 31,2010		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:11

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 $324,125 for the three months ended August 31, 2010 and 2009. As of August 31, 2010, all the outstanding options have vested as follows:

Vested options are as follows:

	~~Number outstanding~~	Number outstanding	~~Total fair value~~		~~Weighted~~Total ~~average grant- date~~ fair value ~~per share~~		Weighted average grant- date fair value per share
Options vested,
Options vested at ,
June 1, 2009	2,272,500		$	2,917,125	$	1.28
May 31, 2010			2,525,000		$	3,241,250	$	1.28
Vesting	252,500			324,125		1.28
August 31, 2010			2,525,000		$	3,241,250	$	1.28
February 28, 2010	2,525,000		$	3,241,250	$	1.28

15If not previously exercised or canceled, options outstanding at May 31, 2010 will expire as follows:

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

	Range of Exercise Prices				Number		Weighted average
Expiry Date	High		Low		of Shares		exercise price

September 29, 2013	$	1.8	$	1.8		1,800,000	$	1.8
October 2, 2013	$	1.8	$	1.8		500,000	$	1.8
October 22, 2013	$	1.8	$	1.8		225,000	$	1.8

	Range of Exercise Prices				Number		Weighted average
Expiry Date	High		Low		of Shares		exercise price
September 29, 2013	$	1.80	$	1.80		1,800,000	$	1.80
October 2, 2013	$	1.80	$	1.80		500,000	$	1.80
October 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.

1816. EARNINGS~~/(LOSS)~~ PER SHARE

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

	Three months ended
	Three months ended August 31,
	February 28, 2010		February 28, 2009
	2010		2009
	(Unaudited)		(Unaudited)
Numerator used in basic net income per share:
Net income/(loss)	$	941,223	$	(725,316	)
Net income	$	685,098	$	237,167
Shares (denominator):
Weighted average common shares outstanding		~~104,~~117,~~920~~587,608		79,~~900~~977,~~000~~609
Weighted average common shares outstanding used in computing diluted earnings/(loss) per ordinary share		104,117,920		79,900,000
Weighted average common shares outstanding used in computing diluted earnings per ordinary share		117,587,608		79,977,609
Earnings/(loss) per common share-basic	$	0.01	$	(0.01	)
Earnings per common share-basic	$	0.01	$	0.00
Earnings/(loss) per common share-diluted	$	0.01	$	(0.01	)
Earnings per common share-diluted	$	0.01	$	0.00

	Nine months ended
	February, 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		79,900,000
Weighted average common shares outstanding used in computing diluted earnings/(loss) per ordinary share		87,950,083		79,900,000
Earnings/(loss) per common share-basic	$	0.03	$	(0.02	)
Earnings/(loss) per common share-diluted	$	0.03	$	(0.02	)

As of August 31, 2010 and 2009, 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 ended August 31, 2010 and 2009.

1612

As17. RELATED ofPARTY ~~February~~TRANSACTIONS ~~28,~~AND 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.BALANCES

19The 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. ~~RELATED~~Lequn ~~PARTY~~Huang; ~~TRANSACTIONS~~and ~~AND~~Bio-Medical ~~BALANCES~~Research and Development Limited Company, previously 30% owned by Mr. Lequn Huang at prices to be negotiated at the time. As of August 31, 2010, the cost of these two intangible assets is $736,000 for each. (See Note 10).

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 910 and 1614)

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 above mentioned transaction of the intellectual property transfer at December 18, 2009 ~~(See Note 1)~~.

Advance payment for intangible assets to shareholder

Advance ~~payment~~payments for intangible assets of $~~987~~991,~~780~~147 and $~~253~~985,760 to a shareholder as of ~~February~~August 2831, 2010 and May 31, ~~2009~~2010 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 iswas signed in July 2008, ~~the~~for ~~contract~~an amount isof $~~293~~292,~~400~~800. As ~~and as~~ of ~~February~~August 2831, 2010 the company prepaid $~~254~~255,~~280~~147. The other ~~one~~contract iswas signed in July 2009, ~~the~~for a contract amount isof $~~733~~736,~~500~~000 and as of ~~February~~August 2831, 2010, the company prepaid $~~733~~736,~~500~~000.(See Note 78)

~~Amounts~~Issuance ~~due~~of toPreferred ~~shareholders~~stock

~~Shareholder~~On ~~loans~~April ~~carry~~2, 2010, pursuant to the ~~value~~terms of ~~$256,725~~the ~~and~~patent ~~$1,169,032~~transfer atagreement ~~February~~for ~~28,~~"Composition ~~2010~~for ~~and~~Lyophilized ~~May~~Powder ~~31,~~of ~~2009.~~Atracurium” ~~The~~signed ~~February~~on 28December 22, ~~2010~~2009, ~~balance~~the ~~represents~~Company ~~the~~issued ~~amount~~1,000,000 ~~owed~~shares toof ~~Meisu~~the ~~Jining~~Series ~~Science~~A ~~and~~Preferred ~~Technology~~Stock (~~Nanjing)~~the ~~Limited~~"Preferred ~~Company~~Stock") ~~for~~to aMr. ~~technology~~Lequn Huang, the Company’s ~~purchased~~chairman, inpresident ~~October~~and ~~2007.~~chief ~~Meisu~~executive ~~Jining~~officer ~~Science~~as ~~and~~consideration ~~Technology~~for ~~(Nanjing)~~the ~~Limited~~patent. ~~Company~~Such ~~has~~number ~~become~~of ashares ~~shareholder~~ of ~~the~~preferred ~~Company~~stock ~~through~~was ~~the~~to ~~transaction~~give Mr. Huang approximately 51% of the ~~intellectual~~voting ~~property~~rights ~~transfer~~and at0% ~~December~~of ~~18,~~the ~~2009~~equity ~~(See~~rights ~~Note~~of 12the ~~and 16)~~Company.

~~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~~18. COMMITMENTS ~~The~~AND 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.CONTINGENCIES

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 RMB8,000,00 000($1,~~172~~171,~~800~~200). As of ~~February~~August 2831, 2010, the Company has paid ~~RMB1~~RMB 4,800,000 ($~~263~~706,~~880~~560) which ~~has~~had been expensed and is committed to pay the remaining of ~~RMB6~~RMB3, 200,000 ($~~908~~471,~~920~~040) before ~~Jan~~January 2015.

On May 30, 2010, the Company’s board resolved that the company would issue Ms. Luk 300,000 shares of the Company's common stock within three months from May 30, 2010 as compensation for serving as an independent director. As of August 31, 2010, the Company has not issued the shares to Ms. Luk. Ms. Luk was elected as a director of the company on May 30, 2010.

Contingencies

OnContingencies ~~December~~through ~~22,~~August ~~2009~~31, ~~the~~2010 ~~Company~~have ~~entered~~been ~~into~~considered 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~~none ~~governmental~~were ~~approval~~noted towhich ~~authorize~~were arequired ~~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~~be Mrdisclosed. 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.

2119. CONCENTRATIONS AND CREDIT RISK

At ~~February~~August 2831, 2010 and May 31, ~~2009~~2010, the Company had a credit risk exposure of cash in banks of $~~790~~1,~~142~~695,590 and $~~891~~1,~~132~~331,959, 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,
	Three months ended August 31,
	2010 (Unaudited)					2009 (Unaudited)
	2010					2009
	(Unaudited)					(Unaudited)
	Amount of Sales		% of Total Sales			Amount of Sales		% of Total Sales
Clindamycin Hydrochloride 0.75g	$	103,~~355~~062		0.5	%	$	2017,~~436~~342		~~2.5~~1	%
Clindamycin Hydrochloride 0.90g		~~18,770~~-		10	%		4836,~~552~~025		63	%
Cisatracurium Besylate 5mg		1,~~964~~833,~~287~~053		~~98.5~~99	%		~~744~~1,~~338~~240,397		~~91.5~~96	%
Total	$	1,993,412		100	%	$	813,326		100	%
Perindopril troche		20,283		1	%		-		-
Total	$	1,856,398		100	%	$	1,293,764		100	%

	Nine months ended February 28,
	2010 (Unaudited)					2009 (Unaudited)
	Amount of Sales		% of Total Sales			Amount of Sales		% of Total Sales
Clindamycin 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,
	Three months ended August 31,
	2010					2009
	(Unaudited)					(Unaudited)
	Amount of sales		% of Total Sales			Amount of sales		% of Total Sales
Customer A	$	~~572~~312,~~949~~341		2917	%	$	~~214~~281,~~682~~785		2622	%
Customer B		~~394~~282,~~349~~932		2015	%		36114,~~337~~123		49	%
Total	$	967,298		49	%	$	251,019		30	%
Customer C		236,974		13	%		210,374		16	%
Total	$	832,247		45	%	$	606,282		47	%

	Nine months ended February 28,
	2010					2009
	(Unaudited)					(Unaudited)
	Amount of sales		% of Total Sales			Amount of sales		% of Total Sales
Customer 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) Suppliers accounted for over 10% of the Company’s total purchases are as follows:

(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.

	Three months ended August 31,
	2010					2009
	(Unaudited)					(Unaudited)
	Amount of sales		% of Total Sales			Amount of sales		% of Total Sales
Supplier A	$	233,028		44	%	$	266,681		66	%
Supplier B		174,785		33	%		-		-	%
Total	$	406,813		77	%	$	266,681		66	%

~~22. RECLASSIFICATION~~14

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 party20. SUBSEQUENT EVENTS

~~23. SUBSEQUENT~~Management ~~EVENTS~~has considered all events occurring through October 15, 2010, the date the financial statements have been issued, and has determined that there are no such events that are material to the financial statements, or all such material events have been fully disclosed.

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.15

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.

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.

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~~R&D, ~~development~~manufacturing, ~~manufacture~~marketing and ~~marketing~~distribution of biopharmaceutical products, inwith ~~China.~~a ~~The~~primary ~~company~~focus ~~has~~on ~~developed~~the ~~new~~muscle ~~methods~~relaxant ~~for~~and ~~synthesis~~heart disease areas. By using its innovative methods of active pharmaceutical ingredient (“API”) synthesis and ~~innovative~~ drug delivery, ~~(new~~the ~~formulation)~~company ~~that~~intends ~~dramatically~~to ~~reduces~~introduce ~~the~~products ~~time~~that ~~and~~enhance ~~cost~~usability, ofreduce drug development timelines and costs. Sinobiopharma ~~Our~~has ~~current~~successfully ~~therapeutic~~brought ~~focus~~four isdrugs onto ~~anesthesia-assisted~~the ~~agents~~Chinese market, including its flagship product, KuTai (cisatracurium), a leading muscle relaxant and its recently launched product, YiTai (perindopril), a first-to-market cardiovascular ~~drugs~~ACE inhibitor. The ~~Our~~company ~~R&D~~has ~~focus~~six isadditional ~~new,~~drug ~~innovative~~candidates ~~methods~~in ofthe ~~synthesizing~~pipeline. Sinobiopharma’s ~~compounds~~production ~~more~~facilities ~~rapidly~~are atGMP-certified ~~lower~~by ~~cost,~~the China State Food and~~/or~~ ~~improved~~Drug ~~drug~~Administration ~~formulation~~(SFDA) ~~with~~and ~~enhanced~~the ~~usability~~Company has an established distribution network in China.

2016

Results of Operations

The Company ~~realized~~had arevenue ~~net income~~ of $~~941~~1,~~223~~856,398 for the three months ended ~~February~~August 2831, 2010, as compared to arevenue ~~net loss~~ of $~~725~~1,~~316~~293,764 for the three months ended ~~February~~August 2831, 2009, and realized a net income of $2685,~~251,940~~098 for the ~~nine~~three months ended ~~February~~August 2831, 2010, as compared to a net ~~loss~~income of $1237,~~622,692~~167 for the ~~nine~~three months ended ~~February~~August 2831, 2009.

Sales and cost of goods sold

Sales increased ~~145~~43% to $1,~~993~~856,~~412~~398 for the three months ended ~~February~~August 2831, 2010, from $~~813~~1,~~326~~293,764 for the three months ended ~~February~~August 2831, 2009. Gross margin increased ~~172~~48% to $1,~~612~~429,~~613~~193 (8177% of sales) for the three months ended ~~February~~August 2831, 2010, from $~~592~~962,~~311~~923 (7374% of sales) for the three months ended ~~February~~August 2831, 2009.

The increase in sales was due to the continuing growth in sales of Cisatracurium Besylate. Sales ~~increased~~of ~~100%~~this product increased to $51,~~424~~833,~~647~~053 for the ~~nine~~three months ended ~~February~~August 2831, 2010, from $21,~~715~~240,~~702~~937 for the ~~nine~~three months ended ~~February~~August 2831, 2009~~. Gross~~, ~~margin~~representing ~~increased 137~~99% toof ~~$4,295,844~~sales ~~(79~~and 96% of sales) for the ~~nine~~three months ended ~~February~~August 2831, 2010 and 2009, ~~from~~respectively. The $1improvement in gross margin is attributable to the fact that,~~815~~ as volume increased,~~491~~ ~~(67%~~the unit production cost of ~~sales)~~Cisatracurium Besylate decreased because the allocation of the unit indirect cost decreased. The improvement in gross margin is also attributable to an increase in the price of Cisatracurium Bestylate for the ~~nine~~sales ~~months~~to ~~ended~~certain ~~February~~distributors, 28because these distributors only provide potential customer contact information to us, ~~2009~~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.

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~~decreased ~~the three months ended February 28, 2010 were~~ $~~593~~21,~~045~~600 ~~representing a 57% decrease as compared~~ to $1649,~~365,359~~187 for the three months ended ~~February~~August 2831, ~~2009. Operating expenses for the nine months ended February 28,~~ 2010 ~~were~~from $1670,~~859,986,~~787 ~~a decrease of 45% as compared to $3,354,149~~ for the ~~nine~~three months ended ~~February~~August 2831, 2009.

The ~~decrease~~change is primarily attributable to the ~~decrease of $1,620,625 in the~~ stock-based compensation expense of $324,125 ~~for~~in the ~~nine~~three months ended ~~February~~August 2831, ~~2010~~2009, ~~compared~~offset toby ~~$1,944,750 for~~ the ~~nine~~increase ~~months~~in ~~ended~~the ~~February~~research ~~28, 2009. The stock options have been fully vested~~ and ~~expensed~~development asexpense of ~~August 31, 2009. There was no stock-based compensation expense for the three months ended February 28, 2010, as compared to~~ $~~972~~179,~~375~~191 for the three months ended ~~February~~August 2831, ~~2009~~2010.

~~Other~~Research ~~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~~development expenses increased $2179,~~788~~191 from $8464,~~034~~302 for the ~~nine~~three months ended ~~February~~August 2831, 2009 to $86243,~~822~~493 for the ~~nine~~three months ended ~~February~~August 2831, 2010. The ~~change~~increase was due to the ~~change~~increased inspending ~~the~~on ~~balance~~research ~~of the shareholder loan~~ and ~~government~~development ~~loan~~of ~~which~~pipeline ~~resulted in the change in imputed interest expenses and imputed income~~products.

~~Net~~Other 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.Income

Other income was $715 for the three months ended August 31, 2010 as compare to other expenses of $54,969 for the three months ended August 31, 2009. The change was due to the decrease in the balances of the shareholder loans, bank loans and government loans.

Income Tax Expense

Income tax expense was $95,624 for the three months ended August 31, 2010. There was no income tax expense for the three months ended August 31, 2010 because the company enjoyed tax free benefit in the calendar year 2009.

Net Income

Net income increased $447,931 from net income of $237,167 for the three months ended August 31, 2009 to net income of $685,098 for the three months ended August 31, 2010. The increase in net income was due to the increase in sales of Cisatracurium Besylate.

Liquidity and Capital Resources

The operations of Dong Ying China have generated profits for the three months ended August 31, 2010. The Company had $1,695,590 in cash. The profit generated from operation is sufficient to enable the Company to support its current operations and pay current debt due for repayment. However, the Company plans to raise more capital through equity finance to provide cash to expand its business development, fund further drug product development and launch new products.

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 $220,050.17

21Net cash provided by the operating activities for the three months ended August 31, 2010 was $650,687 compared to the net cash used in the operating activities of $179,158 for the three months ended August 31, 2009, an increase of $829,845. The increase is primarily attributable to the increase in net income of $447,930, a decrease in the change in accounts receivables for the amount of $290,499 due to the Company’s increased collection efforts in the three months ended August 31, 2010 compared to the three months ended August 31, 2009, and a decrease of the change in advanced payment of $436,471due to the reduced amount paid to the suppliers for the purchasing of raw materials.

~~The~~Net ~~operations~~cash ofused ~~Dong~~in ~~Ying~~the ~~China~~investment ~~have~~activities ~~generated profits~~ for the ~~nine~~three months ended ~~February~~August 2831, 2010. ~~The~~and ~~Company~~2009 ~~had~~was $~~790,~~142,276 ~~in cash~~ and ~~the working capital became positive as of February 28~~$125,924, ~~2010~~respectively. The ~~profit~~Company ~~generated~~has ~~from~~purchased ~~operation~~$310,916 ismore ~~sufficient~~fixed assets to ~~enable~~upgrade ~~Dong~~the ~~Ying~~manufacture ~~China~~facilities toin ~~pay~~the ~~current~~three ~~debt~~months ~~due~~ended ~~for~~August ~~repayment. However~~31, ~~the~~2010 ~~Company~~than ~~plans~~in tothe ~~raise~~same ~~more~~period ~~capital~~of ~~through~~last ~~equity~~year. ~~finance~~Additionally, tothe ~~provide~~investment ~~cash~~in toa ~~expand~~low ~~the~~risk ~~business~~short ~~development,~~term ~~fund~~financial ~~further drug~~ product ~~development~~from ~~and~~China toAgricultural ~~launch~~Bank ~~new~~matured ~~products. The~~and ~~Company~~was issold ~~also~~out ~~working~~for cash in ~~developing~~the ~~markets~~three tomonths ~~increase~~period ~~sales~~ended ~~and~~August ~~positive~~31, ~~cash flow of the existing products~~2010.

Net cash ~~provided~~used byin the ~~operating~~financing activities for the ~~nine~~three months ended ~~February~~August 2831, 2010 was $~~986~~147,~~716~~400 ~~compared~~and ~~to the~~ net cash provided inby the ~~operating~~financing activities ~~of $30,769~~ for the ~~nine~~three months ended ~~February~~August 2831, 2009, anwas ~~increase of~~ $~~955~~120,~~947~~683. ~~The~~During ~~increase is primarily attributable to~~ the ~~increase~~three inmonths ~~net~~ended ~~income~~August of31, $32010,~~874,632~~ ~~which~~the ~~was~~Company ~~offset~~reduced bythrough ~~decrease~~payment inthe ~~stock~~loans ~~based~~from ~~compensation~~banks ofand ~~$1,620,625,~~government ~~an increase~~ in ~~change in notes receivables and accounts receivables for~~ the net amount of $~~779~~147,~~741~~400. ~~due~~In ~~to the increase in sales for the nine months ended February 28~~comparison, ~~2010 compared to~~ the ~~nine~~Company ~~months~~has ~~ended~~borrowed ~~February 28~~$1,461,408, ~~2009~~repaid $730,704 ~~and~~in aloans ~~increase~~and ofanother $~~277~~610,~~835~~021 in ~~the~~shareholder ~~change~~loans ofduring ~~inventories~~the ~~due~~three tomonths ~~our~~period ~~increased~~ended ~~inventory~~August ~~storage~~31, ~~to support our sales growth~~2009.

~~Net~~Loans ~~cash~~from 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.Government

~~Net~~The ~~cash~~Company ~~used~~has ina loan from the ~~financing~~Nantong ~~activities~~Economic ~~for~~and ~~the~~Technology ~~nine~~Development ~~months~~Zone ~~ended~~Administration. ~~February~~The ~~28,~~loan ~~2010~~bears no interest. The original principal amount of the loan was RMB20million ($202,~~467~~928,000 at the exchange rate applicable at May 31, 2010) and ~~net~~was ~~cash~~due ~~provided~~for byrepayment in full in March 2007. During 2007 the ~~financing~~Company ~~activities~~repaid ~~for~~RMB3,000,000($439,200 at the ~~nine~~exchange ~~months~~rate ~~ended~~applicable ~~February~~at 28May 31, ~~2009~~2010). In December 2007 the Company was ~~$342~~granted an extension to December 31,~~606~~ 2008. During the ~~nine~~year ~~months~~ ended ~~February~~December 2831, 2008 the Company repaid RMB2,000,000 ($292,800 at the exchange rate applicable at May 31, 2010). On February 1, 2009 the Company ~~borrowed~~repaid another RMB2,000,000 ($2292,~~194~~800 at the exchange rate applicable at May 31,~~608~~ ~~from~~2010) ~~banks~~and ~~compared~~the Company was granted an extension to December 31, 2009 for the ~~borrowing~~remainder of ~~$731~~the loan of RMB13,000,000 in($1,903,200 at the ~~nine~~exchange ~~months~~rate ~~ended~~applicable ~~February~~at 28May 31, ~~2009~~2010). The ~~company~~Company ~~has~~repaid ~~also~~RMB3,000,000 ~~reduced~~($439,200 at the ~~bank~~exchange ~~loans~~rate ~~outstanding~~applicable byat May 31, 2010) in December 2009, and was granted another extension to December 31, 2010 for the remaining loan balance of RMB10,000,000 ($31,~~148~~464,~~381~~000 ~~during~~at the ~~nine~~exchange ~~months~~rate ~~ended~~applicable ~~February~~at 28May 31, 2010). ~~compared~~On toApril 7, 2010, the ~~payment~~Company ofrepaid RMB1,000,000 ($~~576~~146,~~800~~400 ~~during~~at the ~~nine~~exchange ~~months~~rate ~~period~~applicable ~~ended~~at ~~February~~May 2831, ~~2009~~2010). ~~The~~On May 6, 2010, the Company ~~has~~repaid ~~raised~~RMB1,000,000 ($1146,~~500~~400 at the exchange rate applicable at May 31,~~000~~ ~~through~~2010) leaving a ~~private~~remaining ~~placement~~balance ~~and borrowed~~of ~~$100~~RMB8,000,000 ($1,171,200 ~~from~~at ~~Xinjie~~the Muexchange rate applicable at May 31, ~~the~~2010). ~~CFO~~On ofAugust 31, 2010, the Company repaid RMB1,000,000 ~~during~~($147,200 at the ~~nine~~exchange ~~months~~rate ~~period~~applicable ~~ended~~at ~~February~~August 2831, 2010) leaving a remaining balance of RMB7,000,000 ($1,030,400 at the exchange rate applicable at August 31, 2010).

~~Short~~Since ~~Term~~the ~~Loans~~loan bore 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 February2010, applied in respect of the 2010 year). Imputed loan interest expense included in the accounts for the three months ended as of August 31, 2010 and 2009 was $14,920 and $25,244 which 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 non-interest loans was $8,783 and $0 for the three months ended as of August 31, 2010 and 2009, respectively.

The ~~RMB1,500,000~~present ~~($220,050)~~value ~~short term bank loan as~~ of ~~February~~ ~~28, 2010 represents~~ the ~~loan~~total ~~from~~government ~~the Agricultural Bank of China. On June 10, 2009 the Company received a~~ loan inwas ~~the amount of RMB 10,000,000 (approximately~~ $1,~~462~~010,~~000)~~915 ~~from~~as ~~the Agricultural Bank~~ of ~~China.~~August ~~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~~145,~~950)~~726 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~~May 2831, 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

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.

~~Item 4(T). Controls and Procedures.~~18

Item 4. 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.

23Pursuant 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 three months ended August 31, 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.

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~~August 2831, 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~~August 2831, 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 MrNone. 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.

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.

2520

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.

	SINOBIOPHARMA, INC.
Dated: April 13, 2010	By:	/s/ Lequn Huang
Dated: October 15, 2010	By:	/s/ Lequn Huang
		Name: Lequn Huang
		Title: President, CEO, Treasurer and Director
		Title: President, CEO and Director

Dated: April 13, 2010	By:	/s/ Xinjie Mu
Dated: October 15, 2010	By:	/s/ Xinjie Mu
		Name: Xinjie Mu
		Title: Chief Financial Officer and Director

2621

Filing Compare · Sinobiopharma, Inc.