Summary of CHINA SHENGHUO PHARMACEUTICAL HOLDINGS INC

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

On August 20, 2008, China Shenghuo Pharmaceutical Holdings, Inc. (the "Company") issued a press release announcing that the filing of its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008 (the "Second Quarter 10-Q") would be delayed beyond the filing deadline. The Company had previously filed with the Securities and Exchange Commission, on August 13, 2008, a Form 12b-25 Notification of Late Filing, stating that the Company's Second Quarter 10-Q would not be filed by its due date, August 14, 2008.

This delay was due to a recently completed internal investigation, described below, conducted by the Audit Committee of the Board of Directors (the "Audit Committee"), based on preliminary information received from Hansen, Barnett & Maxwell, P.C., the independent registered public accounting firm of the Company ("HBM"), regarding errors in the accounting for certain sales representative commission advances and trade receivables, the Company's internal controls, the Company's personnel involved and related matters. The Audit Committee engaged independent counsel to assist in the investigation and completed the investigation and addressed the related accounting and other corrective action as described below. The Company has restated and filed its financial statements for its fiscal periods ended December 31, 2007 and first quarter ended March 31, 2008.

At a meeting of the Audit Committee held on August 20, 2008, HBM advised the Audit Committee that due to errors in the accounting for certain sales representative commission advances and trade receivables, no further reliance should be placed on the (1) previously filed financial statements and related audit report dated March 28, 2008 contained in the Company's Form 10-KSB for the fiscal year ended December 31, 2007, as amended and (2) previously filed financial statements for any of the interim periods contained in the Company's Forms 10-QSB and 10-Q for the fiscal quarters ended June 30, 2007, September 30, 2007 and March 31, 2008. As described below, HBM subsequently determined that only the financial statements for the year ended December 31, 2007 and for the quarter ended March 31, 2008 needed to be restated.

The accounting errors identified by HBM in the course of its review of the Company's results of operations for the fiscal quarter ended June 30, 2008 and discussed with the Audit Committee on August 20, 2008 concerned cash transaction journal entries in which uncollected trade receivables were credited (i.e., deemed paid) and corresponding cash debits (i.e., cash deemed received) were recorded, and in connection therewith corresponding cash credits (deemed decreases) and debits (deemed increases) to other receivables from sales representatives were recorded. Under GAAP, it was incorrect to record these transactions as cash transactions. HBM advised the Audit Committee that the effect of the incorrect entries was to improperly reflect the aging of the Company's trade accounts receivables and to understate the Company's bad debt allowance. These errors resulted in the understatement of general and administrative expenses (the line item that includes bad debt allowance) and the resultant overstatement of net income and earnings per share.

As a result of these errors as identified by HBM, HBM conducted further validation procedures with respect to the Company's journal entries and the Audit Committee initiated an independent internal investigation to ascertain whether these errors are attributable to inadequate training and supervision and lack of familiarity with GAAP on the part of the Company's financial staff, or whether improper conduct contributed to recording the incorrect journal entries.

For purposes of the internal investigation, the Audit Committee retained Wilson Sonsini Goodrich & Rosati, P.C. ("WSG&R") as independent U.S. legal counsel on September 12, 2008 to provide guidance to the Audit Committee in determining the scope of the internal investigation and the proper procedures by which the investigation was to be conducted, and Fangda Partners ("Fangda") as independent legal counsel in the People's Republic of China to assist the Audit Committee in conducting the investigation. In addition to the Audit Committee's investigation, HBM conducted further validation procedures with respect to the Company's journal entries.

HBM has advised the Company that it found no additional errors or concerns regarding the Company's journal entries other than those outlined above. Based on the result of the investigation conducted by the independent legal counsel, the Audit Committee concluded that the accounting errors in the Company's journal entries were made at the direction of two supervisors in the Company's financial department, in an incorrect attempt by such supervisors to follow the Company's policy that regional managers and sales representatives should be responsible for the collection of trade receivables, as well as to simplify the financial department's process of generating related data regarding trade receivables and sales representative advances. Because the two supervisors were utilizing generally accepted accounting principals in the PRC ("PRC GAAP") and were unaware of the impact of the accounting errors on the Company's bad debt allowance once the Company's financial statements were converted from PRC GAAP to accepted accounting principals in the United States ("U.S. GAAP"), the Audit Committee determined that the errors were not intended to affect the Company's financial statements and reported results.

On October 10, 2008, the Audit Committee resolved to recommend to the Board of Directors the implementation of the following remedial actions: (1) appropriate disciplinary action should be taken with respect to the two financial department supervisors responsible for the erroneous journal entries; (2) additional training in SOX 404 compliance and financial document production and record retention should be provided to the Company's finance personnel and other personnel who provide financial data that is incorporated into the Company's financial statements; (3) external consultants were previously engaged to assist the Company with remedial measures designed to improve its disclosure controls and procedures and internal controls over financial reporting. The process of improvement should be accelerated (which will include documentation of policies and procedures by the end of 2008 and implementation in January 2009 in compliance with Section 404 of Sarbanes-Oxley following the COSO framework); and
(4) Qiong Hua Gao, the Company's former Chief Financial Officer, along with the Company's two supervisory finance personnel, should be replaced with personnel more experienced in the application of U.S. GAAP. On November 10, 2008, the Board of Directors unanimously approved the implementation of the remedial actions recommended by the Audit Committee, and the Company is actively pursuing each of the recommended remedial actions. As part of its implementation, the Company is accelerating its training of its financial staff and implementation of enhanced internal control procedures, Wendy Fu has been appointed as the Company's new Chief Financial Officer (as disclosed below under Item 5.02 of this Third Amended Current Report on Form 8-K/A) and the employment by the Company (and by any subsidiary of the Company) of the two finance department supervisors found responsible for making the erroneous accounting entries and creating improper supporting documentation was terminated, effective October 13, 2008. On November 12, 2008, the Board of Directors adopted the recommendations by the Audit Committee.

On November 14, 2008, the Company issued a press release announcing that, on November 10, 2008, the Company's Board of Directors had accepted the Final Report and Recommendation of the Audit Committee, following the Audit Committee's conclusion on November 8, 2008 of its independent internal investigation into previously disclosed errors in the Company's accounting for certain sales representative commission advances and trade receivables, the Company's internal controls, the Company's personnel involved and related matters. The effect of these errors was to improperly reflect the aging of the Company's trade accounts and notes receivables and to understate the Company's bad debt allowance, which resulted in the understatement of general and administrative expenses (the line item that includes bad debt allowance) and the overstatement of net income and earnings per share for certain prior fiscal periods as previously disclosed. The errors also resulted in an overstatement of the deferred tax asset, which could adversely affect future operations and profit levels on a continuing basis. The Audit Committee found no evidence to suggest that these accounting errors were made at the direction of, or with the knowledge or involvement of, the Company's executive officers and management.

HBM had previously advised the Audit Committee that no further reliance should be placed on the (1) previously filed financial statements and related audit . . .

Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On November 14, 2008, the Company issued a press release announcing that, on November 10, 2008, the Board of Directors appointed Wendy Fu as Chief Financial Officer of the Company, effective November 10, 2008. Ms. Fu, 40, has over 10 years of experience in accounting, finance and auditing. From September 2007 to March 2008, Ms. Fu served as Vice President of Finance with Shengda Tech, Inc., a manufacturer and supplier of nano precipitated calcium carbonate. From December 2005 to June 2007, Ms. Fu served as a Senior Consultant focusing on Sarbanes-Oxley 404 compliance consulting with Deloitte & Touche, a provider of audit, consulting, financial advisory, risk management, and tax services. From June 1999 to May 2004, Ms. Fu served as Assistant Controller of Wal-Mart China, a retailer. She is a licensed CPA and holds a master's degree in accounting from the University of Texas, Austin.

In connection with Ms. Fu's appointment as Chief Financial Officer, Ms. Fu shall receive a monthly salary of RMB 30,000, in addition to other benefits typical for positions of this type. The Company intends to formalize the terms and conditions of Ms. Fu's employment in a formal employment agreement at a later date. Other than her recent engagement by the Company as a consultant from August 2008 to the present, Ms. Fu has had no other relationships or transactions with the Company.

On November 14, 2008, the Company also announced that, in connection with the remedial actions recommended to the Board of Directors by the Audit Committee, as set forth in Item 4.02 of this Third Amended 8-K/A, Qiong Hua Gao resigned as Chief Financial Officer of the Company, effective November 10, 2008. Ms. Gao has a new position at the Company as a Supervisor of Internal Controls, working closely with the Company's financial department and external consultants on implementing policies and procedures to strengthen the Company's internal controls over financial reporting.

A copy of the November 14, 2008 press release is attached to this Third Amended 8-K/A as Exhibit 99.1 and the information therein is incorporated herein by reference.