UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

EXCHANGE ACT

For the Transition Period From _______ to _________

333-110733

(Commission File Number)

CHINA-BIOTICS, INC.

(Exact Name of Small Business Issuer as Specified in Its Charter)

Delaware	98-0393071
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

No. 999 Ningqiao Road

Jinqiao Export Processing Zone

Pudong, Shanghai 201206

People’s Republic of China

Telephone number: (86 21) 5834 9748

(Address of Principal Executive Offices)

(Issuer’s Telephone Number, Including Area Code)

Check 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 the filing requirements for at least the past 90 days. x Yes o No

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

o Yes x No

As of August 4, 2006, 17,080,000 shares of the Issuer’s common stock were outstanding.

Transitional Small Business Disclosure Format (check one):o Yes x No

TABLE OF CONTENTS

		Page
Part I - Financial Information
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS	15
ITEM 3.	CONTROLS AND PROCEDURES	33
Part II - Other Information
ITEM 6.	EXHIBITS	34
SIGNATURES		35

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINA-BIOTICS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts expressed in US Dollars)

	June 30, 2006
ASSETS
Current assets
Cash and cash equivalents	$	20,025,376
Restricted cash		668,118
Accounts receivable		13,517,664
Advances to related parties
Inventories		163,749
Prepayment		71,365
Travel advances		8,959
Total current assets	$	34,455,231
Plant and equipment, net		2,317,846
Total assets	$	36,773,077
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,575,288
Tax payables		15,990,526
Loan from stockholders		2,297,570
Other payables and accruals		1,664,004
Total current liabilities	$	21,527,388
Commitments and contingencies
Stockholders' equity:
Preferred stock-par value $0.01, 10,000,000
shares authorized, no shares issued and outstanding	$	—
Common stock, par value $0.0001, 100,000,000 shares authorized, 17,080,000 shares issued and outstanding		1,708
Additional paid-in capital		7,863,031
Retained earnings		4,255,570
Accumulated other comprehensive
income (loss)		99,586
Capital and statutory reserves		3,025,794
Total stockholders' equity	$	15,245,689
Total liabilities and stockholders' equity	$	36,773,077

The accompanying notes are an integral part of these financial statements.

3

CHINA-BIOTICS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts expressed in US Dollars)

	Three months ended June 30,
	2005			2006
Net sales	$	4,312,847		$	8,002,964
Cost of sales		(1,282,030	)		(2,358,739	)
Gross profit	$	3,030,817		$	5,644,225
Operating expenses:
Selling expenses	$	(317,651	)	$	(1,269,532	)
General and administrative expenses		(92,423	)		(405,990	)
Total operating expenses	$	(410,074	)	$	(1,675,522	)
Income from operations	$	2,620,743		$	3,968,703
Other income and expenses:
Other income	$	17,319		$	35,523
Other expenses		—			(3,859	)
Total other income (expenses)	$	17,319		$	31,664
Income before taxes	$	2,638,062		$	4,000,367
Provision for income taxes		(879,136	)		(1,124,711	)
Net income	$	1,758,926		$	2,875,656
Earnings per share:
Basic and diluted	$	1.57		$	0.17
Weighted average shares outstanding
Basic and diluted		1,118,600			17,080,000

The accompanying notes are an integral part of these financial statements.

4

CHINA-BIOTICS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts expressed in US Dollars) 

	Common Stock				Additional Paid-in		Retained		Accumulated Other Compre-hensive		Capital & Statutory
	Shares		Amount		Capital		Earnings		Income		Reserves		Total
Balance- March 31, 2006		17,080,000	$	1,708	$	7,863,031	$	1,379,914	$	66,565	$	3,025,794	$	12,337,012
Comprehensive income:
Net income		—		—		—		2,875,656		—		—		2,875,656
Other comprenhensive income:
Foreign currency translation ajustments, net of taxes of $-0-		—		—		—		—		33,021		—		33,021
Total comprehensive income														2,908,677
Balance- June 30, 2006		17,080,000	$	1,708	$	7,863,031	$	4,255,570	$	99,586	$	3,025,794	$	15,245,689

The accompanying notes are an integral part of these financial statements.

5

CHINA-BIOTICS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Amounts expressed in US Dollars)

	Three months ended June 30,
	2005			2006
CASH FLOW FROM OPERATING ACTIVITIES
Net income	$	1,758,926		$	2,875,655
Adjustment for:
Depreciation		207,228			99,376
(Increase)/Decrease in restricted cash		—			83,635
(Increase)/Decrease in accounts receivable		(23,713	)		(2,536,130	)
(Increase)/Decrease in other receivables		1,525			—
(Increase)/Decrease in travel advances		—			—
(Increase)/Decrease in inventories		(15,294	)		94,479
(Increase)/Decrease in prepayments		—			(40,199	)
Increase/(Decrease) in accounts payable		(481,713	)		(257,147	)
Increase/(Decrease) in income tax, surcharge tax and dividends withholding tax		879,136			1,124,711
Increase/(Decrease) in other payables and accruals, and value added tax payable		(24,584	)		(498,059	)
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	2,301,511		$	946,321
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions of fixed assets		—			(816,689	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to related parties	$	(1,712,646	)	$	—
Distribution to previous owners of subsidiary		(6,850,585	)		—
NET CASH PROVIDED BY/(USED IN)FINANCING ACTIVITIES	$	(8,563,231	)	$	—
Effect of exchange rate changes on cash	$	4		$	54,932
NET INCREASE IN CASH AND CASH EQUIVALENTS BALANCES	$	(6,261,716	)	$	184,564
CASH AND CASH EQUIVALENTS BALANCES AT BEGINNING OF PERIOD		10,271,503			19,840,812
CASH AND CASH EQUIVALENTS BALANCES AT END OF PERIOD	$	4,009,787		$	20,025,376

The accompanying notes are an integral part of these financial statements.

6

CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in US Dollars)

1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The accompanying unaudited interim financial statements of China-Biotics, Inc. (the “Company” or “We”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal year ended March 31, 2006 as reported in the Form 10-KSB have been omitted.

As disclosed in Note 1 to our audited financial statements for fiscal year ended March 31, 2006, the share exchange between us and SGI’s shareholders had been accounted for in accordance with the accounting and financial reporting interpretations and guidance set out by the Corporate Finance Division of the Securities and Exchange Commission (“SEC Interpretations and Guidance”) and accounting principles generally accepted in the United States of America (“US GAAP”). The share exchange was treated as a recapitalization of SGI, accompanied by a reverse acquisition of our company with SGI as the accounting acquirer. The unaudited interim financial statements presented herewith have been prepared on the following basis:

(a) The Unaudited Condensed Consolidated Balance Sheet as of June 30, 2006 includes the accounts of SGI, Shining, Growing State Limited (“GSL”), and our company. The historical paid-in capital of SGI and its subsidiaries (the total of ordinary share and additional paid-in capital) as of June 30, 2006 had been restated for the number of shares of common stock we issued to the SGI former shareholders in connection with the share exchange occurred in March 2006, after giving effect to any difference in par value of our common stock and SGI’s ordinary share with such difference accounted for under additional-paid-in capital.

(b) The Unaudited Condensed Consolidated Statements of Operations and the Unaudited Condensed Consolidated Statements of Cash Flow for the three months ended June 30, 2005 and 2006 reflect the following:(i) result of operations and cash flow of SGI, Shining and GSL from April 1, 2005 to June 30, 2005, and (ii) result of operations and cash flow of SGI, Shining, GSL and our company from April 1, 2006 to June 30, 2006. The earnings per share as shown on the Unaudited Condensed Consolidated Statements of Operations were computed based on the weighted average number of shares of our outstanding common stock after giving effect to the recapitalization and reverse acquisition accounting treatment as set out in Note 1 to our audited financial statements for fiscal year ended March 31, 2006.

(c) The Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three months ended June 30, 2006 includes the accounts of SGI, Shining, GSL, and our company.

7

CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in US Dollars)

1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION (continued)

In preparing the unaudited interim financial statements presented herewith, all significant intercompany balances and transactions have been eliminated on consolidation.

The term “Group”, as used in these unaudited interim financial statements, refers to a group of companies comprising SGI, Shining and GSL for any period prior to March 22, 2006; and to a group of companies comprising the Company, SGI, Shining and GSL for any period from March 23, 2006.

2. WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK

Earnings per share is computed by dividing the net income for each reporting period by the weighted average number of outstanding common stock for the same reporting period. The weighted average number of outstanding shares of common stock is determined by relating the portion of time within a reporting period that a particular number of shares of common stock has been outstanding to the total time in that period.

The weighted average number of outstanding shares of common stock as shown in the financial statements presented herewith was computed based on the number of shares of common stock outstanding, and took into account the recapitalization transactions and the reverse acquisition transaction as described in the Notes to the financial statements contained in the audited financial statements for fiscal year ended March 31, 2006, as reported in our Form 10-KSB. Detailed computations are set out as follows: 

	Date of issue or purchase				No. of the			No. of days oustanding				Weighted average number of oustanding common stock
	(as-if basis				Company's			Three				Three
	for the		No. of		common stock			months				months
	Company's		SGI		(Restated for			ended				ended
	common		ordinary		recapitalization			June 30,				June 30,
	stock)		shares		of SGI)			2005		2006		2005		2006
Number of days in reporting period									91		91
SGI existing shares as of March 31, 2004		Pre- 3/31/2004		1,000		1,118,600			91		91		1,118,600		1,118,600
SGI issued new shares upon receipt of cash		3/15/2006		9,000		10,067,400			—		91		—		10,067,400
SGI issued new shares for convertible bond conversion		3/22/2006		1,429		2,924,000			—		91		—		2,924,000
SGI issued new shares for cash of $5M under private placement		3/22/2006		2,858		1,870,000			—		91		—		1,870,000
				14,287
Stock issued in exchange for 14,287 shares of SGI stock (100% equity in SGI)						15,980,000
The Company's stock at time of reverse acquisition
Existing stock in issue at time of reverse acquisition		3/22/2006				25,481,004			—		91		—		25,481,004
Stock held in treasury prior to reverse acquisition		3/22/2006				(4,381,004	)		—		91		—		(4,381,004	)
Repurchased stock from Stan Ford in conjunction with reverse acquisition		3/22/2006				(20,000,000	)		—		91		—		(20,000,000	)
						17,080,000							1,118,600		17,080,000

8

 CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in US Dollars)

3. RISKS, UNCERTAINTIES, AND CONCENTRATIONS

(a)Nature of Operations

Substantially all of the Group’s operations are conducted in the PRC and are subject to various political, economic, and other risks and uncertainties inherent in this country. Among other risks, the Group’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

(b)Concentration of Credit Risk

Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and accounts receivable.

As of June 30, 2006, the Group had cash deposits of $20 million placed with several banks in the People’s Republic of China (“PRC”), which includes the Special Administrative Region of Hong Kong, where there is currently no rules or regulations in place for obligatory insurance of bank accounts.

As of June 30, 2006, the Group had a cash deposit of $668,118 placed with a bank in the United States, which is insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 for each customer account. $568,118 of the Group’s cash deposit at this bank therefore was in excess of the FDIC insured limit. This cash deposit has been shown under the caption “Restricted cash” in these financial statements.

For the three months ended June 30, 2005 and 2006, all of the Group’s sales arose in the PRC. In addition, all accounts receivable as at June 30, 2006 also arose in the PRC.

4. RESTRICTED CASH

In March 2006, SGI completed a private placement for an aggregate consideration of $5.07 million. As part of the agreement for this private placement, SGI agreed with the investors to place $750,000 in an escrow account, which is to be released from time to time to cover certain marketing and executive officer search expenses. Any amounts remaining in the escrow account on March 22, 2007 will automatically be released to SGI.

9

CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in US Dollars)

4. RESTRICTED CASH (continued)

The marketing expenses that are covered include payment for the creation of a website, the publication of company newsletters, the procurement of independent research coverage, and the preparation of press releases and presentations. The executive officer search expenses primarily cover the payment to consultants and search firms for the recruitment of senior management, such as a chief financial officer, and may also cover the appointment of independent directors, if applicable.

In May 2006, the SGI entered into agreements with four unrelated parties for marketing and investor relation services, and a total of $84,660 was paid out of the escrow account. As of June 30, 2006, the balance in this escrow account was $668,118.

5. ACCOUNTS RECEIVABLE

The Group’s accounts receivable as of the balance sheet date as presented in these financial statements are summarized as follows:

	June 30, 2006
Trade receivables	$	13,517,664
Less : Allowances for doubtful debt		—
	$	13,517,664

6. INVENTORIES

The Group’s inventories as of the balance sheet date as presented in these financial statements are summarized as follows:

	June 30, 2006
Raw materials	$	81,257
Work-in-progress		17,732
Finished goods		64,760
	$	163,749

10

CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in US Dollars)

7. PLANT AND EQUIPMENT

The Group’s plant and equipment as of the balance sheet date as presented in these financial statements are summarized as follows:

	June 30, 2006
Plant and machinery	$	3,345,828
Office equipment		1,122,913
Motor vehicles		28,809
Leasehold improvements		557,891
		5,055,441
Less: Accumulated depreciation		(2,737,595	)
	$	2,317,846

8. TAX PAYABLES

The Group’s tax payables as of the balance sheet date as presented in these financial statements are summarized as follows:

	June 30, 2006
Value added tax and other taxes	$	3,905,956
Income tax		3,330,991
Surcharge tax		5,383,107
Dividends withholding tax		3,370,472
	$	15,990,526

11

CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in US Dollars)

9. COMMON STOCK

We are authorized to issue 100,000,000 shares of common stock, $0.0001 par value per share. The common stock as of June 30, 2006, as presented in these financial statements, comprise the following:

	March 31, 2006						Changes from April 1, 2006 to June 30, 2006				June 30, 2006
	Number of shares			Par value $0.0001			Number of shares		Par value $0.0001		Number of shares			Par value $0.0001
In issue		41,461,004		$	4,146			—	$	—		41,461,004		$	4,146
Stock held in treasury (Treasury stock)		(24,381,004	)		(2,438	)		—		—		(24,381,004	)		(2,438	)
Issued and outstanding		17,080,000		$	1,708			—	$	—		17,080,000		$	1,708

10. INCOME TAXES

The income (loss) generated in the British Virgin Islands and the People’s Republic of China (“PRC”) before income taxes during the periods as presented in these financial statements is summarized as follows:

	Three months ended June 30,
	2005			2006
Loss in the British Virgin Islands before income taxes	$	(1,282	)	$	(43,652	)
Income in the PRC before income taxes		1,760,208			4,044,019
	$	1,758,926		$	4,000,367

12

CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in US Dollars)

10. INCOME TAXES (continued)

There is no income tax for companies domiciled in the British Virgin Islands. Accordingly, our financial statements do not present any income tax provisions or credits related to the British Virgin Islands tax jurisdiction. The provision for income tax relating to the PRC for the periods as presented in these financial statements are summarized as follows:

	Three months ended June 30,
	2005		2006
Current	$	879,136	$	1,124,711
Deferred		—		—
	$	879,136	$	1,124,711

As of June 30, 2006, we had no deferred tax assets and liabilities.

The principal reconciling items from income tax computed at the statutory rates and at the effective income tax rates are as follows:

	Three months ended June 30,
	2005			2006
Computed tax at the local PRC statutory rate of 33%	$	870,984		$	1,334,526
Non-deductible items		39,606			238,102
Tax concession		(496,685	)		(857,797	)
Surcharge at 0.5% per day on accrued taxes		465,231			409,880
Total provision for income at effective rate	$	879,136		$	1,124,711

The Group has its principal operations in the People’s Republic of China (“PRC”). Business enterprises are subject to income taxes and value added taxes under PRC tax laws and regulations unless they have exemptions. It had been the belief of the Group’s management that its PRC operations were exempt from income taxes and value added taxes as these operations were recognized by the local government as an advanced technology enterprise. The Group, however, has never received a written confirmation from the appropriate tax authorities regarding the tax exempt status of its PRC operations. In January 2006, management of the Group’s PRC operations took initiative to make tax payments to the PRC tax authorities for the Calendar year 2005, and accrual for all applicable tax liabilities, plus surcharge, for all prior Calendar years were reflected in the Group’s financial statements. According to PRC tax regulations, the Group may be subject to potential penalties for the late payment of taxes calculated on the basis of 0.5 times to 5 times amount of taxes, which amounted from $4.9 million to $49 million as of June 30, 2006. No provision for the potential tax penalties has been made in the Group’s financial statements as management of the Group believes that the Group did not cause the late payment of taxes, and that the possibility of having to pay such late payment penalties is highly unlikely.

13

CHINA-BIOTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amount expressed in US Dollars)

11. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

In addition to the commitments as disclosed in the notes to the audited financial statements for fiscal years ended March 31, 2005 and 2006, the Group made additional commitments during the period from April to June 2006. In May, 2006, the Group entered into an agreement with an unrelated party for marketing and investor relation services for a period of one year. Under this agreement, a further $165,000 is due and payable ratably on a monthly basis over the period from June 2006 to May 2007, and an additional payment of $40,000 is due and payable upon the achievement of certain measurable targets.

CONTINGENCIES

As disclosed in Note 10, The Group has its principal operations in the PRC. Business enterprises are subject to income taxes and value added taxes under PRC tax laws and regulations unless they have exemptions. It has been the belief of the Group’s management that its PRC operations were exempted from income taxes and value added taxes as these operations were recognized by the local government as an advanced technology enterprise. The Group, however, has never received a written confirmation from the appropriate tax authorities for the tax exemption status of its PRC operations. In January 2006, management of the Group’s PRC operations took initiative to make tax payments to the PRC tax authorities for the calendar year 2005, and accrual for all applicable tax liabilities, plus surcharge, for all prior fiscal years were reflected in the Group’s financial statements. According to PRC tax regulations, the Group’s outstanding tax payables for calendar years prior to 2005 may be subject to potential penalties for the late payment of taxes which is calculated on the basis of 0.5 times to 5 times amount of taxes, which amounted from $4.9 million to $49 million as of June 30, 2006. Under the Statements of Financial Accounting Standard (“SFAS”) No. 5, Accounting for Contingencies, it is required to accrue a charge to income for an estimated loss from a loss contingency if two conditions are met: (a) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements, and (b) the amount of loss can be reasonably estimated. SFAS defines the levels of probability as to whether or not future events will confirm the existence of a loss as follows: (1) probable - the future event or events are likely to occur, (2) reasonably possible - the chance of the future events occurring is more than remote but less than likely, and (3) remote - the chance of the future event or events occurring is slight. No provision for the potential tax penalties has been made in the Group’s financial statements as management of the Group believes the Group did not cause the late payment of taxes, and that the probability of having to pay such late payment penalties is remote.

14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB, including the following "Management’s Discussion and Analysis of Financial Condition and Results of Operations", contains forward-looking statements which involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “will,” “expect,” “plan,” “intend, ” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “forecast,” “project” or “continue,” the negative of such terms or other comparable terminology.

You should not rely on forward-looking statements as predictions of future events or results. Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks described in this Form 10-QSB under “Risk Factors” and elsewhere. These factors may cause our actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for us to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. We disclaim any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this report, except as required by applicable law.

Except as otherwise indicated by the context, references in this Quarterly Report on Form 10-QSB to “we,” “us,” or “our” are to the combined business of China-Biotics, Inc. (“the Company”) and its wholly-owned direct subsidiaries, Sinosmart Group Inc. (“SGI”) and Growing State Limited (“GSL”), and SGI’s wholly-owned subsidiary, Shanghai Shining Biotechnology Co. Ltd. ("Shining”). References to “China” or to the “PRC” are references to the People’s Republic of China. All references to “dollars” or “$” refers to United States dollars.

Overview

We manufacture and sell probiotics products. Probiotics comprise mainly live bacteria, which we produce using advanced proprietary fermentation technology. Currently, our products are only sold in the Greater Shanghai region.

The products are mainly sold to distributors, which then distribute them to various retail outlets such as drug stores and supermarkets. As a result, we have historically had a low cost of production. During the three months ended June 30, 2005 and 2006, substantially all our sales revenue comprises amounts receivable from the distributors for the sale of these products. Typically, 60 to 90 days’ credits are given to the distributors.

15

We intend to expand our sales to other cities in China through a combination of distributors and our own stores. In this regard, we opened our first pilot store in Shanghai in March 2006 and four more stores were opened during this quarter. We intend to open over 300 stores over the next two years. We expect that our stores will have a combination of full time staff and part time agents who will receive sales commissions. With our direct sales network, we will be selling to the end users, thereby capturing the margin previously made by our distributors and retail outlets. However, with more staff and agents there will be more selling and general and administrative expenses, with the result that we do not expect significant changes to our overall profit margins.

Our management believes that as China becomes more affluent, its citizens are becoming more health conscious. This has led to higher demand for health and functional food such as probiotics and yogurt. In addition, probiotics are increasingly used as additives in the production of infant formula. We expect that it will become mandatory for baby milk powders produced in China to have probiotics. Currently, the probiotics used in China for such purposes are imported. To capitalize on what we believe is a significant opportunity in this area, we have started a plan to construct a plant that will enable us to capture the anticipated demand for food additives. We expect the new plant will commence production in the second half of 2007 and start to make a significant contribution to our earnings in 2008. The costs of business expansion, expected to be approximately $16 million for the first phase, with the capability to undertake a second phase for an additional $14 million, will be financed by our internal working capital. In connection with our plan to build the new plant, on March 21, 2006, our wholly-owned subsidiary, Growing State Limited, entered into an agreement with Shanghai Qingpu Industrial Park District Development (Group) Company Limited for the lease of 73,157 square meters of land in the Shanghai Qingpu Industrial Park District, on which we will construct a plant consisting bulk manufacturing facilities that will have an initial capacity of 150 tons per year of bulk product with the room for expansion to 300 tons per year. As of June 30, 2006, we are still awaiting for the approval from the relevant government authorities on the leasing arrangement.

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Results of Operations

Quarter Ended June 30, 2005 Compared with the Quarter Ended June 30, 2006

We achieved a net income of $2.88 million in the quarter ended June 30, 2006, which was 63% above our net income of $1.76 million for the quarter ended June 30, 2005. Our growth in net income primarily resulted from growth in our sales volume on our products. Shining Essence continued to be our best selling product, accounting for 62.06% of our sales revenue in the quarter ended June 30, 2006 (70.48% in the quarter ended June 30, 2005). The growth rate on this product’s sales volume was 65% in the quarter ended June 30, 2006 (24% in the quarter ended June 30, 2005). Growth rates on three of our other products (Shining Signal, Shining Golden Shield and Shining Energy) ranged from 57% to 187%. We launched several new products during the quarter ended March 31, 2006. These products contributed only 0.74% of our sales revenue in the quarter ended June 30, 2006.

During the quarter ended June 30, 2006, we opened four additional retail stores. As of June 30, 2006, we had a total of five direct sales retail outlets. We also spent $0.8 million to improve our existing production and research facilities.

Our results for the quarters ended June 30, 2005 and 2006 are summarized below:

	Three months ended June 30, 2005						Three months ended June 30, 2006
	Amount			% of Net sales			Amount			% of Net sales
Net sales	$	4,312,847			100.00	%	$	8,002,964			100.00	%
Cost of sales		(1,282,030	)		-29.73	%		(2,358,739	)		-29.47	%
Gross profit	$	3,030,817			70.27	%	$	5,644,225			70.53	%
Operating expenses:
Selling expenses	$	(317,651	)		-7.37	%	$	(1,269,532	)		-15.86	%
General and administrative expenses		(92,423	)		-2.14	%		(405,990	)		-5.07	%
Total operating expenses	$	(410,074	)		-9.51	%	$	(1,675,522	)		-20.94	%
Income from operations	$	2,620,743			60.77	%	$	3,968,703			49.59	%
Other income and expenses:
Other income	$	17,319			0.40	%	$	35,523			0.44	%
Other expenses		—			0.00	%		(3,859	)		-0.05	%
Total other income (expenses)	$	17,319			0.40	%	$	31,664			0.40	%
Income before taxes	$	2,638,062			61.17	%	$	4,000,367			49.99	%
Provision for income taxes		(879,136	)		-20.38	%		(1,124,711	)		-14.05	%
Net income	$	1,758,926			40.78	%	$	2,875,656			35.93	%

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Net sales

Net sales in our financial statements are stated at invoiced value less sales tax. Our net sales for the quarters ended June 30, 2005 and 2006 comprised of the following:

	Three months ended June 30,
	2005			2006
Invoiced value on sales		4,335,650			8,054,492
Less : sales tax		(22,803	)		(51,528	)
		4,312,847			8,002,964

Net sales of $8,002,964 for the quarter ended June 30, 2006 were 85.56% above the net sales of $4,312,847 for the quarter ended June 30, 2005. The increase was mainly because of increased sales volume.

The contributions of each product as a percentage of invoiced value on sales for the quarters ended June 30, 2005 and 2006 are summarized below:

	Three months ended June 30,
	2005			2006
Shining Essence Capsules		70.48	%		62.06	%
Shining Signal Capsules		13.10	%		19.70	%
Shining Golden Shield Capsules		10.10	%		8.93	%
Shining Energy Capsules		6.32	%		8.57	%
Miscellaneous		0.0	%		0.74	%
		100.00	%		100.00	%

Unit volume and unit prices comparatives (on the invoiced value of sales) for the quarters ended June 30, 2005 and 2006 are summarized below:

	Percentages increase (decrease) from the prior year
	Three months ended June 30,
	2005									2006
	Unit volume			Selling prices			Overall increase / (decrease)			Unit volume			Selling prices			Overall increase / (decrease)
Shining Essence Capsules		24	%		5	%		29	%		65	%		-7	%		58	%
Shining Signal Capsules		14	%		14	%		28	%		187	%		-17	%		170	%
Shining Golden Shield Capsules		17	%		4	%		21	%		57	%		2	%		59	%
Shining Energy Capsules		66	%		-26	%		40	%		120	%		23	%		143	%
Miscellaneous		N/A			N/A			N/A			100	%		N/A			100	%

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Cost of sales

Cost of sales for the quarter ended June 30, 2006 was $2,358,739 compared with $1,282,030 for the quarter ended June 30, 2005. The increase in cost of sales was primarily caused by increased sales volume. The average unit cost of all products, in fact, decreased despite increases in the overall material costs of approximately 20% in the quarter ended June 30, 2006. Because of tight control over production overhead, the increase in production volume resulted in a much lower overhead on a per unit basis. As a result, the average unit cost of production in the quarter ended June 30, 2006 was approximately16% lower than in the quarter ended June 30, 2005.

Unit volume and unit costs comparatives for the quarters ended June 30, 2005 and 2006 are summarized below:

	Percentages increase (decrease) from the prior year
	Three months ended June 30,
	2005									2006
	Unit volume			Unit costs			Overall increase / (decrease)			Unit volume			Unit costs			Overall increase / (decrease)
Shining Essence Capsules		24	%		-9	%		15	%		65	%		-9	%		56	%
Shining Signal Capsules		14	%		20	%		34	%		187	%		-41	%		146	%
Shining Golden Shield Capsules		17	%		8	%		25	%		57	%		-12	%		45	%
Shining Energy Capsules		66	%		-18	%		48	%		120	%		2	%		122	%
Miscellaneous		N/A			N/A			N/A			100	%		N/A			100	%

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Gross profit

Gross profit for the quarter ended June 30, 2006 was $5,644,225 compared with $3,030,817 for the quarter ended June 30, 2005. The increase in gross profit was primarily due to an increase in sales volume.

The contributions of each product as a percentage of total gross profit for the quarters ended June 30, 2005 and 2006 are summarized below: 

	Three months ended June 30,
	2005			2006
	%			%
Shining Essence Capsules		76.58	%		67.38	%
Shining Signal Capsules		9.48	%		15.45	%
Shining Golden Shield Capsules		7.30	%		6.97	%
Shining Energy Capsules		6.64	%		9.24	%
Miscellaneous		0.00	%		0.96	%
		100.00	%		100.00	%

The average gross profit percentage for all of our product for the quarters ended June 30, 2005 and 2006 is summarized below:

	Three months ended June 30,
	2005			2006
Average for all products		70.43	%		70.72	%

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Selling expenses

Selling expenses were $1,269,532 or 15.86% of net sales for the quarter ended June 30, 2006 compared with $317,651 or 7.37% of net sales for the quarter ended June 30, 2005. The increase was mainly attributable to an increase in advertising expenses, which was the most significant item included in selling expenses. Advertising expenses accounted for 87% of total selling expenses for the quarter ended June 30, 2006 (73% for the quarter ended June 30, 2005). Management believes that the increase in advertising expenses was a significant reason for the 85% increase in sales revenue in the quarter ended June 30, 2006.

General and administrative expenses

General and administrative expenses were $405,990 or 5.07% of net sales for the quarter ended June 30, 2006 compared with 92,423 or 2.14% of net sales for the quarter ended June 30, 2005. The increase of $313,567 was primarily due to the additional administrative expenses incurred to support a large volume of business, and our commencement of an investor relations program. The following items, in total, accounted for 88% of the increase: (a) an increase in consulting fees incurred by our main production/sales unit in Shanghai of $164,955, (b) an increase in administrative personnel costs of $70,599, and (c) $41,619 of investor relations expenses.

Provision for income taxes

Provision for income taxes for the quarters ended June 30, 2005 and 2006 comprised the following items:

	Three months ended June 30,
	2005		2006
Income taxes	$	413,905	$	714,831
Surcharge at 0.5% per day on accrued taxes		465,231		409,880
Total provision for income	$	879,136	$	1,124,711

The increase in income taxes was due to higher income before taxes which increased 51.6%. The tax surcharge was accrued for unpaid taxes relating to calendar years prior to 2005.

Our principal operations are in China. Business enterprises established in China are subject to income taxes and value added taxes under Chinese tax laws and regulations unless they have exemptions. We have made tax payments to the Chinese tax authorities for 2005. Our management believes that our operations in China were exempted from income taxes and value added taxes for all prior years because we had been recognized by the local government as an advanced technology enterprise. However, we have never received a written confirmation from the appropriate tax authorities regarding the tax exemption status of our operations in China. As a result, there is no way to ascertain the position which may be taken by the relevant Chinese tax authorities in the future.  Accordingly, our financial statements contain full provisions for all applicable tax liabilities, plus surcharge, for all prior calendar years. Such provisions for tax liabilities and surcharge will be reversed out of the financial statements at the appropriate point in the future.

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According to Chinese tax regulations, outstanding tax payable in China for the calendar years prior to 2005 may be subject to potential penalties for the late payment of taxes, which is calculated on the basis of 0.5 times to five times the amount of taxes payable. This amounts to $4.9 million (if calculated based on 0.5 times the taxes payable) to $49 million (if calculated based on five times the amount of taxes payable) as of June 30, 2006. No provision for the potential tax penalties has been made in our financial statements as our management believes that the possibility of having to pay the penalties is remote.

Segment reporting

We have adopted the “products and services” approach for segment reporting. For the quarters ended June 30, 2005 and 2006, we had only one reporting segment—the probiotic products as health supplement. We manufactured and sold the probiotic products solely in China and delivered all shipments to destinations within China, and all of our long-lived assets were physically located in China. We made all sales to external customers, and no single customer accounted for 10% or more of our total sales.

Liquidity and Capital Resources

We had cash of $20.03 million and working capital of $12.93 million as of June 30, 2006. We started to pay taxes in early 2006 in respect of the 2005 fiscal year. Prior to that, we did not pay taxes. As a result, during the quarter ended June 30, 2005, cash generated from operations of $2.30 million was higher than the net income for the period of $1.78 million. Cash generated from operations for the quarter ended June 30, 2006 of $0.95 million was lower than net income for the period of $2.88 million reflecting the payment of taxes and higher working capital needs, mainly increases in accounts receivable.

We had capital expenditures totaling $0.8 million in the quarter ended June 30, 2006, primarily on improvements to production and research facilities. We did not spend any cash on acquisition of assets in fiscal year 2005. We plan to invest approximately $18 million in the coming two years for a new plant with a 150 ton production capacity and to open over 300 direct sales outlets.

We did not have any cash flows from/used in financing activities for the quarter ended June 30, 2006. We used $8.56 million in financing activities during the quarter ended June 30, 2005. A summary of our financing activities cash flow is as follows:

	Three months ended June 30,
	2005			2006
	$' Million			$' Million
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to related parties		(1.71	)		—
Payment of liquidating dividends (in form of purchase consideration) to previous owners of the subsidiary in conjunction with acquisition of subsidiary		(6.85	)		—
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES		(8.56	)		—

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Shining, our wholly-owned subsidiary, made advances to its equity holders (whom are referred to as related parties in the summary above) prior to the share exchange under which it became our wholly-owned subsidiary. The total amount of $1.71 million of advances was fully repaid to us in March 2006, shortly after the share exchange.

Taking into account our current cash position and our anticipated cash flows from operations, we expect we will be able to meet all our funding needs, including payments required in the next twelve months to settle our contractual obligations, for the construction of our new plant and for our opening of new stores. No assurance, however, can be given that our business plan will succeed. In the event that our business plan does not materialize as predicted, we may need to seek for external financing to fund our expansion plan. There can be no assurance that we will be able to raise needed capital on favorable terms, if at all. In addition, there is no assurance that our estimate of our liquidity needs is accurate or that new business development or other unforeseen events will not occur, resulting in the need to raise additional funds.

Inflation

We believe that inflation has not had a material impact on our results of operations for the quarters ended June 30, 2005 and 2006.

Seasonality

Typically, 60% of our sales take place in the second half of the fiscal year. We may experience additional seasonal variations in our future revenues and our operating costs due to seasonality, however, we do not believe that these variations will be material.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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Research and Development Expenditures

We have a research and development team supported by a technical advisory board of experts. In addition to having advanced technology in bacteria culturing and protection, we also conducts research and development into complimentary technology, including genetically engineered drugs, drug delivery solutions and Chinese medicine, in an effort formulate solutions to address specific health problems and expand our product line. We incurred research and development costs of approximately RMB180,306 in the three months ended June 30, 2006 and 112,727 in the three months ended June 30, 2005. Such research and development costs are mainly comprised of staff salaries in the research and development division, which were included as part of the production costs in the Company’s financial statements for such periods.

Critical Accounting Policies

Our critical accounting policies are described in the Notes to the Financial Statements included in our Annual Report filed with the SEC on Form 10-KSB for the fiscal year ended March 31, 2006, and this Form 10-QSB should be read in conjunction with that Annual Report. This MD&A discusses our consolidated financial statements for the three months ended June 30, 2005 and 2006. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States. In preparing these financial statements, we are required to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates and judgments on historical experience and on various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We consider accounting policies related to (a) allowance for doubtful accounts, and (b) use of estimates as applied to potential penalties for the late payment of taxes, to be critical accounting policies due to the estimation process involved in each.

Allowance for doubtful accounts

We maintain an allowance for doubtful accounts for estimated losses that may result from the inability of our customers to make required payments. Such allowances are based upon several factors including, but not limited to, historical experience and the current and projected financial condition of specific customers. Since our inception of business, we have never experienced any unrecoverable receivables. We have not experienced situations causing us to caste doubt on the ability of our customers to make required payments. The balance of our allowance for doubtful account has always been zero. We had trade receivables totaling $13,517,664 as of June 30, 2006, and a zero balance for allowance for doubtful accounts. We have considered all relevant factors, including the financial conditions, affecting the payment abilities of customers comprising these receivables up to the date of this Form-10QSB and we believe these customers are able to make required payments. We, however, cannot give assurance that these factors, including the financial conditions of these customers, will not change adversely in the future. We will continue to evaluate the ability of all our customers to make required payments. Were the financial condition of a customer to deteriorate, resulting in an impairment of its ability to make payments, allowances may be required.

Use of estimates as applied to potential penalties for the late payment of taxes

As disclosed in our financial statements for the fiscal years ended March 31, 2005 and 2006, we have made tax payments to the Chinese tax authorities for 2005. We believe that our operations in China were exempted from income taxes and value added taxes for all prior years because we had been recognized by the local government as an advanced technology enterprise. However, we have never received a written confirmation from the appropriate tax authorities for the tax exemption status of our operations in China. As a result, there is no way to ascertain the position which may be taken by the relevant Chinese tax authorities in the future. Accordingly, our financial statements contain full provisions for all applicable tax liabilities, plus surcharge, for all prior calendar years. Such provisions for tax liabilities and surcharge will be reversed out of the financial statements at the appropriate point in the future.

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According to Chinese tax regulations, our outstanding tax payable in China for the calendar years prior to 2005 may be subject to potential penalties for the late payment of taxes which is calculated on the basis of 0.5 times to five times the amount of taxes payable. This amounts to $4.9 million (if calculated based on 0.5 times of taxes payable) to $49 million (if calculated based on five times of the amount of taxes payable) as of June 30, 2006. Under the Statements of Financial Accounting Standard (“SFAS”) No. 5, Accounting for Contingencies, it is required to accrue a charge to income for an estimated loss from a loss contingency if two conditions are met: (a) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements, and (b) the amount of loss can be reasonably estimated. SFAS defines the levels of probability as to whether or not future events will confirm the existence of a loss as follows: (1) probable - the future event or events are likely to occur, (2) reasonably possible - the chance of the future events occurring is more than remote but less than likely, and (3) remote - the chance of the future event or events occurring is slight. No provision for the potential tax penalties has been made in our financial statements as we believe we did not cause the late payment of taxes, and that the probability of having to pay such late payment penalties is remote. We have reviewed our tax situation up to the date of this Form-10QSB, and concluded that the probability of having to pay such late payment penalties remains remote.

Recent Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”, replacement of APB Opinion No. 20, “Accounting Changes”, and Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements” (“SFAS 154”). SFAS 154 will require companies to account for and apply changes in accounting principles retrospectively to prior periods’ financial statements, instead of recording a cumulative effect adjustment within the period of the change, unless it is impracticable to determine the effects of the change to each period being presented. SFAS 154 is effective for accounting changes made in annual periods beginning after December 15, 2005, and accordingly, adoption of this statement for new accounting provisions is required for our fiscal year beginning April 1, 2006. The adoption of this statement is not expected to have any effect on our financial condition or results of operations.

In June 2005, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus to amend EITF No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholders Have Certain Approval or Veto Rights”. The EITF agreed to amend the Protective Rights section of this consensus, as well as Example of Exhibit 96-16A, to be consistent with the consensus reached in Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similarly Entity When the Limited Partners Have Certain Rights.” The provisions of this amendment should be applied prospectively to new investments and to investment agreements that are modified after June 29, 2005. We believe the adoption of this pronouncement will not have a material effect on our consolidated financial statements. In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements (“EITF 05-6.”) EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material effect on our consolidated financial position or results of operations.

In February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the CHINA-BIOTICS, INC. AND SUBSIDIARIES qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of our first fiscal year that begins after September 15, 2006. We have not evaluated the impact of this pronouncement on our financial statements.

In March 2006, FASB issued SFAS 156 “Accounting for Servicing of Financial Assets” this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:

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1. Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.

2. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3. Permits an entity to choose 'Amortization method' or Fair value measurement method' for each class of separately recognized servicing assets and servicing liabilities.

4. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.

5. Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006.

We believe that this statement will not have a significant impact on our financial statement.

In April 2006, the FASB issued FASB Staff Position No. FIN 46(R)-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R)” (“FSP FIN 46(R)-6”). FSP FIN 46(R)-6 requires that the determination of the variability to be considered in applying FIN 46R be based on an analysis of the design of the entity. In evaluating whether an interest with a variable interest entity creates or absorbs variability, FSP FIN 46(R)-6 focuses on the role of a contract or arrangement in the design of an entity, regardless of its legal form or accounting classification. The Company will adopt the guidance in FSP FIN 46(R)-6 prospectively beginning September 1, 2006 to all entities that the Company first becomes involved with and to all entities previously required to be analyzed under FIN 46R when a reconsideration event has occurred under paragraph 7 of FIN 46R. We do not expect the adoption of FSP FIN 46(R)-6 to have a material impact on our financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FIN 48).  This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a threshold condition that a tax position must meet for any of the benefit of the uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding derecognition, classification and disclosure of these uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not expect that this Interpretation will have a material impact on our financial position, results of operations or cash flows.

In June 2006, the EITF reached consensus on and ratified EITF Issue 06-03, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (EITF 06-03). The scope of this Issue includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, and some excise taxes. The Task Force concluded that the presentation of taxes within the scope of the Issue on either a gross (included in revenues and costs) or a net (excluded from revenues) basis is an accounting policy decision that should be disclosed pursuant to Opinion 22. In addition, for any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. The disclosure of those taxes can be done on an aggregate basis. The consensus in this Issue should be applied to financial reports for interim and annual reporting periods beginning after December 15, 2006. We believe the adoption of EITF 06-03 will not have a material impact on our method for recording and reporting these type taxes in its consolidated financial statements, as the Company’s policy is to exclude all such taxes from revenue.

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Risk Factors

Investing in our common stock involves a high degree of risk. Investors should carefully consider the risks described below together with the financial statements and other information contained in this document.

Risks Related to our Business

We depend on the services of our director and key employees, the loss of which could harm our business.

We believe our success relies on the strategies, vision, efforts and technical expertise of our director and key management personnel, including Mr. Song Jinan, Dr. Huang Weida and Dr. Du Wen Min. The resignation or departure of any of these key people could have a material adverse impact on our operations and future prospects. In addition, if any of these key people join a competitor or form a competing company, we could lose customers and incur additional expenses to recruit replacements and train personnel. We have entered into standard form confidentiality agreements with our technical employees with the exception of our director and our key executives which contain non-competition clauses. We do not maintain key-man life insurance for any of our key executives.

Failure to attract and retain qualified employees may adversely affect our business.

Our continued success depends largely on our ability to attract and retain highly skilled executive, managerial and technical employees. We may face difficulties in recruiting skilled personnel in our industry due to its specialized nature. If we are unable to attract and retain a sufficient number of suitably skilled and qualified personnel, our business would be materially and adversely affected. We may also have to pay substantial wages to attract sufficient numbers of skilled employees and professionals, which may adversely affect our operating margins.

We are not insured against potential losses and could be seriously harmed by natural disasters, catastrophes or acts of war.

Our facilities and inventories could be materially damaged by hurricanes, floods and other natural disasters, catastrophes, acts of war or other catastrophic circumstances. We do not maintain insurance covering such events. If any of these events occur, we could incur material losses and liabilities, which could negatively affect our operating results.

We may incur material product liability claims, which could increase our costs and adversely affect our reputation, revenues and operating income.

As a manufacturer of products designed for human consumption, we are subject to product liability claims that the use of our products has resulted in injury. Our products contain three types of live bacteria, lactobacillus acidophilus, bifidobacterium bifidum and bifidobacterium adolescentis, which fall within the nine types of “good” live bacteria that are approved for direct sale to the public in China as health food. We obtain our bacteria from human sources. Although we believe this reduces the risk that it will be rejected by the human body, there can be no assurance that consumption of such bacteria could not result in adverse health effects. We do not maintain any product liability insurance. A product liability claim against us could result in costly litigation and could adversely affect our reputation with our customers, which in turn could adversely affect our revenues and operating income.

Our revenues primarily depend on sales of one product and a decline in sales of this product could cause our revenues to decrease.

We have derived the majority of our revenue from the sale of our Shining Essence product. Sales of this product represented approximately 68% of our total sales for the year ended March 31, 2006. We expect that Shining Essence will continue to account for a large portion of our revenues for the foreseeable future. Any factors adversely affecting the pricing of, demand for or market acceptance of Shining Essence, including increased competition, could cause our revenues to decline and our business and future operating results to suffer.

Our failure to develop products that are compatible with market needs could have an adverse effect on our sales and earnings.

Our business is particularly subject to changing consumer trends and preferences. Our continued success depends in part on our ability to anticipate and respond to these changes. We may not respond in a timely or commercially appropriate manner to such changes. Because markets for our products differentiate geographically, we must accurately assess demand in each specific market into which we wish to make sales. If we fail to invest in extensive market research on consumer health needs in each market we target, we may face limited market acceptance of our products, which could have a material adverse effect on our sales and revenues.

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If our products fail to keep pace with advances in the industry, they may be displaced by competitors' newly developed products.

Other companies in our industry may gain significant competitive advantages by introducing new products to the market, delivering constant innovation in products and techniques and offering competitive prices. Our future growth partially depends on our ability to develop products that are more effective in meeting consumer needs. In addition, we must be able to manufacture and effectively market those products. The sales of our existing products may decline if a competing product is introduced by other companies.

We may have difficulty competing with larger and better financed companies in our industry, which could require us, among other things, to lower our prices and could result in the loss of our customers.

Some of our existing and future competitors may have greater technical and financial resources than we do and may use these resources to pursue a competitive position that threatens our products. Our products could be rendered obsolete or uneconomical by the development of new products to treat conditions addressed by our products, as a result of technological advances affecting the cost of production, or as a result of marketing or pricing action by one or more of our competitors.

Additionally, with China’s accession to the World Trade Organization, the Chinese government has undertaken to open up the Chinese market to foreign companies. China reduced its average import tariff rate overall to 11.50% in 2003 and has further reduced it to 9.90% in 2005. As a result, foreign competitors may form alliances with or acquire companies in our industry in China. Intensified competition from these foreign competitors may lead to lower profit margins due to price competition, loss of customers and slower than anticipated growth.

Unfavorable publicity or research reports casting a negative light on our industry or our products could change consumer perceptions and have an adverse affect on our ability to market and sell our products.

We believe that our industry is affected by media attention. Future research reports or publicity about the quality of products in our industry generally, or our products in particular, could have a material adverse effect on our business. Scientific research to date is preliminary and there can be no assurance that future scientific research or publicity will be favorable to our industry or any particular product or consistent with earlier favorable research or publicity. Adverse publicity could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately. Given our dependence upon consumer perceptions, adverse publicity, whether or not accurate, associated with illness or other adverse effects resulting from the consumption of our products or any similar products distributed by other companies could have a material adverse effect on our business.

Our planned expansion into the bulk additive business may not generate sufficient revenues and the construction of our new facility to accommodate this business may result in increased costs and losses.

We intend to expand our operations into the bulk additive business through the supply of high quality probiotics to be used as additives in dairy products to manufacturers in China. We plan to construct a new production plant with a 150-ton capacity which can accommodate our new bulk additive business. This will expose us to many risks, including the following:

l there may not be sufficient market demand for bulk probiotics additives or our products in particular;

l we may experience delays and cost overruns during construction of our new facility which may result in losses; and

l we may experience substantial start up losses when the plant is first commissioned.

Our plans to geographically expand our marketing and sales efforts and directly sell our products directly to retail consumers may fail.

To date, we have only sold our products in the greater Shanghai area. We currently intend to expand our marketing and sales efforts to the rest of China. There is no assurance that we will receive the same level of public demand for our products in other parts of China.

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In addition, we have been selling through distributors since our first product, Shining Essence, was launched in the market in April 2001. We opened our first retail store in March 2006. We intend to expand our operations by opening new retail stores or introducing a franchise structure to facilitate direct sales of our products to customers. We have hired consultants who have many years of experience in the direct selling industry to develop this new line of business, but there is no assurance that we can successfully implement our direct selling model.

As we increase the geographic area of our selling efforts and implement a direct selling model, there is a risk that our current systems may not be able to accommodate the increased volume or the complexity of the future business. Our short term operating results may be adversely affected as additional capital investments will have to be made for system upgrades, replacements or improvements.

We face potential tax exposure.

Our principal operations are in China. Business enterprises established in China are subject to income taxes and value added taxes under Chinese tax laws and regulations unless they have exemptions. We have made tax payments to the Chinese tax authorities for 2005. Our management believes that our operations in China were exempted from income taxes and value added taxes for all prior years because we had been recognized by the local government as an advanced technology enterprise. However, we have never received a written confirmation from the appropriate tax authorities for the tax exemption status of our operations in China. As a result, there is no way to ascertain the position which may be taken by the relevant Chinese tax authorities in the future.  Accordingly, our financial statements contain full provisions for all applicable tax liabilities, plus surcharge, for all prior calendar years. Such provisions for tax liabilities and surcharge will be reversed out of the financial statements at the appropriate point in the future.

According to Chinese tax regulations, outstanding tax payable in China for the calendar years prior to 2005 may be subject to potential penalties for the late payment of taxes which is calculated on the basis of 0.5 times to five times the amount of taxes payable, which amount to $4.88 million (if calculated based on 0.5 times of taxes payable) to $49 million (if calculated based on five times of the amount of taxes payable) as of March 31, 2006. No provision for the potential tax penalties has been made in our financial statements as our management believes that the possibility of having to pay the penalties is unlikely.

We may not be able to protect our intellectual property against claims by other parties or enforce our rights with respect to our intellectual property.

Although we have three registered Chinese patents in respect of the packaging processes and technologies we use in our production process and have applied for registration of a patent regarding the production of one of our products in June 2004, we have not purchased or applied for any patents other than these as we are of the view that it would not be cost-effective to do so at this time. Except with respect to the processes and technologies for which we have been granted patents, we may have no legal recourse in the event that our processes and technologies are replicated by other parties. If our competitors are able to replicate our processes, technologies and systems at lower costs, we may lose our competitive advantage and our profitability will be adversely affected.

In addition, we believe that over the last five years, our “Shining” brand has become a highly recognizable brand in our industry in Shanghai. To protect this brand, which we consider important to our continued success, we have registered four trademarks in China. If our competitors introduce products of inferior qualities to the market using trademarks that are confusingly similar to the “Shining” trademarks, our reputation and operating results will be adversely affected.

From time to time, we may have to resort to litigation to enforce our rights with respect to our intellectual property. This type of litigation could result in substantial costs and diversion of our resources, which would adversely affect our results of operations.

Management by a sole officer and director may create corporate governance risks and impede the successful implementation of our growth plans.

Mr. Song, as our sole officer and director, is responsible for all managerial functions and functions of our board of directors. Consequently, there may not be effective oversight and control with respect to corporate governance functions such as the approval of related party transactions, the compensation of the executive officer, the oversight of the accounting function and the segregation of duties. This concentration of management could be disadvantageous to stockholders with interests different from those of Mr. Song. In addition, without a more complete executive management team we may not be able to implement our growth plans, which could adversely affect our results of operations. We currently plan on hiring additional employees to complete our management team, but we cannot assure you that we will be able to successfully locate or hire suitable candidates.

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Risks Related to Government Regulations

We are subject to government regulation in China, and changes in Chinese regulations may substantially increase the cost of manufacturing and selling our products.

The manufacturing and marketing of our products are subject to various governmental regulations in China. Government regulation includes inspection of and controls over manufacturing, safety and environmental controls, efficacy, labeling and the sale and distribution of wellness products.

As a company which produces probiotics supplements, we are subject to the Law on the Food Conditions of the PRC which became effective on October 30, 1995, the Administrative Rules for Healthy Food promulgated by the Ministry of Health on March 15, 1996 which became effective on June 1, 1996, the Notice of Circulating the Appraisal Standard of Fungal and Good-Live-Bacterial Healthy Food and its appendixes-Appraisal Standard of Fungal and Good-Live-Bacterial Healthy Food, and List of Good-Live-Bacteria Applicable for Healthy Food, promulgated by the Ministry of Health which became effective on March 23, 2001, the Administration Rules for the Registration of Healthy Food (experimental) promulgated by the State Food and Drug Administration on April 30, 2005 which became effective on July 1, 2005, and other relevant rules and regulations issued by the Ministry of Health and the State Food and Drug Administration. In addition, Shining is a Chinese corporation and therefore is subject to the Company Law of China and more specifically to the Foreign Company provisions of the Company Law and the Law on Foreign Capital Enterprises of China.

Our industry is relatively new in China, and the manner and extent to which it is regulated is evolving. Changes in existing laws or new interpretations of such laws may have a significant impact on our methods and costs of doing business. For example, new legislative proposals that affect our product pricing, reimbursement levels, approval criteria and manufacturing requirements may be proposed and adopted.

The costs of compliance with current or future legislation or regulatory requirements may be significant, and could force us to curtail our operations or otherwise have a material adverse effect on our financial condition, results of operations or cash flows. For example, we have obtained three licenses and permits which are required for us to operate our business in China. Management estimates that the cost of obtaining these licenses and permits was approximately RMB2 million for Shining Essence. If the regulations regarding these licenses and permits is changed, it may be materially burdensome for us to obtain or renew these licenses and permits or they may be otherwise unavailable.

Government regulation of our retail prices and advertising methods may adversely affect our results of operations.

We are subject to government regulations with respect to the retail prices we charge and our advertising methods. The market retail price of our products is subject to approval from the government pricing division. However, there are no restrictions on the sales price when we sell products to distributors in China. In addition, we are required to obtain approval from Chinese government authorities regarding the contents of advertisements related to our products before they can be published. If the Chinese government may require that we set our retail prices at undesirable prices or significantly limits our ability to advertise our products, it could have a material adverse effect on our results of operations.

We may not be able to obtain regulatory approvals for our products or reimbursement from the sale of our products.

The manufacture and sale of our products in China is highly regulated by a number of state, regional and local authorities. These regulations significantly increase the difficulty and costs involved in obtaining and maintaining regulatory approval for marketing new and existing products. In addition, our future growth and profitability are, to a significant extent, dependent upon our ability to obtain timely regulatory approvals from the relevant authorities.

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Risks Related to Doing Business in China

Adverse changes in China’s economic, political and social conditions and government policies could have a material adverse effect on the overall economic growth of China, which could adversely affect our results of operations and financial condition.

We currently conduct our business solely in China. Changes in the economic and political situation in China and the economic, financial, fiscal and other policies adopted by the Chinese government may affect our operations, performance and profitability. The economy of China differs from the economies of most developed countries in many respects, including:

l structure;

l extent of government involvement;

l level of development;

l growth rate;

l control of foreign exchange; and

l allocation of resources.

China’s economy has traditionally been subject to central planning, with a series of economic plans promulgated and implemented by the Chinese government. Over the past 25 years, the Chinese government has been reforming the economic and political systems in China. These reforms have resulted in significant economic and social advancements. Many of these reforms were unprecedented and are expected to continue while political, economic and social factors may also lead to further adjustments to China’s reform measures. These reforms and adjustments may not always have a positive effect on our operations. Accordingly, we cannot assure you that our performance and profitability will not be adversely affected from these measures. In addition, there is no assurance that the Chinese government will continue to pursue economic liberalization and other reforms.

Macroeconomic measures taken by the Chinese government may cause the Chinese economy to slow down.

In response to concerns relating to China’s high rate of growth in industrial production, bank credit, fixed investment and money supply and growing inflationary pressures, the Chinese government has taken measures to slow economic growth to a more manageable level. Among the measures that the Chinese government has taken are restrictions on bank loans in certain sectors and the increase of interest rates. We cannot assure you that those measures will not result in a slowdown in economic growth and hence a reduction in demand for consumer products in China. These measures and any additional measures could contribute to a slowdown in the Chinese economy and could potentially cause the economy to enter a recession, which could have an adverse impact on demand for a wide range of products in China, including our products.

There are uncertainties regarding interpretation and enforcement of Chinese laws and regulations.

China’s legal system is a civil law system based on statutory law. Prior legal decisions and judgments have little precedential value. China is still in the process of developing a comprehensive statutory framework and its legal system is still considered to be underdeveloped in comparison with the legal systems in some western countries. Since 1979, the Chinese government has formulated and enacted a large number of laws and regulations governing economic matters, securities activities and foreign investments.

Despite significant development in its legal system, China does not have a comprehensive system of laws. The interpretation of Chinese law by courts and tribunals may be inconsistent and influenced by government policies and other considerations. In addition, the enforcement of existing laws and regulations can be uncertain and unpredictable. Judgments and arbitration rulings may be unenforceable. The promulgation of new laws, changes to existing laws and inconsistent interpretation of laws could have a negative impact on our business.

A majority of our officers and directors, and substantially all of our assets, are located in China, thus it may be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets.

Because our sole executive officer and director is a Chinese citizen it may be difficult, if not impossible, to acquire jurisdiction over him in the event a lawsuit is initiated against us or our officer and director by a stockholder or group of stockholders in the United States. We anticipate that our future officers and directors will also be Chinese citizens. Because the majority of our assets are located in China, it would also be extremely difficult to access those assets to satisfy an award entered against us in U.S. court.

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Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.

Since almost all of our future revenues may be in the form of Renminbi, any future restrictions on currency exchanges may limit our ability to use revenue generated in Renminbi to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the existing foreign exchange regulations allow greater convertibility of the Renminbi for current account transactions, significant restrictions still remain, including primarily the restriction that foreign invested enterprises may only buy, sell or remit foreign currencies, after providing valid commercial documents, at those banks authorized to conduct foreign exchange business. In addition, conversion of Renminbi for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the Renminbi, especially with respect to foreign exchange transactions.

Risks Related to our Common Stock

Shares of our common stock which are eligible for immediate sale by our stockholders may decrease the market price of our common stock.

We had 17,080,000 shares outstanding as of June 14, 2006, including approximately 230,000 shares which are free trading and may be sold immediately by our stockholders and 5,664,833 shares which are subject to a registration statement that we have filed with the SEC but has not yet been declared effective. If our stockholders sell substantial amounts of our common stock, or there is a perception in the market that such sales may occur, then the market price of our common stock could decrease.

Concentration of our ownership by our sole executive officer and director and his family may dissuade new investors from purchasing our securities which could result in a lower trading price for our securities than if our ownership was less concentrated.

As of June 14, 2006, Mr. Song, our sole officer and director, owned 29.8% of our outstanding common stock, and members of his family owned an additional 20.3% of our common stock. As a result, Mr. Song has the ability to exert substantial influence or absolute control over all matters requiring approval by our stockholders, including the election and removal of directors, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. This concentration of control could be disadvantageous to other stockholders with interests different from those of Mr. Song. For example, Mr. Song could delay or prevent an acquisition or merger even if the transaction would benefit other stockholders. In addition, this concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with a significant concentration of ownership among a limited number of stockholders.

Our common stock price has been volatile, and you may not be able to sell your shares at or above the price that you pay for the shares.

Our common stock is currently quoted on the OTC Bulletin Board. Securities quoted on the OTC Bulletin Board tend to be highly illiquid, in part because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of market volatility for securities that trade on the OTC Bulletin Board as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors including:

l the lack of readily available price quotations;

l the absence of consistent administrative supervision of "bid" and "ask" quotations;

l lower trading volume; and

l market conditions.

The price of our common stock has historically been volatile and our investors experience wide fluctuations in the market price of our securities. These fluctuations may have an extremely negative effect on the market price of our securities and may prevent you from obtaining a market price equal to your purchase price when you attempt to sell our securities in the open market. In these situations, you may be required to either sell our securities at a market price which is lower than your purchase price, or to hold our securities for a longer period of time than you planned.

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Volitality in the price of our common stock may cause it to be classified as penny stock, which will result in limits on trading and our stock price could decline.

Because our common stock price is volatile, it may in the future fall under the SEC definition of “penny stock”. If our common stock is classified as “penny stock”, we expect trading in our common stock, if any, to be limited because broker-dealers are required to provide their customers with disclosure documents prior to allowing them to participate in transactions involving our common stock. These disclosure requirements are burdensome to broker-dealers and may discourage them from allowing their customers to participate in transactions involving our common stock.

Rules promulgated by the SEC under Section 15(g) of the U.S. Securities Exchange Act of 1934, or Exchange Act, require broker-dealers engaging in transactions in penny stocks, to first provide to their customers a series of disclosures and documents, including:

l a standardized risk disclosure document identifying the risks inherent in investment in penny stocks;

l all compensation received by the broker-dealer in connection with the transaction;

l current quotation prices and other relevant market data; and

l monthly account statements reflecting the fair market value of the securities.

In addition, these rules require that a broker-dealer obtain financial and other information from a customer, determine that transactions in penny stocks are suitable for such customer and deliver a written statement to such customer setting forth the basis for this determination.

Our preferred stock may make a third-party acquisition of our company more difficult which in turn would make a purchase of our shares less desirable, thereby potentially reducing our stock price or the liquidity of our shares.

Our certificate of incorporation authorizes our board of directors to issue up to 10,000,000 shares of preferred stock having such rights as may be designated by our board of directors, without stockholder approval. However, pursuant to the terms of the Investors’ Rights Agreement we entered into in connection with the share exchange, we are restricted from issuing preferred stock for a period of two years from the date of such agreement without first obtaining the approval of the holders of at least 75% of our outstanding shares of common stock. The issuance of preferred stock could inhibit a change in our control by making it more difficult to acquire the majority of our voting stock and thereby making the purchase of our shares by new investors less likely. A lesser interest in the purchase of our shares could reduce our market price or make it more difficult for stockholders to sell their shares. No shares of preferred stock are currently outstanding.

We do not anticipate paying dividends.

We do not anticipate paying dividends in the foreseeable future. Also, pursuant to the terms of the Investors’ Rights Agreement we entered into in connection with the share exchange, we are restricted from authorizing the payment of dividends for a period of two years from the date of such agreement without the approval of the holders of at least 75% of our outstanding shares of common stock. Any dividends which we may pay in the future will be at the discretion of our board of directors and will depend on our future earnings, any applicable regulatory considerations, our financial requirements and other similarly unpredictable factors. For the foreseeable future, we anticipate that we will retain any earnings which we may generate from our operations to finance and develop our growth.

ITEM 3. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures.  Based upon, and as of the date of that evaluation, our principal executive officer and principal financial officer concluded that, our disclosure controls and procedures are effective to assure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and accumulated and communicated to our management to allow timely decisions regarding disclosure.

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There were no changes in our internal control over financial reporting during the quarter ended June 30, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

None.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit 31 - Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32 - Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* * * * *

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHINA-BIOTICS, INC. (Registrant)
Date: August 14, 2006	/s/ Song Jinan
	Song, Chief Executive Officer, Chief Financial Officer, Controller, Director and Secretary

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