CDBT China Dasheng Biotechnology Company (PK)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009

OR

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________

 

CHINA DASHENG BIOTECHNOLOGY COMPANY
(Exact name of registrant as specified in its charter)

Nevada	333-141327	26-0162321
(State or other jurisdiction	Commission File Number	(I.R.S. Employer
of incorporation or organization)		Identification No.)

Building B 17th Floor
Century Plaza
Qingyang Road
Lanzhou, Gansu
People's Republic of China
Telephone number: (86)931 8441248
(Address and telephone number of principal executive offices)

P.O Box 520767
Flushing, NY 11352
Telephone number: (908) 938-2025
(Address and telephone number of United States agent offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x          No o

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

Large accelerated filer  o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

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

Yes o              No x

As of May 12, 2009, 30,000,000 shares of common stock, par value $.001 per share, were outstanding.

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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
Consolidated Balance Sheets as of June 30, 2008 and March 31, 2009 (Unaudited)		4
Consolidated Statements of Operations for three months and nine months ended March 31, 2009 and 2008 (Unaudited)		5
Consolidated Statements of Cash Flows for the nine months ended March 31, 2009 and 2008 (Unaudited)		6
Notes to Consolidated Unaudited Financial Statements		7-14
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15-16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 5.	Other Information	18
Item 6.	Exhibitions	18
Signatures		19

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CHINA DASHENG BIOTECHNOLOGY COMPANY
(FORMERLY NAMED AS MAX NUTRITION INC.)
CONSOLIDATED BALANCE SHEETS (Unaudited)
AS OF MARCH 31, 2009 and JUNE 30, 2008
(in US DOLLARS)

		31-Mar-09			30-Jun-08
ASSETS
Current assets:
Cash & cash equivalents	$	10,413,273		$	1,561,403
Accounts receivable, net of allowance for doubtful accounts of $22,794 and $16,303, respectively		3,670,524			3,244,476
Inventory		476,832			561,883
Advances to suppliers		20,886			1,486,379
Due from related parties		94,093			1,580,820
Prepayments and other current assets		89,073			35,675
Total current assets		14,764,681			8,470,636
Investment in Real Estate Ventures		5,401,954			6,483,437
Property, plant and equipment, net of accumulated depreciation		2,859,290			1,618,829
Other Assets
Land use right, net of accumulated amortization		1,453,481			1,531,555
Notes receivable		1,066,449			998,502
Long-term prepayments		818,882			1,150,082
Total other assets		3,338,812			3,680,139
Total Assets	$	26,364,737		$	20,253,041
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,425,217		$	725,680
Accrued expenses and other payables		784,142			809,463
Payable to related parties		18,134			-
Total current liabilities		2,227,493			1,535,143
Long-term payable - land use right		1,464,575			1,459,137
Minority Interest		3,447,892			2,282,109
Stockholders' Equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, - 0 - shares issued and outstanding at March 31,2009 and June 30, 2008		-			-
Common stock, $0.001 par value, 74,000,000 and 74,000,000 shares authorized, 30,000,000 and 30,000,000 shares issued and outstanding at March 31, 2009 and June 30, 2008, respectively		30,000			30,000
Additional paid-in-capital		3,846,035			3,846,035
Statutory surplus reserve and common welfare fund		2,643,339			1,837,187
Retained earnings		11,568,237			8,009,800
Accumulated other comprehensive income		1,137,166			1,253,630
Total stockholders' equity		19,224,777			14,976,652
Total Liabilities and Stockholders' Equity	$	26,364,737		$	20,253,041

See accompanying notes to the Consolidated Unaudited Financial Statements

4

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CHINA DASHENG BIOTECHNOLOGY COMPANY
(FORMERLY NAMED AS MAX NUTRITION INC.)
CONSOLIDATED STATEMENTS OF OPERATION (Unaudited)
FOR THE NINE AND THREE MONTHS ENDED MARCH 31, 2009 and 2008
(in US DOLLARS)

		For the nine months ended March 31,						For the three months ended March 31,
		2009			2008			2009			2008
Net Sales	$	16,076,862		$	11,421,215		$	5,308,553		$	3,706,091
Cost of Sales		(8,270,673	)		(6,135,328	)		(2,665,814	)		(1,945,490	)
Gross profit		7,806,189			5,285,887			2,642,739			1,760,601
Operating Expenses:
Selling expenses		966,504			603,492			316,595			202,689
General and administration expense		1,583,324			1,388,148			758,157			904,209
Total operating expenses		2,549,828			1,991,640			1,074,752			1,106,898
Income from Operations		5,256,361			3,294,247			1,567,987			653,703
Other Income and Expenses:
Interest income (expenses)		83,245			(31,837	)		29,653			(3,194	)
Other income		2,925						0			-
Other expenses		(4,363	)		(58,468	)		646			(1,319	)
Total other income and (expense)		81,807			(90,305	)		30,299			(4,513	)
Income before income taxes and minority interest		5,338,168			3,203,942			1,598,286			649,190
Minority Interest		(973,579	)		(607,097	)		(293,613	)		(215,623	)
Net income	$	4,364,589		$	2,596,845		$	1,304,673		$	433,567
Other Comprehensive Income:
Foreign currency translation adjustment		(116,464	)		1,070,681			31,683			542,545
Comprehensive income	$	4,248,125		$	3,667,526		$	1,336,356		$	976,112
Basic and Diluted Income per common share
Basic	$	0.15		$	0.09		$	0.04		$	0.01
Diluted	$	0.15		$	0.09		$	0.04		$	0.01
Weighted average common share outstanding
Basic		30,000,000			30,000,000			30,000,000			30,000,000
Diluted		30,000,000			30,000,000			30,000,000			30,000,000

See accompanying notes to the Consolidated Unaudited Financial Statements

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CHINA DASHENG BIOTECHNOLOGY COMPANY
(FORMERLY NAMED AS MAX NUTRITION INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED MARCH 31, 2009 AND 2008
( in US DOLLARS)

		For the nine months ended March 31,
		2009			2008
Cash Flows From Operating Activities:
Net income	$	4,364,589		$	2,596,845
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in net income of consolidated subsidiaries		973,579			607,097
Bad debt expense		6,424
Depreciation expense		236,961			236,690
Amortization expense		170,027			110,544
Loss on disposal of fixed asset		4,922
Changes in operating assets and liabilities:
Accounts receivable		(420,370	)		(512,552	)
Inventory		(83,626	)		196,945
Advance to suppliers		1,471,038
Prepayments and other current assets		199,819			1,119,869
Accounts payable		867,602			(310,613	)
Accrued expenses and other current liabilities		(28,342	)		(2,010,476	)
Cash provided (used) by operating activities		7,762,623			2,034,349
Cash Flows From Investing Activities:
Purchases of property, plant and equipment		(1,488,893	)		(28,405	)
Notes Receivables		(64,221	)
Cash dividends received from real estate investments		1,105,676
Cash used in investing activities		(447,438	)		(28,405	)
Cash Flows From Financing Activities:
Repayment of long-term debt		-			(1,197,946	)
Amounts received from related parties		1,510,758			938,601
Cash provided by financing activities		1,510,758			(259,345	)
Effect of currency exchange rate on cash and cash equivalents		25,927			277,319
Increase in cash and cash equivalents		8,851,870			2,023,918
Cash and Cash Equivalents - Beginning of the year		1,561,403			1,316,569
Cash and Cash Equivalents - Ending of the year	$	10,413,273		$	3,340,487
Supplemental disclosures of cash flow information:
Interest paid	$	41,760		$	-
Income Taxes paid		-			-

See accompanying notes to the Consolidated Unaudited Financial Statements

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

China Dasheng Biotechnology Company (“Dasheng” or the “Company”) was incorporated in the state of Nevada on January 12, 2007, under the original name of Max Nutrition Inc, as a holding vehicle for selling the nutritional supplements.

On January 29, 2008, Pursuant to an Agreement and Plan of Reorganization, American Spring Pharmaceutical, Inc., a Delaware corporation (“ASPI”) purchased an aggregate of 7,700,000 shares of the 10,000,000 issued and outstanding shares of Max Nutrition common stock for $183,000 and ASPI’s transfer of 100% of the issued and outstanding shares of Gansu Dasheng Biology Science and Technology Stock Co., Ltd. (“Dasheng”) to Max Nutrition in exchange for 20,000,000 shares of the common stock of Max Nutrition. Upon completion of the transaction, ASPI distributed 27,700,000 shares of Max Nutrition common stock it received from Max Nutrition and the Max Nutrition’ previous principal stockholder to Dasheng’s shareholders, pro rata. At the effective time of the merger, the total number of shares of Max Nutrition acquired and number of shares of Max Nutrition Common Stock issued to the shareholders of Dasheng pursuant to the agreement, represented approximately 92.33% of the outstanding shares of Max Nutrition’s common stock after giving effect to Max Nutrition’s acquisition of Dasheng. As a result of the ownership interests of the former shareholders of Dasheng, for financial statement reporting purposes, the merger between the Company and Dasheng has been treated as a reverse acquisition with Dasheng deemed as the accounting acquirer and the Max Nutrition deemed the accounting acquire in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS No. 141”). The reverse merger is deemed as a recapitalization of Dasheng and the net assets of Dasheng (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their historical carrying value before the combination. The assets and liabilities of Dasheng are recorded at historical cost.

Gansu Dasheng Biology Science and Technology Stock Co., Ltd. was incorporated on October 16, 2002, in the City of Lanzhou, Gansu Province, People’s Republic of China (“PRC”). Dasheng operates within the biological products and agents market. This space includes organic fertilizers, non-chemical agents, and biological agents based additives.

On March 6, 2008, the Company changed its name to China Dasheng Biotechnology Company.

The Company derived its revenues from the sale of products in the biological products and agents market. All revenues generated are from sales to customers in China. The Company has two majority-owned subsidiaries in China. It has 80% interest in Hainan Lüshen Biology Technology Co., Ltd. (“Lüshen”) located in HaiKou, Hainan Province, China. Lüshen engages in developing, manufacturing and marketing artificial microorganisms (“AM”), high-efficiency microorganism (“HM”) based biological bacterium blends, and biological preservatives. The Company also has a 60% interest in Yangling Elemiss Foods Co., Ltd. (“Elemiss”) located in City of Yangling, Shaanxi Province, China. Elemiss engages in developing, manufacturing and marketing artificial microorganism (“AM”) based biological bacterium blends, and Bulgarian lactobacillus live stock feed additives.

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim financial statements

The accompanying unaudited interim financial statements of China DaSheng Biotechnology Company 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, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Amendment No. 1 to Annual Report filed with the SEC on Form 10-K/A. 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 consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for 2008 as reported in the 10-K/A have been omitted.

Basis of presentation and consolidation

The consolidated financial statements include the financial statements of DaSheng, and its wholly owned subsidiary, and its majority-owned subsidiaries, Lüshen and Elemiss. All significant inter-company transactions and balances among the Company and its subsidiary are eliminated upon consolidation.

Reclassifications

Certain previously reported amounts have been reclassified to conform to classifications adopted in the period ended March 31, 2009.

Accounts receivable

Accounts receivables consist primarily of receivables resulting from sales of products. The Company establishes provisions for doubtful accounts receivable based on management’s estimates of amounts that it believes are unlikely to be collected. Collectability of receivables is reviewed and the allowance for doubtful accounts is adjusted at least quarterly, based on aging of specific accounts and other available information about the associated customers. The allowance for uncollectible amounts as of March 31, 2009 and June 30, 2008 was $22,794 and $16,303, respectively.

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment in real estate ventures

The Company had two joint ventures for real estate projects in China to develop commercial and residential real estate in China. The Company’s ownership interests in the two ventures are 17.5% and 16.5%, respectively. As a result, the Company accounts for these two ventures based on cost method of accounting.

Land use rights

Land use rights represent the cost to obtain the right to use land in China. Land use rights are carried at cost and amortized on a straight-line basis over the lives of the rights, ranging from 17 to 50 years.

Patent and purchased formulae

The Company has adopted the guidelines as set out in Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”) for the patent and purchased formulae. Under the requirements as set out in SFAS No. 142, the Company amortizes the costs of acquired patent and formulae over their remaining legal lives or the term of the contract, whichever is shorter. All internally developed process costs incurred to the point when a patent application is to be filed are expensed as incurred and classified as research and development costs. Patent application costs, generally legal costs, thereafter incurred, are capitalized pending disposition of the individual patent application, and are subsequently either amortized based on the initial patent life granted, generally 15 to 20 years for domestic patents and 5 to 20 years for foreign patents, or expensed if the patent application is rejected. The costs of defending and maintaining patents are expensed as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Impairment of long-lived assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. No impairment loss is recorded for the nine months ended March 31, 2009 and 2008.

Income taxes

The Company accounts for income tax under the provisions of SFAS No.109 "Accounting for Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. There are no deferred tax amounts as at March 31, 2009 and June 30, 2008.

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue recognition

The Company utilizes the accrual method of accounting. In accordance with the provisions of Staff Accounting Bulletin (“SAB”) 104, sales revenue is recognized when products are shipped and payments of the customers and collection are reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin 104 (“SAB No.104”) for revenue recognition. The Company records revenue when persuasive evidence of an arrangement exists, product delivery has occurred and the title and risk of loss transfer to the buyer, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. For sale of additive for livestock feed and crop cultivation, the Company derives the majority of its revenue from sales contracts with customers with revenues being generated upon the shipment of goods. Persuasive evidence of an arrangement is demonstrated via invoice, product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the trucking or rail company and title transfers upon shipment, based on either free on board (“FOB”) factory or destination terms; the sales price to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

Earnings per share

The Company computes earnings per share (“EPS’) in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share” ("FAS No. 128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There are 30,000,000 and 30,000,000 shares of common stock equivalent available in the computation of dilute earnings per share at March 31, 2009 and June 30, 2008 respectively.

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The operations of the Company are located in the PRC. Accordingly, the Company's business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

Foreign currency translation

The Company’s functional currency is the Renminbi (“RMB”). For financial reporting purposes, RMB has been translated into United States dollars ("USD") as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated other comprehensive income". Gains and losses resulting from foreign currency translations are included in accumulated other comprehensive income. There is no significant fluctuation in exchange rate for the conversion of RMB to USD after the balance sheet date.

NOTE 3 – INVENTORY

The inventory consists of the following as of March 31, 2009 and June 30, 2008:

		Balance as of
		March 31, 2009			June 30, 2008
Raw Materials	$	19,942		$	218,895
Packing Materials		46,148			14,461
Work - in - process		361,789			246,695
Finished goods		48,953			81,742
Total	$	476,832		$	561,883

No allowance for inventory was made as of March 31, 2009 and June 30, 2008.

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – RELATED PARTY TRANSACTIONS

The detail of related party transactions is as follows:

(i) Office space

On December 1, 2006, Lüshen entered into a non-cancellable operating lease for its manufacturing facility in Hainan Province from Dasheng Industries Co., Ltd., an affiliate of the Company, expiring November 30, 2026. Lüshen prepaid the total lease obligation of RMB3.0 million (equivalent to $391,448 and $437,375 at March 31, 2009 and June 30, 2008 respectively) upon signing the lease, which approximates the present fair market value of the lease.

(ii) Due from (+) and to (-) related parties

		Balance as of
		March 31, 2009			June 30, 2008
Receivables from shareholder/officer	$	94,093		$	1,580,820
Payable to Shareholder		(18,134	)		-
Total	$	75,959			1,580,820

The advances to shareholders/officers bear no interest and have no formal repayment terms.

NOTE 5 – REAL ESTATE

i) Dasheng Garden Development Project

On March 19, 2005, the Company signed a joint venture property development ("JV") agreement with an unrelated developer (the "Developer"). Under the agreement, the Company was required to (1) contribute RMB14 million (equivalent to $1,924,002 at date of signing) in cash as the investment into the project, (2) assist the Developer in the project planning and (3) assist the Developer in applying for and obtaining relevant approvals. The Developer was required to contribute RMB71million (equivalent to $8,578,505 at date of signing) in cash into the project.

Upon completion of Phase I, representing approximately 50% of the Company owned land use rights in the City of Lanzhou, the Company will receive RMB7 million (equivalent to $845,768 at date of signing) from the JV and will retain the ownership of all the commercial retail units on the first floor and the basement which will be sold as a parking lot, and the Developer will obtain all remaining units.

Upon completion of Phase II, (which concerns the development of the remaining 50% of the land use rights, the Company and the Developer will be entitled to 29% and 71% of the net profits, respectively.

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – REAL ESTATE (Continued)

The Company ownership percentage in the real estate venture is 16.5% .

On June 30, 2005 the Company transferred the land use right associated with Phase I valued at RMB 2,929,686 (equivalent to $353,976 at date of transfer) less accumulated amortization of RMB459,142 (equivalent to $55,475 at date of transfer) from the land use right account and reclassified the net amount to investment in real estate ventures, with no further amortization of the land use right to be taken.

On December 31, 2007, the Company received cash from Dasheng Garden Development of RMB 7,000,000 (equivalent to US$1,020,542), which was accounted for as a reduction of the investment in real estate investment (return of capital).

On March 31, 2009, the Company received cash from Dasheng Garden Development of RMB 7,555,589 (equivalent to US$1,105,676), which was accounted for as a reduction of the investment in real estate investment (return of capital).

(ii) Changlin Real Estate Development project

On May 31, 2008, the Company contributed RMB35m (equivalent to US$5,102,710) to set up a joint venture of Changlin Real Estate Development Co., Ltd. The joint venture intends to develop residential real estate in an old manufacturing site in Lanzhou within 2 years. The Company's share of the joint venture project is 17.5% .

NOTE 6 – INCOME TAXES

The Company is governed by the Income Tax Law of the People’s Republic of China concerning foreign invested companies, which, until January 2008, generally subject to tax at a statutory rate of 33% (30% state income tax plus 3% local income tax) on income reported in the statutory financial statements after appropriate tax adjustments.

Substantially all of the Company’s taxable income and related tax expense are from PRC sources. Dasheng, Lüshen and Elemiss file separate income tax returns under the Income Tax Law of the People’s Republic of China concerning Foreign Investment Enterprises and Foreign Enterprises and local income tax laws (the “PRC Income Tax Law”). In accordance with the relevant income tax laws, the profits of the Company derived from agribusiness are fully exempted from income taxes and the profits of the Company derived from real estate investment are subject to income taxes. As of March 31, 2009 and 2008, the Company derived all of its revenues and profits from its agriculture business.

On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”), which is effective from January 1, 2008. Under the new law, the corporate income tax rate applicable to all Companies, including both domestic and foreign-invested companies, will be 25%, replacing the current applicable tax rate of 33%. However, tax concession granted to eligible companies prior to the new CIT laws will be grand fathered in.

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CHINA DASHENG BIOTECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – INCOME TAXES (Continued)

The Company has been formally approved by the local tax bureau for the favorable tax benefit enjoyed by the foreign invested company, which allows two-year tax exemption of income tax from January 20, 2008 through January 19, 2010, and three-year 50% tax reduction from January 20, 2010 to January 19, 2013.

For the nine months ended March 31, 2009 and 2008, the Company still enjoyed the tax concession and no income tax provision was recognized.

NOTE 7 – FOREIGN OPERATIONS

(i) Operations

Substantially all of the Company’s operations are carried out and all of its assets are located in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

(ii) Profit Appropriation & Statutory Reserves

Under the laws of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years’ losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least 10% of net income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital; (iii) Allocations to any discretionary surplus reserve, if approved by stockholders.

The statutory reserves represent restricted retained earnings and is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

As of March 31, 2009 and June 30, 2008, the Company established and segregated in retained earnings an aggregate amount for the Statutory Surplus Reserve of $1,709,143 and $1,837,187, respectively.

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

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking” statements as such term is defined in the Private Securities Litigation Reform Act of 1995 and information relating to the Company that is based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar import, as they relate to the Company or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein and in other filings made by the company with the Securities and Exchange Commission. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.

Management’s Discussion of Financial Condition and Results of Operations

Results of Operation – Three months ended March 31 ^st , 2009 compared to three months ended March 31 ^st , 2008 .

Revenues for the three months ended March 31 ^st , 2009 were $5,308,553 compared to $3,706,091 for the same period of year 2008, there was $1,602,462 or 43.2% increase in revenues. This revenue increase is due to the continuous sales growth during this quarter.

Costs of products ended March 31 ^st , 2009 were $2,665,814. Compared to $1,945,490 for the same period of year 2008, there was $720,324 or 37% increase. Since the percentage growth in revenues exceeded the percentage growth in costs of products, profit margin increased by 2.3% .

Gross profit for the three months ended March 31 ^st , 2009 was $2,642,739, an increase of $882,138 or 50.1% increase compared to the same period of year 2008. The gross profit increase is from the sales growth and production cost control management focused on increasing production efficiency.

Operating expenses for the three months ended March 31 ^st , 2009 were $1,074,752 compared to $1,106,898 in the same period last year, a decrease of $32,146 or 2.9% . This reduction reflected management’s focus on cost control, particularly on controlling selling expenses and general administration activities. Reduced operating expenses further contributed to the profit margin for the Company’s business.

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Results of Operation – First three quarters of year 2009 compared to first three quarters of year 2008.

The Company has one reportable segment that is engaged in manufacturing and marketing certain products that are primarily fertilizer and livestock feed.

Net sales increased from $11,421,215 in the first three quarters of fiscal 2008 to $16,076,862 in the first three quarters of fiscal 2009, an increase of $4,655,647 or 40.8% . This growth rate is in line with the first two quarter growth rate for fiscal 2009 (46.5%) and we continue to see strong demand for Company’s products.

The table below shows a breakdown of net sales by products as a percentage of total revenue for the first three quarters on both fiscal 2008 and fiscal 2009:

		Net Sales and Percentage on 2008						Net Sales and Percentage on 2009
Product Line
AM/HM Crop Additives	$	6,658,568			58.30%		$	9,115,576			56.70%
AM/HM Livestock Additives	$	4,237,270			37.10%		$	5,723,368			35.60%
FGW Preservatives	$	525,377			4.60%		$	1,237,918			7.70%
Total	$	11,421,215			100%		$	16,076,862			100%

The Net Sales distribution on the products showed above indicated that the Company enjoyed relatively steady distribution for the nine month period between fiscal 2008 and fiscal 2009. AM/HM Crop Additives and AM/HM Livestock Additives were reduced within the limit of 2% while FGW Preservatives were increased 3.1 %. Overall, we are still able to see strong market demand for our production line.

Gross profit increased from $5,285,887 in the first three quarters of fiscal 2008 to $7,806,189 in the same period of fiscal 2009 an increase of $2,520,302 or 47.7% . This growth rate is in line with the first two quarter’s results which showed a 46.5% increase over the prior year.

General administration expenses for the three quarters of fiscal 2009 was $1,583,324, an increase of $135,412 from $1,388,148 of the same period in fiscal 2008. This increase is due to the higher professional fees.

Net income increased from $2,596,845 n the first three quarters of fiscal 2008 to $4,364,589 in the same period of fiscal 2009, an increase of $1,767,744 or 68.1% as a result of our higher gross profit.

Cash inflow from operation activities increased from $2,034,349 in the first three quarters in fiscal 2008 to $7,762,623 in the same period of fiscal 2009. This increase is largely due to the net income growth, advances to suppliers and account payables. Cash inflow from financial activities was increased by $1,510,758 for fiscal 2009 as well. The result is that the Company’s liquidity is improved and it has the cash to maintain its operations and grow its product line.

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Overall, the Company is still enjoying remarkable market demand for its products in relatively stable domestic market environment. Management’s focus has been on cost control to reduce expenses and thereby to boost profit margin.

LIQUIDITY AND CAPITAL RESOURCES

We continued to strengthen our balance sheet in the third quarter of year 2009. Total assets and stockholders’ equity have both increased. Currently, we utilized short-term bank financing to provide operating liquidity needs for our operation and growth. For the long-term, we plans to seek additional equity or debt to increase our plant capacity and company head counts to support the increased operational activities.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES OF MARKET RISK

None.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of March 31, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are not effective as of March 31, 2009. In course of making our assessment of effectiveness of internal controls over financial reporting, we identified some material weakness in our internal control over financial reporting. We lack sufficient personnel with appropriate level of knowledge, experience and training in the application of accounting operation of our company. This weakness causes us to not fully indentify and make all accounting adjustments in time.

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(b) Changes in Internal Controls

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report 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

The company is not party to any material legal proceeding.

Item 1A. Risk Factors

There have been no material changes in risk factors from those reported in the Company’s last Annual Report on Form 10-K.

Item 2. Changes in Securities

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 No.	Description
31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32 .1	Certifications of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32 .2	Certifications of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

China Dasheng Biotechnology Company

By:

/s/ Sidong Zhang                                                           
Sidong Zhang
Chief Executive Officer and President
(Principal Executive Officer)
Date: May 12, 2009

/s/ Hongsheng Wang                                                   
Hongsheng Wang
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 12, 2009

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