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

# FORM 10-KSB

| |  | ANNUAL REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR
THE FISCAL YEAR ENDED MAY 31, 2007
| |  | --------------------------------------------------------------------------------------------------------------------

| |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
| |  | ------------------------------------------------------------------------------------------------------------------------------------

Commission file number:
333-118259

|CHINA SUN GROUP HIGH-TECH CO.                                    
|-----------------------------------------------------------------
|(Exact name of small business issuer as specified in its charter)

|                                                               | 
|-------------------------------------------------------------- | 
|Delaware                                                       | 
|                                                               | 
|(State or other jurisdiction of incorporation or organization) | 
|                                                               | 
|1 Hutan Street, Zhongshan District Dalian, P.R. China          | 
|                                                               | 
|(Address of principal executive offices                        | 

Securities registered under Section
12(b) of the Exchange Act: None

Securities registered under Section
12(g) of the Exchange Act: Common Stock, par value $0.001 per share

Check whether the issuer is not
required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act.

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 such filing requirements for the past 90 days. Yes 
 No

Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

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

The issuers revenues for its
most recent fiscal year were $8,275,066.





---

The aggregate market value of the
voting and non-voting common stock of the issuer held by non-affiliates as of August 15,
2007 was approximately $7,931,236.95 based upon the closing price of the common
stock as quoted by Nasdaq OTC Bulletin Board on such date. As of August 15, 2007, there
were 43,422,971 issued and outstanding shares of the issuers common stock.

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

ii



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China Sun Group
High-Tech Co.

Annual Report on Form
10-KSBFor the Fiscal Year Ended May 31, 2007

Table of Contents

PART I

|       |                         |  
|------ | ----------------------- | -
|Item 1 | Description of Business | 1
|Item 2 | Description of Property | 8
|Item 3 | Legal Proceedings       | 8

PART II

|        |                                                                 |   
|------- | --------------------------------------------------------------- | --
|Item 5  | Market For Common Equity And Related Shareholder Matters        | 9 
|Item 6  | Management's Discussion and Analysis or Plan of Operation       | 10
|Item 7  | Financial Statements                                            | 19
|Item 8  | Changes In and Disagreements with Accountants on Accounting and
|        | Financial Disclosure                                            | 20
|Item 8A | Controls and Procedures                                         | 20
|Item 8B | Other Information                                               | 20

PART III

|        |                                                                          |   
|------- | ------------------------------------------------------------------------ | --
|Item 9  | Directors, Executive Officers, Promoters and Control Persons; Compliance |   
|        | With Section 16(a) of the Exchange Act                                   | 21
|Item 10 | Executive Compensation                                                   | 23
|Item 11 | Security Ownership of Certain Beneficial Owners and Management           | 24
|Item 12 | Certain Relationships, Related Transactions and Director Independence    | 26
|Item 13 | Exhibits                                                                 | 28
|Item 14 | Principal Accountant Fees and Services                                   | 30

|                                                                     |    
|-------------------------------------------------------------------- | ---
|Financial Statements                                                 | F-1
|Report of Independent Registered Public Accounting Firm              | F-2
|Consolidated Balance Sheet                                           | F-3
|Consolidated Statements of Operation and Comprehensive Income (Loss) | F-4
|Consolidated Statements of Cash Flows                                | F-5
|Consolidated Statements of Stockholders Equity                       | F-6
|Notes to Consolidated Financial Statements                           | F-7

As used herein, China Sun, we, us, our and
the Company refer to China Sun Group High-Tech Co.

iii



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# PART I

# ITEM 1. DESCRIPTION OF
BUSINESS.

# History

We
were incorporated in North Carolina on February 2, 2004 to engage in the business of
commercial finance brokerage and consulting. Prior to the Exchange, we were engaged in the
commercial finance brokerage and consulting business.

Da
Lian Xin Yang High-Tech Development Co. Ltd (the DLX) was registered as a
limited liability company in the Peoples Republic of China on August 16, 2000 with
its principal place of business in Dalian City, Liaoning Province, the Peoples
Republic of China. Its initial registered capital was Renminbi Yuan (RMB)
5,500,000 (equivalent to US$665,037), contributed by Sun Group High Technology Development
Co., Ltd, a limited liability company registered in Dalian City, Liaoning Province, the
Peoples Republic of China, and Ms. Li Zhi, a citizen of the Peoples Republic
of China. Prior to April 2006, DLXs principal activity was acting as a research
center to develop technologically feasible nanometers to be used in lithium batteries and
generated no revenue. It was considered as a development stage company. In April 2006, DLX
began production and sales of cobaltosic oxide which is used as the anode of high capacity
lithium ion rechargeable batteries. Sales are made primarily to battery manufacturers.
Currently, all of DLXs operations and customers are located in China.

On
July 6, 2005, $13,126,609 (RMB100,500,000) in capital was contributed by its two existing
investors and one new investor, Ms. Wang Jiao, in the forms of cash and property that
included the production facilities located in Dalian City. On May 10, 2006, these three
shareholders transferred all of their ownership interests in DLX to Ms Feng Guimei, Mr. Li
Gang and Mr. Kan Yang who are all citizens of the PRC.

On
February 28, 2007, we completed the Exchange pursuant to the Plan of Exchange, by and
among us, DLX, the DLX Shareholders, and David Koran. Under the Agreement, (1) Mr. Wang
Bin received 9,500,000 shares of our common stock from Mr. Koran for $600,000 in cash,
paid for by DLX and (2) the DLX Shareholders received (a) 30,000,000 shares of our newly
issued common stock in exchange for a 70% ownership interest in DLX and (b) a two year
non-transferable option to purchase 10,000,000 shares of our common stock for an aggregate
purchase price of RMB 31,800,000. As a result, we under went a change in control, whereby
the DLX Shareholders now own an aggregate of 39,500,000 shares, representing 93% of our
common stock issued and outstanding.

On
August 24, 2007, DLX was reincorporated from North Carolina to Delaware and changed its
name to China Sun Group High-Tech Co. The par value of common stock of China Sun Group
High-Tech Co. is $0.001 per share.

# Business

DLX
is a large producer of cobaltosic oxide and lithium cobalt oxide, both anode materials for
lithium ion batteries. According to the China Battery Industry Association, which conducts
research of and puts forth reports on the battery industry, we have the second largest
cobalt series production capacity in China. This sizable production capacity will allow
DLX to help meet the growing demand for anode materials as the demand for lithium
batteries increases. Lithium batteries are becoming widely used due to its power capacity,
long service life, and compatibility with carbon cathode materials, necessary for battery
circuitry. The expected growth of the lithium ion battery industry affords DLX a business
opportunity for increasing revenues and growth potential. In addition, DLXs current
operations are solely in China, which provides us with access to low-cost skilled labor,
raw materials, machinery and facilities which enables us to price our products
competitively in an increasingly price-sensitive market.

-1-



---

DLX
provides a comprehensive selection of cobalt products such as battery cobalt carbonate,
nano-level cobaltosic oxide, and high-crystallinity ball lithium cobalt oxide. DLX also
provides substitute products including lithium iron phosphate (LiFePO4)
developed through our research and development efforts. DLXs two main products,
however, are cobaltosic oxide (Co3O4) and lithium cobalt oxide
(LiCoO2), which are manufactured in its production facilities that span 24,000
square meters. There DLX has 12 production lines, a research and development facility, and
employee housing. Currently, 8 of the 12 productions lines are dedicated to manufacture of
cobaltosic oxide, which aggregates to a production capacity of 1500 tons per year. The
remaining 4 production lines are dedicated to manufacturing lithium cobalt oxide, which
aggregates to a capacity of 1000 tons per year.

Industry

The
lithium ion battery market is a green energy resource whose popularity rose during the
1990s. Its research and development is a hot topic amongst the scientific and high-tech
community. Lithium ion batteries continue to gain in popularity due to their versatility,
high energy density and capacity, high voltage, compact size, light weight, lack of memory
effect, and excellent energy retention characteristics. These attributes make lithium ion
batteries suitable for use in portable devices in particular. Commercially, lithium ion
batteries are used in various gadgets, such as mobile phones, PDAs, laptops, and digital
cameras and other uses such as electric automobiles and solar and wind energy storage
units. It is also used by governments, mainly for military use in submarines, underwater
robots, unpiloted airplanes, and space satellites. As the cost/power ratio of
lithium-based batteries continues to improve, it is expected that its usage will also
extend into other applications.

With
the development of other technologies, management foresees that lithium ion batteries will
also be widely used in electric bicycles and scooters. The progress in the manufacturing
technology of lithium ion batteries, in conjunction with the constant demand for enhanced
battery performance and the falling costs of batteries cost will greatly accelerate the
use of lithium ion batteries in modern mobile communications, home appliances, electric
automobiles, and various government uses. According to the Battery Industry Association of
China, the lithium ion battery will become one of the most important sources of chemical
power in 21st century.

The
Battery Industry Association of China forecasts that the growing demand for portable
products like mobile phones and laptops, will stimulate the lithium ion battery industry
in China, which is expected to grow at an annual rate of over 30% of annual output, based
on units. Lithium ion batteries used in such portable products apply lithium cobalt oxide
(LiCoO2) as an anode material. The China Battery Industry Association also reports that
the aggregate global demand for lithium cobalt oxide is approximately 40,000 to 50,000
tons. Currently, Chinas lithium cobalt oxide demand is mainly supplied by overseas
suppliers. The China Battery Industry Association writes that from September 2004 to late
2005, the demand for lithium cobalt oxide in China exceeded 10,000 tons, which led to a
significant rise in the price of cobalt, a major component in the manufacture of lithium
cobalt oxide. As a result of high demand, it is reported that the price of industrial
lithium carbonate and battery lithium carbonate also increased in tandem by approximately
50% from September 2004 to late 2005.

Anode
materials for lithium ion batteries are currently in short supply in China. In addition,
cobaltosic oxide and lithium cobalt oxide continues to develop its presence, thus,
presenting DLX with noteworthy growth potential.

Products

DLXs
three main products, cobalt carbonate (CoCO3), cobaltosic oxide (Co3O4)
and lithium cobalt oxide (LiCoO2) are manufactured in its production
facilities, which span 24,000 square meters. There DLX has 12 production lines, a
research and development facility, and employee housing. 8 of the 12 productions lines
are dedicated to manufacture of cobaltosic oxide, which aggregates to a production
capacity of 1500 tons per year. The remaining 4 production lines are dedicated to
manufacturing lithium cobalt oxide, which aggregates to a capacity of 1000 tons per year.
The core technology of CoCO3is the pressure leaching and high-efficiency
extraction. The core technology of nanometer Co3O4and LiCoO2is mesh belt calcination.

-2-



---

According
to the Battery Industry Association of China, DLX is the second largest non-governmental
manufacturer of hi-tech cobalt salt products in Asia based on tons produced. DLXs
products and processing capabilities include the production of cobalt ore, cobalt
carbonate, nanometer-sized cobaltosic oxide and high-crystalline spherical lithium cobalt
oxide which is used lithium batteries. In addition, Sun Group specializes in:

| |  |  | Hi-pressure
leaching technology of raw materials,
| | - |  | -------------------------------------------------

| |  |  | Hi-performance
extraction technology of soluble cobalt salts,
| | - |  | -------------------------------------------------------------

| |  |  | Chemical
precipitation technology of soluble cobalt salts,
| | - |  | ----------------------------------------------------------

| |  |  | Mesh-belt
metallurgical powder calcinations,
| | - |  | --------------------------------------------

| |  |  | Multilevel
selecting technology, and
| | - |  | ------------------------------------

| |  |  | Stable
sol and gel technology.
| | - |  | ------------------------------

DLX
provides a comprehensive selection of cobalt products such as battery anode cobaltous
(cobalt) carbonate, nano-level cobalto cobaltic (cobaltosic) oxide, and high-crystallinity
ball lithium cobalt oxide. DLX also provides substitute products, including ternary anode
material (which is composed of lithium cobalt oxide, lithium nickel oxide and lithium
manganese oxide) developed through our research and development efforts.

Currently,
DLXs products are classified in China at the third quality standard, the highest
standard in China based on certain qualitative measures. Furthermore, DLXs products
can be directly supplied to the domestic and foreign markets as independent finished
products.

Currently,
DLX distributes its products directly to customers or through its sales agents.

Customers

Our
target market includes lithium ion battery manufacturers, end product users, and lithium
series product manufacturers throughout the world. Our initial focus however, is the
development of a domestic market in China. Once we have gained a sizable share of the
Chinese market, we will focus our attention on exporting our products internationally.

In
China, we have six main customers of our Co3O4. These include Hunan
Shanshan Advanced Material, CITIC Guoan Mengguli Corporation, Hunan Reshine New Material
Co., Ltd., Changzhou PowerGenie Materials Co., Ltd., Xiamen Tungsten Co., Ltd, and
Beijing Easpring Material Technology Co., Ltd. These companies are all the leading
battery producers at the lithium ion battery market in China. Their combined total
purchase capacity is 1000T/month. Our current production capacity is 50T/month. As Co3O4has a sellers market in China, we believe that these customers will purchase
more from us as soon as we increase our production capacity. For the fiscal year ended
May 31, 2007, one out of the six main customers accounted for 76% of our total revenues.
However, production only began in April 2006. During 2007, we launched different
marketing campaigns based on various strategies. We have added several customers such as
Zhejiang Tianhong Energy Technology Co., Ltd., Zhejiang Wanma Battery Co., Ltd.,
Guangzhou Huaneng Battery Co., Ltd. and Shenzhen Sunristar Electronics Co., Ltd. In the
international market, we have approached potential customers such as Panasonic, Sanyo,
Maxell and Sumsung.

Potential of International Market

The
major consuming countries in the global market are Japan and Korea. However, with the
improvement of Chinas production and technology and the market advantage, Japans
Diacelltec, Sanyo, Sony and Panasonic have successively relocated their production bases
to China, Koreas LG, Samsung and SK have also established major procurement centers
in China.

Koreas
Project Development & Consultation Co., Ltd. (PD&C) has entered into an agent
agreement with us. Under this agreement, PD&C
will find customers in South Korea to buy our products totally valued at or more than USD
8 million per year. The term of the agreement is 2 year.

-3-



---

The
potential customers we have approached and have showed strong interest in our products in
the international market include: Tanaka, Honjo, HLST, Sanyo, Sony, Panasonic,
Nihonkagakusangyo, Maxell, LG, Samsung, SK, Hanhua and Light & Future.

Competition

We
compete mainly with other manufacturers of battery anode materials located locally in
China, as well as from Japan and Korea. Our key competitors are Hunan Haina Advanced
Material Co., Ltd., Gansu Jinchuan Group, Henan Guangkuotiandi Cobalt Product Co., Ltd.,
and Nanjing Hanrui Cobalt Product Co., Ltd.

We
believe that we are able to leverage our low-cost advantage to compete favorably with our
competitors. Compared to Korean and Japanese manufacturers, we are able to source our
needs for skilled labor and raw materials locally and economically. Our significant
production capacity should translate into greater purchasing power in the future, thereby
helping us negotiate lower purchase prices for our raw materials. Furthermore, our
proprietary technologies and use of a combination of manual labor and automation at the
key stages of the manufacturing process enable us to enhance our production efficiency,
resulting in further reduction in the cost, while ensuring high-uniformity and
high-quality standards.

Raw Materials

We
obtain our raw materials from only a few suppliers. However, there are an abundance of
such suppliers available. For the fiscal year ended May 31, 2007, 76% of our raw
materials came from one supplier, Aote Gunie Zhi Pin Co., Ltd. To remedy this situation,
DLX purchased interests in a cobalt ore mine in the Congo. For additional details on the
purchase of the interests in the cobalt mine in Congo, see Item 6, Managements
Discussion and Analysis or Plan of Operation. Purchase of these interests will provide us
with an additional supply of raw material and will also enable us to sell these materials
to other enterprises in this industry.

Currently,
the export of crude ore is prohibited in Africa. Therefore, building the primary
processing plant of cobalt ore in Africa can avoid the export limitation, save freight
and ensure a stable supply of raw material. We plan to build such a processing plant of
cobalt ore in Congo. Construction will begin in the third quarter of the fiscal year
2008. Once the processing plant is complete, we will benefit from the reduced costs of
raw materials and ensure a stable supply of raw material, which will provide us with a
competitive advantage.

According
to an article published by the Information Center of the Ministry of Commerce of PRC on May 13, 2007, now
the contribution rate
of China-Africa trade to Africas economic growth has reached as high as 20% of its
growth rate. In 2006, the amount of China-Africa trade reached USD 55.5 billion. China
becomes the third trading partner of Africa. By the end of 2006, Chinas investments
in Africa had accumulated to USD 11.7 billion. Chinas key investment fields include
agricultural development, machining and manufacture, traffic, communication, water and
electricity. In 2006, Chinas government announced eight measures to promote the
development of a China-Africa new strategic partner relationship. African countries made
the Africas Plan to Develop New Partners as its whole development strategy. China
has signed the bilateral agreements of promotion and protection of investment with 26
African countries and signed the agreement of avoiding dual taxation with 8 African
countries.

The
Democratic Republic of Congo has also signed the bilateral economic and trading
agreements with 44 countries in the world, including China, joined 9 regional
organizations including the Economic Community of Central African States, and joined in
14 international and multilateral economic and trading organizations including the
International Tin Association and African, Caribbean, & Pacific Countries (ACP). The
Democratic Republic of Congo entered into the General Agreement of Tariffs and Trade in
1971 and became a member of WTO in 1995. In 2002, it created a body of investment law
which included a policy favorable toward foreign invested enterprise which stipulated
that such enterprises with over USD 20,000 in capital can be exempted from taxes for 5
years and such enterprises with USD 1 million in capital are eligible for certain
favorable policy treatments. The investment law is currently in the progress of revision.

-4-



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Intellectual Property

We
have filed for a patent on our process of manufacturing active lithium cobalt oxide from
Chinas Patent Bureau and are currently in the review stage of the
patent-procurement process.

On
August 20, 2004, DLX applied for the patent of its method of processing active lithium
cobalt dioxide at the State Intellectual Property Office of the Peoples Republic of
China. Upon the preliminary examination, the application conformed to the patent law and
the implementation rules.

On
Apr. 1, 2005, the State Intellectual Property Office announced this patent application in
the official journal of invention and patent according to the patent law.

On
Sep. 16, 2005, upon the applicants request of substantive examination, the State
Intellectual Property Office examined the application in accordance with the patent
rights. This patent application has been in the process of substantive examination.

Government Regulation

The
major environmental regulations applicable to us include the PRC Environmental Protection
Law, the PRC Law on the Prevention and Control of Water Pollution and its Implementation
Rules, the PRC Law on the Prevention and Control of Air Pollution and its Implementation
Rules, the PRC Law on the Prevention and Control of Solid Waste Pollution, and the PRC Law
on the Prevention and Control of Noise Pollution. As we conduct our manufacturing
activities in China, we are subject to the requirements of these environmental laws and
regulations on air emission, waste water discharge, solid wastes and noise. We plan to
comply with environmental laws and regulations. We are not subject to any admonition,
penalty, investigations or inquiries imposed by the environmental regulators, nor are we
subject to any claims or legal proceedings to which we are named as defendant for
violation of any environmental laws and regulations. We do not have any reasonable basis
to believe that there is any threatened claim, action or legal proceedings against us that
would have a material adverse effect on our business, financial condition or results of
operations.

Chinas
intellectual property protection regime is consistent with those of other modern
industrialized countries. The PRC has domestic laws for the protection of rights in
copyrights, patents, trademarks and trade secrets. The PRC is also a signatory to most of
the worlds major intellectual property conventions, including:

| |  |  | Convention
establishing the World Intellectual Property Organization (WIPO Convention) (June 4,
1980);
| | - |  | ------------------------------------------------------------------------------------------------------

| |  |  | Paris
Convention for the Protection of Industrial Property (March 19, 1985);
| | - |  | ----------------------------------------------------------------------------

| |  |  | Patent
Cooperation Treaty (January 1, 1991); and
| | - |  | ------------------------------------------------

| |  |  | The
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (November 11,
2001).
| | - |  | ---------------------------------------------------------------------------------------------------

Patents
in the PRC are governed by the China Patent Law and its Implementing Regulations, each of
which went into effect in 1985. Amended versions of the China Patent Law and its
Implementing Regulations came into effect in 2001 and 2003, respectively.

The
PRC is signatory to the Paris Convention for the Protection of Industrial Property, in
accordance with which any person who has duly filed an application for a patent in one
signatory country shall enjoy, for the purposes of filing in the other countries, a right
of priority during the period fixed in the convention (12 months for inventions and
utility models, and 6 months for industrial designs).

The
Patent Law covers three kinds of patents, i.e., patents for inventions, utility models
and designs respectively. The Chinese patent system adopts the principle of first to
file. This means that, where more than one people file patent applications for the same
invention, a patent can only be granted to the people who first filed the

-5-



---

application. Consistent with
international practice, the PRC only allows the patenting of inventions or utility models
that possess the characteristics of novelty, inventiveness and practical applicability.
For a design to be patentable, it should not be identical with or similar to any design
which, before the date of filing, has been publicly disclosed in publications in the
country or abroad or has been publicly used in the country, and should not be in conflict
with any prior right of another.

PRC
law provides that anyone wishing to exploit the patent of another must conclude a written
licensing contract with the patent holder and pay the patent holder a fee. One rather
broad exception to this, however, is that, where a party possesses the means to exploit a
patent but cannot obtain a license from the patent holder on reasonable terms and in
reasonable period of time, the PRC State Intellectual Property Office, or SIPO, is
authorized to grant a compulsory license. A compulsory license can also be granted where a
national emergency or any extraordinary state of affairs occurs or where the public
interest so requires. SIPO, however, has not granted any compulsory license up to now. The
patent holder may appeal such decision within three months from receiving notification by
filing a suit in a peoples court.

PRC
law defines patent infringement as the exploitation of a patent without the authorization
of the patent holder. A patent holder who believes his patent is being infringed may file
a civil suit or file a complaint with a PRC local Intellectual Property Administrative
Authority, which may order the infringer to stop the infringing acts. Preliminary
injunction may be issued by the Peoples Court upon the patentees or the
interested parties request before instituting any legal proceedings or during the
proceedings. Evidence preservation and property preservation measures are also available
both before and during the litigation. Damages in the case of patent infringement is
calculated as either the loss suffered by the patent holder arising from the infringement
or the benefit gained by the infringer from the infringement. If it is difficult to
ascertain damages in this manner, damages may be reasonably determined in an amount
ranging from one to more times of the license fee under a contractual license. The
infringing party may be also fined by Administration of Patent Management in an amount of
up to three times the unlawful income earned by such infringing party. If there is no
unlawful income so earned, the infringing party may be fined in an amount of up to
RMB500,000, or approximately $62,500.

Research and
Development

DLX
spent $89,166 and $83,000 on research and development for the fiscal years ended May 31,
2007 and 2006, and $10,735 was spent on research and development for the fiscal year ended
May 31, 2005. These research and development costs were not added to the purchase price of
our products and thus, were not passed along to our customers.

As
represented by the foregoing amounts, DLX has already invested material funds into
research and development efforts. We have recently begun construction of a R&D test
and detection center, equipped with detection and test apparatus and instruments. The
center will be used to conduct quality controls reviews to provide assurance regarding the
quality of our products. In addition, the center will conduct research and development to
keep abreast of technology and the changing needs of our customers.

-6-



---

With
the efforts of our R&D group, we have successfully possessed the nanometer
technologies to develop the following three series of nanometer metal products:

|1. |  | Nanometer
Simple Metal Substance: Cu, Fe, Ni, Ag, Al, Zn, Co. The sizes of these
          substances vary between 10-100nm. Being even, spherical,
          high-crystallization and high-dispersion, they are mainly  applied to
          martial, chem-industrial, pharmaceutical, and electronic industries. They can
be           used as  efficient catalyst, antiseptic, combustion-supporting agent and
          electrode materials.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Nanometer
Compound Metal Substance: ZnO, TiO2, NiO, SnO, WO3. The
sizes of these substances vary  between 10-70nm; mainly   applied to such
industries as airplane manufacture and auto manufacture
          industries; have the function of sterilization, energy-saving and extend the
          durability of rubber.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Nanometer
Metal Alloy: Fe-Ni, Sn-Ag, Ti-Al. Used in plastic and lubricant oil           industries;
 have high tensile strength, high abrasion resistance,           good sturdiness,
good oil-resistance and  chemical-resistance.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

DLXs New
Material Development

DLXs
R&D team led by the General Technical Supervisor Cheng Yijing has 14 members in total.
The team started the research of the new battery anode material (i.e. ternary anode
material) in October 2005. The laboratory test was conducted in May 2006 to examine
whether the ternary anode material conformed to industry standards. The test has proved
that various technical parameters conformed to the industry standard. After about ten
months testing, the commercial test on the ternary anode material has been
completed. As a result, in terms of technology, the conditions for mass production of the
ternary anode material have matured.

The
ternary material is composed of lithium cobalt dioxide, lithium manganate and lithium
nickelate. This material has the following characteristics: high specific capacity, high
safety, superior performance of cycling and rate, stability performance at low and high
temperatures, charge and discharge duration, high performance price ratio, etc. The material
can be applied as the main anodes of
small-sized communication and power instruments, such as portable power tool, electronic
apparatus, laptop, video camera, and is replacing the lithium cobalt oxide gradually. It
also has a good prospect of application in electric autos and electric bicycle.

In
April 2004, we established a strategic relationship with Northeastern University, located
in China. Northeastern University is an institution which has research development
capabilities that complement ours. Through our collaborative efforts, we will conduct
research and development activities to improve on the currently available anode materials
which are components of lithium ion batteries. Currently, we are looking into improvements
on the latest lithium cobalt oxide technology and are conducting trials of new ternary
materials, which are combinations of source anode materials as an alternative to the sole
use of cobalt.

DLX
plans to continue to align itself with many industry experts and enter into agreements
with various research teams at institutes and universities.

Employees

As
of May 31, 2007, we have 258 full-time employees and no part-time employees. This includes
41 people in marketing, 195 in manufacturing, 13 in research and development and quality
control, 4 in financial and accounting, and 5 in general management.

-7-



---

# ITEM 2. DESCRIPTION OF
PROPERTY

All
land in China is owned by the State. Individuals and companies are permitted to acquire
rights to use land or land use rights for specific purposes. In the case of land used for
commercial purposes, the land use rights are granted for a period of 50 years. This period
may be renewed at the expiration of the initial and any subsequent terms. Granted land use
rights are transferable and may be used as security for borrowings and other obligations.

Corporate Headquarters

Our
corporate headquarters are located on leased premises at 1 Hutan Street, Zhongshan
District, Dalian PRC. These offices encompass approximately 1,987 square meters. The lease
term ends on 2046. The land use agreement has a 50-year term which expires in May 2049.
The annual lease payment is 50,000 RMB/year.

Operating Facility

All
of our operations are located on premises at Gan Jing Zi Hi-Tech Park, Dalian PRC. This
facility consists of approximately 258,240 square feet. The land use agreement has a
50-year term which expires in May 2046. In return for the use of the premises, we pay an
annual property tax of $62,500. The operating facility is used as office space,
manufacturing plants, research and development, and as employees living quarters
which can house up to 320 individuals. There is also an eatery and hotel that is used by
visitors to the operating facility which has an occupancy rate of up to 50 people.

As
of August 15, 2007 and May 31, 2007, we did not incur any construction costs. Pursuant to
a written agreement, DLX has acquired the prospecting and mining rights of a cobalt mine
in Congo, and plans to construct a processing plant in Congo. Construction will begin in
the third quarter of the fiscal year 2008. For additional details on the purchase of the
interests in the cobalt mine in Congo, see Item 6, Managements Discussion and
Analysis or Plan of Operation.

We
believe that all our properties and equipment have been adequately maintained, are
generally in good condition, and are suitable and adequate for our business.

Our
facilities are not covered by insurance.

# ITEM 3. LEGAL PROCEEDINGS

Currently,
we are not a party to any ongoing or pending legal proceeding.

-8-



---

# PART II

# ITEM 5. MARKET FOR
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

# The Market for Our
Common Stock

Our
shares of common stock, par value $0.001 per share, are quoted on the Nasdaq OTC Bulletin
Board under the trading symbol CRFU where they have traded since September
2006. The following table sets forth the high and low bid prices for our common stock as
reported on the OTC Bulletin Board. These prices reflect inter-dealer prices, without
retail mark-up, mark-down or commissions, and may not necessarily represent actual
transactions.

|              | Year Ended
May 31, 2008 | Year Ended
May 31, 2007 | Year Ended
May 31, 2006(3)
|------------- | ----------------------- | ----------------------- | --------------------------
|              |                         |                        
|
|              |                         |                        
|FirstQuarter  |                         | $1.09                   | (1)                       
|SecondQuarter |                         |                        |                           
|ThirdQuarter  |                         |                        |                           
|FourthQuarter |                         |                        |                           

_________________

As
reported by Bloomberg.

(1)       
          Information provided through August 15, 2007.

(2)       
          Information provided beginning September 7, 2006, the day we began trading on
          the OTC Bulletin Board.

(3)       
          Information not provided, because we did not begin trading on the OTC Bulletin
          Board until September 7, 2006.

On
August 15, 2007, the closing price for our common stock, as reported by the OTC Bulletin
Board, was $0.45 per share and there were 623 shareholders of our common stock of record.
However, we believe that there are additional beneficial owners of our common stock who
own their shares in street name.

# Dividend Policy

We
have not paid any cash dividends since our inception and do not anticipate paying any cash
dividends on our common stock in the foreseeable future. We expect to retain our earnings,
if any, to provide funds for the expansion of our business. Future dividend policy will be
determined periodically by the Board of Directors based upon conditions then existing,
including our earnings and financial condition, capital requirements, and other relevant
factors.

# Equity Compensation
Plans

There
were no equity compensation plans effective as of May 31, 2007.

-9-



---

ITEM 6. MANAGEMENTS
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

# Cautionary Notice
Regarding Forward-Looking Statements

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

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

| |  |  | the
effect of political, economic, and market conditions and geopolitical events;
| | - |  | ---------------------------------------------------------------------------------

| |  |  | legislative
and regulatory changes that affect our business;
| | - |  | ------------------------------------------------------------

| |  |  | the
availability of funds and working capital;
| | - |  | ----------------------------------------------

| |  |  | the
actions and initiatives of current and potential competitors;
| | - |  | -----------------------------------------------------------------

| |  |  | investor
sentiment; and
| | - |  | -----------------------

| |  |  | our
reputation.
| | - |  | ---------------

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

The
following discussion and analysis should be read in conjunction with our consolidated
financial statements and the related notes thereto as filed with the SEC and other
financial information contained elsewhere in this Form 10-KSB.

-10-



---

# Overview

Currently,
our only operations are conducted through DLX, who engages in the business of
manufacturing and selling cobaltosic oxide products. These products are primarily
manufactured, marketed, and sold in China.

According
to the Battery Industry Association of China, DLX is the second largest non-governmental
manufacturer of hi-tech cobalt salt products in Asia based on tons produced. DLXs
products and processing capabilities include the production of cobalt ore, cobalt
carbonate, nanometer-sized cobaltosic oxide and high-crystalline spherical lithium cobalt
oxide which is used lithium batteries. In April 2006, DLX commenced production and quickly
amassed sales of over $1.5 million dollars.

# New Financial
Accounting Pronouncements

In
February 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 155, Accounting for Certain Hybrid Instruments-an amendment of FASB
Statements 133 and 140, which is effective for all financial instruments
acquired or issued after the beginning of an entitys first fiscal year that begins
after September 15, 2006. The statement improves financial reporting by eliminating the
exemption from applying SFAS No. 133 to interests in securitized financial assets so that
similar instruments are accounted for similarly regardless of the form of the
instruments. The statement also improves financial reporting by allowing a preparer to
elect fair value measurement at acquisition, at issuance, or when a previously recognized
have to bifurcated, if the holder elects to account for the whole
instrument-by-instrument basis, in cases in which a derivative would otherwise have to
bifurcated, if the holder elects to account for the whole instrument on a fair value
basis. We do not expect that the adoption of this statement would have a material effect
on our financial position or results of operations. [Note, since the rest of the document
is in first person and this is what the SEC prefers, consistently write in the first
person.]

In
May 2006, the FASB issued SFAS No. 154,Accounting Changes and Error Corrections (SFAS
154), which replaces Accounting Principles Board Opinions No. 20, Accounting
Changesand SFAS No. 3, Reporting Accounting changes in Interim
Financial StatementsAn Amendment of APB Opinion No. 28. SFAS 154 provides
guidance on the accounting for and reporting of accounting changes. It establishes
retrospective application, or the latest practicable date, as the required method for
reporting a change in accounting principle and the reporting of a correction of an error.
SFAS 154 is effective for accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2006. The adoption of this statement did not have a
material effect on our financial position or results of operations.

In
June 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109(FIN
48). This pronouncement prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. FIN 48 is effective for fiscal years beginning after December 15,
2006. We do not expect that the adoption of this statement would have a material effect
on our financial position or results of operations.

In
June 2006, the FASB ratified the consensus reached on Emerging Issues Task Force (EITF)
Issue No. 06-03, How Sales Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (that is, Gross
Versus Net Presentation) (EITF 06-03). The EITF reached a consensus that the
presentation of taxes on either a gross or net basis is an accounting policy decision
that requires disclosure. EITF 06-03 is effective for our fiscal year beginning June 3,
2007. Sales tax amounts collected from customers have been recorded on a net basis. The
adoption of EITF 06-03 will not have any effect on our financial position or results of
operations.

In
September 2006, the FASBs Emerging Issues Task Force (EITF) reached a
final consensus on Issue 04-13, Accounting for Purchases and Sales of Inventory
with the Same Counterparty (EITF 04-13). EITF 04-13 requires that
two or more legally separate exchange transactions with the same counterparty be combined
and considered a single arrangement for purposes of applying APB Opinion No. 29,
Accounting for Nonmonetary Transactions, when the transactions are
entered into in contemplation of one another. EITF 04-13 is effective for new arrangements
entered into, or modifications or renewals of existing arrangements, in interim or annual
periods

-11-



---

beginning after March 15, 2006. We
do not expect that the adoption of this statement would have a material effect on our
financial position or results of operations.

In
July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement No. 109", which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires that the Company
recognizes in its consolidated financial statements the impact of a tax position if that
position is more likely than not of being sustained on audit, based on the technical
merits of the position. The provisions of FIN 48 are effective for the Company on January
1, 2007, with the cumulative effect of the change in accounting principle, if any,
recorded as an adjustment to opening retained earnings. We do not expect that the adoption
of this statement would have a material effect on our financial position or results of
operations.

In
September 2006, the SEC released SAB No. 108,Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements (SAB 108). SAB 108 provides interpretive guidance on the
SECs views on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a current year misstatement. The
provision of SAB 108 is effective for the Company in the current fiscal year ended
December 31, 2006. We are currently evaluating the impact of SAB 108 but do not believe
that the application of SAB 108 would have a material effect on our financial position,
cash flows, or results of operations.

In
September 2006, the FASB issued SFAS No.157, Fair Value Measurements
(SFAS 157), which defines fair value, establishes guidelines for measuring
fair value and expands disclosures regarding fair value measurements. SFAS 157 does not
require any new fair value measurements but rather eliminates inconsistencies in guidance
found in various prior accounting pronouncements. SFAS 157 will be effective for us
starting January 1, 2008. Earlier adoption is permitted, provided we have not yet issued
financial statements, including for interim periods, for that fiscal year. We are
currently evaluating the impact of SFAS 157 on our consolidated financial position, cash
flows, and results of operations.

In
February 2007, the FASB issued SFAS No. 159 The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159), which permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been elected are
reported in earnings. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. We have not yet determined the impact that the elective adoption
of SFAS 159 may have on our results of operations or financial position.

In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
No. 123R, Share-Based Payment (SFAS 123R). SFAS 123R revises FASB
Statement No. 123 Accounting for Stock-Based Compensation and supersedes APB
Opinion No. 25 Accounting for Stock Issued to Employees. SFAS 123R requires
all public and non-public companies to measure and recognize compensation expense for all
stock-based payments for services received at the grant-date fair value, with the cost
recognized over the vesting period (or the requisite service period). SFAS 123R is
effective for small business issuers for all interim periods beginning after December 15,
2005. The adoption of SFAS 123R did not have a material impact on our financial
statements or results of operations.

SFAS
No. 123R permits public companies to adopt its requirements using one of two methods. A
modified prospective method in which compensation cost is recognized beginning
with the effective date (a) based on the requirements of SFAS 123R for all share-based
payments granted after the effective date and (b) based on the requirements of SFAS No.
123 for all awards granted to employees prior to the effective date of SFAS No. 123R that
remain unvested on the effective date. A modified retrospective method which
includes the requirements of the modified prospective method described above, but also
permits entities to restate based on the amounts previously recognized under SFAS No. 123
for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior
interim periods of the year of adoption. We have yet to determine which method to use in
adopting SFAS 123R.

-12-



---

In
November 2004, the FASB issued SFAS No. 151 Inventory Costs  an amendment of
ARB No. 43, Chapter 4" (SFAS 151). This statement amends the guidance in
ARB No. 43, Chapter 4, Inventory Pricing to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). SFAS 151 requires that those items be recognized as current-period charges. In
addition, this Statement requires that allocation of fixed production overheads to costs
of conversion be based upon the normal capacity of the production facilities. The
provisions of SFAS 151 are effective for fiscal years beginning after June 15, 2005. As
such, we have adopted these provisions, if any, at the beginning of the fiscal year 2006.

In
December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets 
an amendment of APB Opinion No. 29 (SFAS 153). SFAS 153 replaces the
exception from fair value measurement in APB Opinion No. 29 for non-monetary exchanges of
similar productive assets with a general exception from fair value measurement for
exchanges of non-monetary assets that do not have commercial substance. A non-monetary
exchange has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is effective for all interim
periods beginning after June 15, 2005. The adoption of SFAS 153 did not have a material
impact on our financial statements or results of operations.

In
May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections
 a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS
154). SFAS 154 changes the requirements for the accounting for and reporting of a
change in accounting principle. These requirements apply to all voluntary changes and
changes required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. SFAS 154 is effective for
fiscal years beginning after December 15, 2005. As such, we have adopted these provisions,
if any, at the beginning of the fiscal year ended May 31, 2006.

In
February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 and 140 (SFAS
155). This Statement amends FASB Statements No. 133, Accounting for Derivative
Instruments and Hedging Activities, and No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. This Statement
resolves issues addressed in Statement 133 Implementation Issue No. D1, Application
of Statement 133 to Beneficial Interests in Securitized Financial Assets. This
Statement permits fair value re-measurement 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
Statement 133, establishes a requirement to evaluate interests 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 Statement 140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument. SFAS 155 is
effective for all financial instruments acquired or issued for us for fiscal years
beginning after September 15, 2006. The adoption of this standard is not expected to have
a material effect on our results of operations or financial position.

-13-



---

Results
of Operations

Selected
Financial Data

|                     | YEARS ENDED MAY 31,
|-------------------- | -------------------
|
|Statement of Income: |                    
|                     |                    
|Revenue, net         |                    
|Cost of revenue      |                    
|                     |                    
|Gross profit         |                    
|                     |                    

|                                                           |  |            |   |            |   |            |  
|---------------------------------------------------------- |  | ---------- | - | ---------- | - | ---------- | -
|Total operating expenses                                   |  | 1,999,803  |   | 479,707    |   | 116,408    |  
|                                                           |  |            |   |            |   |           
|                                                           | 
|Income (loss) from operations                              |  | 1,400,185  |   | (343,950   | ) | (116,408   | )
|                                                           | 
|Income tax expense                                         |  | (804,189   | ) | -          |   | -          |  
|                                                           | 
|Income (loss) before minority interest                     |  | 595,996    |   | (343,950   | ) | (116,408   | )
|                                                           | 
|Minority interest                                          |  | (178,799   | ) | 103,185    |   | 34,922     |  
|                                                           | 
|Net income (loss)                                          |  | 417,197    |   | (240,765   | ) | (81,486    | )
|                                                           | 
|Other comprehensive income:                                | 
|Foreign currency translation gain:                         |  | 111,899    |   | 113,164    |   | 805        |  
|                                                           | 
|Comprehensive income (loss):                               |  | 529,096    |   | (127,601   | ) | (80,681    | )
|                                                           |  |            |   |            |   |           
|                                                           | 
|Basic earnings per share                                   |  | $0.01      |   | $(0.01     | ) | $(0.00     | )
|                                                           |  |            |   |            |   |           
|                                                           | 
|Shares used in thecalculation of basicearnings per share   |  | 39,478,020 |   | 30,000,000 |   | 30,000,000 |  
|                                                           |  |            |   |            |   |           
|                                                           | 
|Diluted earnings per share                                 |  | $0.01      |   | $(0.01     | ) | $(0.00     | )
|                                                           |  |            |   |            |   |           
|Shares used in thecalculation of dilutedearnings per share |  | 39,478,020 |   | 30,000,000 |   | 30,000,000 |  
|                                                           |  |            |   |            |   |           
|                                                           | 

-14-



---

|                                                    | Years Ended May 31,
|--------------------------------------------------- | -------------------
|
|Statement of Cash Flows Data:                       |                    
|                                                    |                    
|Net cash (used in) operating activities             |                    
|                                                    |                    
|Net cash used in investing activities               |                    
|                                                    |                    
|Net cash provided by (used in) financing activities |                    
|                                                    |                    
|Net increase in cash and cash equivalents           |                    
|                                                    |                    

Our
primary, near term business objective is to raise sufficient capital to pay our cost of
revenue and selling, general and administrative expenses. In addition, in the fiscal year
of 2008, we plan to construct a processing plant in Congo for the cobalt mine in which we
have entered into an agreement to purchase certain prospecting and mining rights. We
expect to finance the project by raising additional money. Our operating expenses
currently average approximately $166,650 per month, which cover our costs to operate our
current production line, accounting and legal fees and general and administrative
expenses. For additional details on the purchase of the interests in the cobalt mine in
Congo, see Item 6, Managements Discussion and Analysis or Plan of Operation.

We
believe that the funds available to us and those generated from operations are adequate to
meet our operating needs for the rest of fiscal 2008. We will continue to evaluate
alternative sources of capital to meet our growth requirements, including additional asset
or debt financings, issuing equity securities, and entering into financing arrangements.
There can be no assurance, however, that any of the contemplated financing arrangements
described herein will be available and, if available, can be obtained on terms favorable
to us. If we fail to raise or generate the necessary funds to continue operations we may
be required to significantly reduce the scope of or completely cease our operations.

Comparison
of Year Ended May 31, 2007 to Year Ended May 31, 2006

Revenues

Revenues
for the year ended May 31, 2007 totaled $8,275,066 compared to $277,715 for the year ended
May 31, 2006, an increase of $7,997,351. The increase resulted from new sources of sales
channels and market demand from business development of new customer.

Cost of Revenue

Cost
of revenues for the year ended May 31, 2007 totaled $4,758,023 compared to $Nil for the
year ended May 31, 2006, an increase of $4,758,023. The increase resulted from the
increase in sales and market demand for the products.

-15-



---

Cost of Revenue  Related
Parties

Cost
of revenues  related parties for the year ended May 31, 2007 totaled $117,055
compared to $141,958 for the year ended May 31, 2006, a decrease] of $24,903. The decrease
resulted from the change of vendors to independent suppliers.

General and
Administrative Expense

General
and administrative expense for the year ended May 31, 2007 totaled $1,247,533compared to
$163,341 for the year ended May 31, 2006, an increase of $1,084,192. The increase resulted
from the allowance of doubtful account of $777,831 and the additional overhead for a new office setup
in the United States.

Research and
Development Expense

Research
and development expense for the year ended May 31, 2007 totaled $89,166 compared to
$83,000 for the year ended May 31, 2006, an increase of $6,166. The increase resulted from
the continuous development of new products and advancement of manufacturing methods.

Depreciation Expense

Depreciation
expense for the year ended May 31, 2007 totaled $213,104 compared to $233,366 for the year
ended May 31, 2006, a decrease of $20,262. The decrease resulted from the appreciation of
average exchange rate of RMB/USD during the year.

Income (Loss) From
Operations

Income
from operations for the year ended May 31, 2007 totaled $1,400,185 compared to loss from
operation of $343,950 for the year ended May 31, 2006, an increase of $1,744,135. The
increase resulted from growth in sales.

Liquidity and Capital
Resources

During
the years ended May 31, 2007 and 2006, net cash used for operating activities was $730,162
and $651,081, respectively. During fiscal 2007, operating funds were primarily used for
working capital and increase in the balance of trade accounts receivable.

Net
cash used for investing activities was $72,764 and $5,836, for the years ended May 31,
2007 and 2006, respectively. During fiscal 2007, investing funds were [primarily used to
the purchase of plant and equipment.

Net
cash received from financing activities was $1,297,272 and $542,623, for the years ended
May 31, 2007 and 2006, respectively. During fiscal 2007, financing funds were primarily
received from the settlement of the amount due from a related party.

Total
capital expenditures during the years ended May 31, 2007 and 2006 were $72,764 and $5,836,
respectively. During fiscal 2007, capital expenditures were primarily used to the purchase
of plant and equipment.

Comparison of Year
Ended May 31, 2006 to Year Ended May 31, 2005

Revenues

Revenues
for the year ended May 31, 2006 totaled $277,715 compared to $0 for the year ended May 31,
2005, a increase of $277,715. The increase resulted from the commencement of production
since April 2006.

-16-



---

Cost of Revenue Related
Parties

Cost
of revenues for the year ended May 31, 2006 totaled $141,958 compared to $0 for the year
ended May 31, 2005, an increase of $141,958. The increase resulted from the commencement
of production since April 2006.

General and
Administrative Expense

General
and administrative expense for the year ended May 31, 2006 totaled $163,341 compared to
$101,467 for the year ended May 31, 2005, an increase of $61,874. The increase resulted
from the commencement of production since April 2006 and increase in headcount.

Research and
Development Expense

Research
and development expense for the year ended May 31, 2006 totaled $83,000 compared to
$10,735 for the year ended May 31, 2005, an increase of $72,265. The increase resulted
from the development of new products.

Depreciation Expense

Depreciation
expense for the year ended May 31, 2006 totaled $233,366 compared to $4,206 for the year
ended May 31, 2005, an increase of $229,160. The increase resulted from the operation of
plant and equipment for the production facility.

Loss From Operations

Loss
from operations for the year ended May 31, 2006 totaled $343,950 compared to $116,408 for
the year ended May 31, 2005, an increase of $227,542. The increase resulted from the
commencement of production since April 2006.

Liquidity and Capital
Resources

During
the years ended May 31, 2006 and 2005, net cash used for operating activities was $651,081
and $4,129, respectively. During fiscal 2006, operating funds were primarily used in
working capital to commence the production starting from April 2006.

Net
cash used for investing activities was $5,836 and $862, for the years ended May 31, 2006
and 2005, respectively. During fiscal 2006, investing funds were primarily used to the
purchase of plant and equipment.

Net
cash received from financing activities was $546,623 and $0, for the years ended May 31,
2006 and 2005, respectively. During fiscal 2006, financing funds were primarily received
from the advances of shareholders.

Total
capital expenditures during the years ended May 31, 2006 and 2005 were $5,836 and $862,
respectively. During fiscal 2007, capital expenditures were primarily used to the addition
of plant and equipment.

Export
Sales

Revenues
from sales to customers located outside of the United States accounted for approximately
100% and 100% of our net sales for fiscal 2007 and 2006, respectively.

-17-



---

Trends

The
current trend that will substantially impact the net sales or revenues of our cobalt
products is the trend in the cobalt product industry to directly possess a cobalt mine
and therefore has direct access to its supply of the cobalt ore. More and more companies
are looking to access the low cost cobalt mines in Africa. Having a cobalt mine in Africa
will avoid the export limitation imposed by the African governments such as Congos,
save freight and ensure a stable supply of raw material. That is also the reason why we
acquired a cobalt mine in Africa and will construct a processing plant in Congo.

We
are not aware of any trends, events or uncertainties that have or are reasonably likely
to have a material impact on our short-term or long-term liquidity.

Inflation

We
believe that inflation has not had a material or significant impact on our revenue or our
results of operations.

Material
Commitments for Capital Expenditures

Currently,
we have bought the prospecting and mining rights of a cobalt mine in Congo. We plan to
start the construction of a processing plant in Congo in the third quarter of the 2008
fiscal year. We plan to finance $5,000,000 in total for the project, of which $2,000,000
was used to acquire the mining right of the cobalt mine, $2,000,000 will be used to set up the
processing plant and $ 1,000,000 will be used as the operational fund.

Subsequent
Events

On
June 9, 2007, DLX entered into an African Mining Project Contract of Cooperation (the
Purchase Agreement) with Shengbao Group, and South African Shengbao Mining
Enterprises (together referred to as Shengbao), pursuant to which DLX
purchased the prospecting and mining rights of a cobalt ore mine that is owned by Shengbao
in the Congo area, Africa. The parties agreed that the purchase price would be
US$2,000,000 and that DLX would give Shengbao 20% of its monthly ore production each month
for the payment of the purchase price. Pursuant to the Purchase Agreement, Shengbao will
provide DLX a mine of approximately 35 sq. km in the Congo area to prospect and mine. DLX
would provide the necessary funding, equipment and engineering staff for the mining and
would produce no less than twenty (20) tons of ore per day. With regard to the product
ownership, DLX would own eighty percent (80%) of the mining products, and Shengbao would
own twenty percent (20%). Shengbao agreed to bear the risk of losing part or all of the
US$2,000,000 if the mining production fails.

On
August 24, 2007, DLX was reincorporated from North Carolina to Delaware and
          changed its name to China Sun Group High-Tech Co. The par value of common stock
          of China Sun Group High-Tech Co. is $0.001 per share.

Operating lease commitment

We
lease an office premise under a non-cancelable operating lease. Costs incurred
under this operating lease are recorded as rental expense and totaled approximately $6,369
and $6,152 for the years ended May 31, 2007 and 2006.

-18-



---

Future
minimum rental payments due under a non-cancelable operating lease are as follows:

|                     | 
|-------------------- | 
|                     | 
|Years ending May 31: | 
|2008                 | 
|                     | 
|2009                 | 
|                     | 
|                     | 
|Total:               | 
|                     | 

# Item 7. Financial
Statements.

Our financial
statements for the year ended May 31, 2007 are attached hereto, beginning on the next
page.

-19-



---

# China Sun Group
High-Tech Co.

# (Formerly Capital
Resource Funding, Inc.)

# CONSOLIDATED FINANCIAL
STATEMENTS

# As of May 31, 2007 and
2006 and

# For the Years Ended
May 31, 2007 and 2006

# Table of Contents

|                                                                      | 
|--------------------------------------------------------------------- | 
|                                                                      | 
|Report of Independent Registered Public Accounting Firm               | 
|                                                                      | 
|Consolidated Balance Sheets                                           | 
|                                                                      | 
|Consolidated Statements of Operations And Comprehensive Income (Loss) | 
|                                                                      | 
|Consolidated Statements of Cash Flows                                 | 
|                                                                      | 
|Consolidated Statements of Stockholders' Equity                       | 
|                                                                      | 
|Notes to Consolidated Financial Statements                            | 

F-1



---

# REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

The Board of Directors
and Stockholders of

# China Sun Group
High-Tech Co. (Formerly Capital
Resource Funding, Inc.)

We
have audited the accompanying consolidated balance sheets of China Sun Group High-Tech Co.
(Formerly Capital Resource Funding, Inc.) and Subsidiary (the Company) as of
May 31, 2007 and 2006 and the related consolidated statements of operations and
comprehensive income (loss), cash flows and stockholders equity for the years ended
May 31, 2007 and 2006. The financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits include
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of May 31, 2007 and 2006
and the results of operations and cash flows for the years ended May 31, 2007 and 2006 and
in conformity with accounting principles generally accepted in the United States of
America.

/s/Zhong Yi (Hong Kong) C.P.A. Company Limited 
Zhong Yi (Hong Kong) C.P.A. Company Limited 
Certified Public Accountants

\
Hong Kong, China 
August 29, 2007

F-2



---

# CHINA SUN GROUP
HIGH-TECH CO.
(Formerly Capital Resource Funding, Inc.) CONSOLIDATED BALANCE SHEETSAS OF MAY 31, 2007 AND 2006 
(Currency expressed in United States Dollars (US$), except for number of shares)

|                                                                                      | As of May 31,
|------------------------------------------------------------------------------------- | -------------
|
|ASSETS                                                                                |              
|Current assets:                                                                       |              
|Cash and cash equivalents                                                             |              
|Accounts receivable, net                                                              |              
|Inventories                                                                           |              
|Amount due from a related party                                                       |              
|Prepaid expenses and other current assets                                             |              
|                                                                                      |              
|Total current assets                                                                  |              
|                                                                                      |              
|Property, plant and equipment, net                                                    |              
|                                                                                      |              
|TOTAL ASSETS                                                                          |              
|                                                                                      |              
|                                                                                      |              
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                  |              
|Current liabilities:                                                                  |              
|Accounts payable, trade                                                               |              
|Customer deposits                                                                     |              
|Value-added tax payable                                                               |              
|Income tax payable                                                                    |              
|Other payables and accrued liabilities                                                |              
|                                                                                      |              
|Total liabilities                                                                     |              
|                                                                                      |              
|Minority interest                                                                     |              
|                                                                                      |              
|Stockholders' equity:                                                                 |              
|Convertible preferred stock; $0.00000005 par value; 2,000,000 shares authorized; none |              
|of shares issued and outstanding                                                      |              
|Common stock, $0.00000005 par value; 100,000,000 shares authorized; 43,422,971        |              
|shares and 42,422,971 shares issued and outstanding as of May 31, 2007 and 2006       |              
|Additional paid-in capital                                                            |              
|Accumulated other comprehensive income                                                |              
|Accumulated deficit                                                                   |              
|                                                                                      |              
|                                                                                      |              
|Total stockholders' equity                                                            |              
|                                                                                      |              
|                                                                                      |              
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                            |              
|                                                                                      |              

See accompanying notes
to consolidated financial statements.

F-3



---

# CHINA SUN GROUP
HIGH-TECH CO. 
(Formerly Capital Resource Funding, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 
FOR THE YEARS ENDED MAY 31, 2007 AND 2006
(Currency expressed in United States Dollars (US$), except for number of shares)

|                                                                                  | Years ended May 31,
|--------------------------------------------------------------------------------- | -------------------
|
|                                                                                  |                    
|                                                                                  |                    
|REVENUES, NET                                                                     |                    
|                                                                                  |                    
|Cost of revenue - third parties                                                   |                    
|Cost of revenue - a related party                                                 |                    
|Total cost of revenue                                                             |                    
|                                                                                  |                    
|                                                                                  |                    
|GROSS PROFIT                                                                      |                    
|                                                                                  |                    
|Operating expenses:                                                               |                    
|Stock-based compensation                                                          |                    
|Research and development                                                          |                    
|Depreciation                                                                      |                    
|General and administrative                                                        |                    
|                                                                                  |                    
|                                                                                  |                    
|Total operating expenses                                                          |                    
|                                                                                  |                    
|                                                                                  |                    
|INCOME (LOSS) FROM OPERATIONS                                                     |                    
|                                                                                  |                    
|                                                                                  |                    
|Income tax expenses                                                               |                    
|                                                                                  |                    
|                                                                                  |                    
|INCOME (LOSS) BEFORE MINORITY INTEREST                                            |                    
|                                                                                  |                    
|Minority interest                                                                 |                    
|                                                                                  |                    
|                                                                                  |                    
|NET INCOME (LOSS)                                                                 |                    
|                                                                                  |                    
|                                                                                  |                    
|Other comprehensive income:                                                       |                    
|- Foreign currency translation gain                                               |                    
|                                                                                  |                    
|                                                                                  |                    
|COMPREHENSIVE INCOME (LOSS)                                                       |                    
|                                                                                  |                    
|                                                                                  |                    
|Net income (loss) per share - Basic and diluted                                   |                    
|                                                                                  |                    
|                                                                                  |                    
|Weighted average number of shares outstanding during the year - Basic and diluted |                    
|                                                                                  |                    

See accompanying notes
to consolidated financial statements.

F-4



---

# CHINA SUN GROUP
HIGH-TECH CO. 
(Formerly Capital Resource Funding, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED MAY 31, 2007 AND 2006 
(Currency expressed in United States Dollars (US$))

|                                                                                     | Years ended May 31,
|------------------------------------------------------------------------------------ | -------------------
|
|                                                                                     |                    
|Cash flows from operating activities:                                                |                    
|Net income (loss)                                                                    |                    
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |                    
|Minority interest                                                                    |                    
|Depreciation                                                                         |                    
|Stock-based compensation                                                             |                    
|Allowance for doubtful accounts                                                      |                    
|Change in operating assets and liabilities:                                          |                    
|Accounts receivable, trade                                                           |                    
|Inventories                                                                          |                    
|Prepaid expenses and other current assets                                            |                    
|Accounts payable, trade                                                              |                    
|Customer deposits                                                                    |                    
|Value-added tax payable                                                              |                    
|Income tax payable                                                                   |                    
|Other payables and accrued liabilities                                               |                    
|                                                                                     |                    
|Net cash used in operating activities                                                |                    
|                                                                                     |                    
|                                                                                     |                    
|Cash flows from investing activities:                                                |                    
|Purchase of plant and equipment                                                      |                    
|                                                                                     |                    
|Net cash used in investing activities                                                |                    
|                                                                                     |                    
|                                                                                     |                    
|Cash flows from financing activities:                                                |                    
|Repayment of advances from a related party                                           |                    
|Advances from a related party                                                        |                    
|Advances from shareholders                                                           |                    
|                                                                                     |                    
|Net cash provided by financing activities                                            |                    
|                                                                                     |                    
|                                                                                     |                    
|Foreign currency translation adjustment                                              |                    
|                                                                                     |                    
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                              |                    
|                                                                                     |                    
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                         |                    
|                                                                                     |                    
|                                                                                     |                    
|CASH AND CASH EQUIVALENTS, END OF YEAR                                               |                    
|                                                                                     |                    
|                                                                                     |                    
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                    |                    
|Cash paid for income taxes                                                           |                    
|Cash paid for interest expenses                                                      |                    
|                                                                                     |                    

See
accompanying notes to consolidated financial statements.

F-5



---

# CHINA SUN GROUP
HIGH-TECH CO. 
(Formerly Capital Resource Funding, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY FOR THE YEARS ENDED MAY 31, 2007 AND 2006
(Currency expressed in United States Dollars (US$), except for number of shares)

|                                              | Convertible
preferred stock |  | Common stock |  
|--------------------------------------------- | --------------------------- |  | ------------ | -
|
|Balance as of June 1, 2005 (restated)         |                             |  |              | -
|                                              |                             | 
|Net loss for the year                         |                             |  |              | -
|                                              |                             | 
|Foreign currency translation adjustment       |                             |  |              | -
|                                              |                             |  |              |  
|                                              |                             | 
|Balance as of May 31, 2006                    |                             |  |              | -
|                                              |                             | 
|Shares issued to complete reverse acquisition |                             |  |              | -
|                                              |                             | 
|Issuance of common stock for services         |                             |  |              | -
|                                              |                             | 
|Net income for the year                       |                             |  |              | -
|                                              |                             | 
|Foreign currency translation adjustment       |                             |  |              | -
|                                              |                             |  |              |  
|                                              |                             | 
|Balance as of May 31, 2007                    |                             |  |              | -
|                                              |                             |  |              |  

See accompanying notes
to consolidated financial statements.

F-6



---

|1. |  | ORGANIZATION
AND BUSINESS BACKGROUND
|-- |  | ------------------------------------

Capital Resource Funding, Inc. (the
Company or CRFU) was organized under the laws of the State of
North Carolina on February 2, 2004 as a subchapter S-Corporation. CRFU is a holding
company whose primary business operations are conducted by through its sole operating
subsidiary, in the provision of consultative service to small to mid-sized businesses in
need of financing source ranging from SBA loans, commercial mortgages, factoring and
asset based loans.

On September 6, 2006, CRFU entered a
stock exchange transaction with Da Lian Xin Yang High-Tech Development Co., Ltd (Sun
Group) and the transaction was effectively completed on February 28, 2007. Sun
Group was incorporated as a limited liability company in the Peoples Republic of
China (PRC) on August 8, 2000 with its principal place of business in Da Lian
City, Liaoning Province, the PRC. Sun Group is principally engaged in the production and
sales of cobaltosic oxide and lithium cobalt oxide, both anode materials used in lithium
ion rechargeable batteries.

The stock exchange transaction
involved the following simultaneous transactions:

|1) | CRFU issued to Sun Groups owners an amount equal to 30,000,000 new shares
          of common stock of CRFU pursuant to Regulation S under the Securities Act of
          1933, as amended, in exchange for 70% interest of Sun Group; and
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2) | the majority shareholder of CRFU delivered the 9,500,000 shares of common stock
          to Sun Groups owners in exchange for total payments of $600,000 in cash,
          less related expenses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Also in connection with this stock
exchange transaction, CRFU and Sun Group agreed that:

|1. | CRFU granted to Sun Groups 30%-controlling owners a two (2) years option
          for the subscription and purchase of the additional 10,000,000 new shares of
          common stock of CRFU in exchange for RMB 38,100,000, equivalent to 30% of the
          registered capital of Sun Group; and
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | CRFU
would settle all of its material liabilities as defined by U.S. Generally
          Accepted Accounting Principles; and
|-- | ----------------------------------------------------------------------------------------------------------------------------

|3. | The
existing directors would resign from the           positions of director and officer of
CRFU and a nominee of Sun Group would be           appointed to the Board of Directors of
CRFU to fill the vacancy.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Upon completion of the exchange, Sun
Group became a wholly-owned subsidiary of CRFU and the former owners of Sun Group then
owned 93% of the issued and outstanding shares of the Company.

On September 29, 2006, CRFU
appointed Mr. Wang, Bin as President and Chief Executive Officer, Ms. Feng, Gui Mei as
Vice President and Director, Ms. Liu, Ming Fen as Chief Financial Officer. Furthermore,
all of the Companys former officers resigned from their positions.

On October 30, 2006, CRFU accepted
the resignation of Ms. Feng, Gui Mei as Vice President and Director and appointed Mr.
Wang, Yu Long as Vice President of the Company, effective as of October 30, 2006.

The stock exchange transaction has
been accounted for as a reverse acquisition and recapitalization of the CRFU whereby Sun
Group is deemed to be the accounting acquirer (legal acquiree) and CRFU to be the
accounting acquiree (legal acquirer). The accompanying consolidated financial statements
are in substance those of Sun Group, with the assets and liabilities, and revenues and
expenses, of CRFU being included effective from the date of stock exchange transaction.
CRFU is deemed to be a continuation of the business of Sun Group. Accordingly, the
accompanying consolidated financial statements include the following:

|(1) | the balance sheet consists of the net assets of the accounting acquirer at
          historical cost and the net assets of the accounting acquiree at historical
          cost; and
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-7



---

|(2) | the financial position, results of operations, and cash flows of the acquirer
          for all periods presented as if the recapitalization had occurred at the
          beginning of the earliest period presented and the operations of the accounting
          acquiree from the date of stock exchange transaction.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CRFU and Sun Group are hereinafter
referred to as (the Company).

On August 24, 2007, the Company
changed its name to China Sun Group High-Tech Co.

|2. |  | SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------

| |  | Basis
of presentation
|- |  | ---------------------

These accompanying consolidated
financial statements have been prepared in accordance with generally accepted accounting
principles in the United States of America.

| |  | Use
of estimates
|- |  | ----------------

In preparing these consolidated
financial statements, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities in the balance sheets and revenues and expenses during
the years reported. Actual results may differ from these estimates.

| |  | Basis
of consolidation
|- |  | ----------------------

The consolidated financial
statements include the financial statements of the Company and its subsidiary, Sun Group.

All significant inter-company
balances and transactions within the Company and subsidiary have been eliminated upon
consolidation.

| |  | Revenue
recognition
|- |  | -------------------

Revenue is recognized when products
are delivered to customers. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same period the
related sales are recorded. In instances where products are configured to customer
requirements, revenue is recorded upon the successful completion of the Companys
final test procedures and the customers acceptance.

The Company is subject to
valued-added tax (VAT) which is levied on the majority of the products of Sun
Group at the rate of 17% on the invoiced value of sales. Output VAT is borne by customers
in addition to the invoiced value of sales and input VAT is borne by the Company in
addition to the invoiced value of purchases to the extent not refunded for export sales.

Starting April 1, 2006, the Company
commenced the production and sales of cobaltosic oxide in the PRC.

| |  | Cost
of revenue
|- |  | ---------------

Cost of revenue primarily includes
the purchase of raw materials, direct labor and manufacturing overhead.

| |  | Shipping
and handling costs
|- |  | ---------------------------

Shipping and handling costs,
associated with the distribution of products to customers, are recorded in costs of
revenue and are recognized when the related product is shipped to the customer. The
company incurred $7,857 and $Nil for the years ended May 31, 2007 and 2006, respectively.

F-8



---

| |  | Research
and development costs
|- |  | ------------------------------

Research and development costs
mainly related to labor cost incurred in the development of new products and
manufacturing methods and are charged to expense as incurred. The Company incurred
$89,166 and $83,000 for the years ended May 31, 2007 and 2006, respectively.

| |  | Advertising
cost
|- |  | ----------------

The Company expenses advertising
costs as incurred in accordance with SOP 93-7 Reporting for Advertising Costs. Advertising
expenses of $720 and $Nil were incurred for the years ended May 31, 2007 and 2006,
respectively.

| |  | Cash
and cash equivalents
|- |  | -------------------------

Cash and cash equivalents are
carried at cost and represent cash on hand, demand deposits placed with banks or other
financial institutions and all highly liquid investments with an original maturity of
three months or less as of the purchase date of such investments.

| |  | Accounts
receivable
|- |  | -------------------

Accounts receivable are recorded at
the invoiced amount and do not bear interest. The Company extends unsecured credit to its
customers in the ordinary course of business but mitigates the associated risks by
performing credit checks and actively pursuing past due accounts. An allowance for
doubtful accounts is established and determined based on managements assessment of
known requirements, aging of receivables, payment history, the customers current
credit worthiness and the economic environment. As of May 31, 2007, an allowance for
doubtful accounts of $777,831 was provided.

| |  | Property,
plant and equipment, net
|- |  | ----------------------------------

Property, plant and equipment are
stated at cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciation is calculated on the straight-line basis over the following expected useful
lives from the date on which they become fully operational and after taking into account
their estimated residual values:

|                    | Depreciable life |            | Residual value |   
|------------------- | ---------------- | ---------- | -------------- | --
|Building            |                  | 40 years   |                | 5%
|Plant and machinery |                  | 5-40 years |                | 5%
|Office equipment    |                  | 5 years    |                | 5%
|Motor vehicle       |                  | 5 years    |                | 5%

Expenditure for maintenance and
repairs is expensed as incurred.

| |  | Valuation
of long-lived assets
|- |  | ------------------------------

Long-lived assets primarily include
property and equipment. In accordance with SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, the Company periodically
reviews long-lived assets for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable or that the useful lives are no longer appropriate. Each impairment test is
based on a comparison of the undiscounted cash flows to the recorded value of the asset.
If an impairment is indicated, the asset is written down to its estimated fair value
based on a discounted cash flow analysis. Determining the fair value of long-lived assets
includes significant judgment by management, and different judgments could yield
different results. There has been no impairment as of May 31, 2007.

F-9



---

| |  | Comprehensive
income (loss)
|- |  | ---------------------------

SFAS No. 130, Reporting
Comprehensive Income, establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive income as
defined includes all changes in equity during a period from non-owner sources.
Accumulated comprehensive income, as presented in the accompanying consolidated
statements of stockholders equity consists of changes in unrealized gains and
losses on foreign currency translation. This comprehensive income is not included in the
computation of income tax expense or benefit.

| |  | Income
taxes
|- |  | ------------

The Company accounts for income tax
using SFAS No. 109Accounting for Income Taxes, which requires the
asset and liability approach for financial accounting and reporting for income taxes.
Under this approach, deferred income taxes are provided for the estimated future tax
effects attributable to temporary differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases, and for the expected
future tax benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years of
recovery or reversal and the effect from a change in tax rates is recognized in the
consolidated statement of operations and comprehensive income in the period of enactment.
A valuation allowance is provided to reduce the amount of deferred tax assets if it is
considered more likely than not that some portion of, or all of the deferred tax assets
will not be realized.

| |  | Net
income (loss) per share
|- |  | ---------------------------

The Company calculates net
income (loss) per share in accordance with SFAS No. 128,Earnings perShare.
Basic income (loss) per share is computed by dividing the net income (loss) by the
weighted-average number of common shares outstanding during the year. Diluted income
(loss) per share is computed similar to basic income (loss) per share except that the
denominator is increased to include the number of additional common shares that would
have been outstanding if the potential common stock equivalents had been issued and if
the additional common shares were dilutive.

| |  | Foreign
currencies translation
|- |  | ------------------------------

The reporting currency of the
Company is the United States dollar (U.S. dollars). Transactions denominated
in currencies other than U.S. dollar are calculated at the average rate for the period.
Monetary assets and liabilities denominated in currencies other than U.S. dollar are
translated into U.S. dollar at the rates of exchange ruling at the balance sheet date.
The resulting exchange differences are recorded in the other expenses in the consolidated
statement of operations and comprehensive income.

The Companys subsidiary, Sun
Group maintains its books and records in its local currency, the Renminbi Yuan (RMB),
which is functional currency as being the primary currency of the economic environment in
which its operations are conducted. In general, for consolidation purposes, the Company
translates the subsidiarys assets and liabilities into U.S. dollars using the
applicable exchange rates prevailing at the balance sheet date, and the statement of
operations is translated at average exchange rates during the reporting period.
Adjustments resulting from the translation of the subsidiarys financial statements
are recorded as accumulated other comprehensive income.

| |  | Stock-based
compensation
|- |  | ------------------------

The Company adopts SFAS No. 123R,Accounting
for Stock-Based Compensationusing the fair value method. Under SFAS No. 123R,
stock-based compensation expense is measured at the grant date based on the value of the
option or restricted stock and is
recognized as expense, less expected forfeitures, over the requisite service period, which
is generally the vesting period.

F-10



---

| |  | Retirement
plan costs
|- |  | ---------------------

Contributions to retirement schemes
(which are defined contribution plans) are charged to general and administrative expenses
in the consolidated statements of operation and comprehensive income (loss) as and when
the related employee service is provided.

| |  | Related
parties
|- |  | ---------------

Parties, which can be a corporation
or individual, are considered to be related if the Company has the ability, directly or
indirectly, to control the other party or exercise significant influence over the other
party in making financial and operating decisions. Companies are also considered to be
related if they are subject to common control or common significant influence.

| |  | Segment
reporting
|- |  | -----------------

SFAS No. 131 Disclosures
about Segments of an Enterprise and Related Information establishes standards
for reporting information about operating segments on a basis consistent with the Companys
internal organization structure as well as information about geographical areas, business
segments and major customers in the financial statements. The Company operates in one
reportable segment in the PRC.

| |  | Fair
value of financial instruments
|- |  | -----------------------------------

The Company values its financial
instruments as required by Statement of Financial Accounting Standard (SFAS) No. 107, Disclosures
about Fair Value of Financial Instruments. The estimated fair value amounts
have been determined by the Company, using available market information and appropriate
valuation methodologies. The estimates presented herein are not necessarily indicative of
amounts that the Company could realize in a current market exchange.

The Companys financial
instruments primarily consist of cash and cash equivalents, accounts receivable, accounts
payable, customer deposits, income tax payable, value-added tax payable, other payables
and accrued liabilities.

As of the balance sheet dates, the
estimated fair values of the financial instruments were not materially different from
their carrying values as presented due to the short term maturities of these instruments
and that the interest rates on the borrowings approximate those that would have been
available for loans of similar remaining maturity and risk profile at respective year
ends.

| |  | Recently
issued accounting standards
|- |  | ------------------------------------

In February 2006, the FASB issued
SFAS No. 155, Accounting for Certain Hybrid Instruments-an amendment of FASB
Statements 133 and 140", which is effective for all financial instruments
acquired or issued after the beginning of an entitys first fiscal year that begins
after September 15, 2006. The statement improves financial reporting by eliminating the
exemption from applying SFAS No. 133 to interests in securitized financial assets so that
similar instruments are accounted for similarly regardless of the form of the
instruments. The Statement also improves financial reporting by allowing a preparer to
elect fair value measurement at acquisition, at issuance, or when a previously recognized
have to bifurcated, if the holder elects to account for the whole
instrument-by-instrument basis, in cases in which a derivative would otherwise have to
bifurcated, if the holder elects to account for the whole instrument on a fair value
basis. The Company does not expect that the adoption of this statement would have a
material effect on the Companys financial position or results of operations.

In May 2006, the FASB issued SFAS
No. 154,Accounting Changes and Error Corrections (SFAS 154),
which replaces Accounting Principles Board Opinions No. 20, Accounting Changesand
SFAS No. 3, Reporting Accounting changes in Interim Financial StatementsAn
Amendment of APB Opinion No. 28". SFAS 154 provides guidance on the accounting
for and reporting of accounting changes. It establishes retrospective application, or the
latest practicable date, as the required method for reporting a change in accounting
principle and the reporting of a correction of an error. SFAS 154 is effective for
accounting changes and corrections of errors made in fiscal years

F-11



---

beginning after December 15, 2006.
The adoption of this statement did not have a material effect on the Companys
financial position or results of operations.

In June 2006, the FASB issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109(FIN 48). This pronouncement
prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax
return. FIN 48 is effective for fiscal years beginning after December 15, 2006. The
Company does not expect that the adoption of this statement would have a material effect
on the Companys financial position or results of operations.

In June 2006, the FASB ratified the
consensus reached on Emerging Issues Task Force (EITF) Issue No. 06-03, How
Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statement (that is, Gross Versus Net Presentation) (EITF
06-03). The EITF reached a consensus that the presentation of taxes on either a gross or
net basis is an accounting policy decision that requires disclosure. EITF 06-03 is
effective for our fiscal year beginning June 3, 2007. Sales tax amounts collected
from customers have been recorded on a net basis. The adoption of EITF 06-03 will not
have any effect on our financial position or results of operations.

In September 2006, the FASBs
Emerging Issues Task Force (EITF) reached a final consensus on Issue 04-13,
Accounting for Purchases and Sales of Inventory with the Same Counterparty (EITF
04-13). EITF 04-13 requires that two or more legally separate exchange transactions
with the same counterparty be combined and considered a single arrangement for purposes
of applying APB Opinion No. 29, Accounting for Nonmonetary Transactions,
when the transactions are entered into in contemplation of one another. EITF 04-13 is
effective for new arrangements entered into, or modifications or renewals of existing
arrangements, in interim or annual periods beginning after March 15, 2006. The Company
does not expect that the adoption of this statement would have a material effect on the
Companys financial position or results of operations.

In July 2006, the FASB issued FIN
48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB
Statement No. 109", which clarifies the accounting for uncertainty in tax
positions. This Interpretation requires that the Company recognizes in its consolidated
financial statements the impact of a tax position if that position is more likely than
not of being sustained on audit, based on the technical merits of the position. The
provisions of FIN 48 are effective for the Company on January 1, 2007, with the
cumulative effect of the change in accounting principle, if any, recorded as an
adjustment to opening retained earnings. The Company does not expect that the adoption of
this statement would have a material effect on the Companys financial position or
results of operations.

In September 2006, the SEC released
SAB No. 108,Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements (SAB 108).
SAB 108 provides interpretive guidance on the SECs views on how the effects of the
carryover or reversal of prior year misstatements should be considered in quantifying a
current year misstatement. The provision of SAB 108 is effective for the Company in the
current fiscal year ended December 31, 2006. The Company is currently evaluating the
impact of SAB 108 but does not believe that the application of SAB 108 would have a
material effect on its financial position, cash flows nor results of operations.

In September 2006, the FASB issued
SFAS No.157, Fair Value Measurements(SFAS 157), which
defines fair value, establishes guidelines for measuring fair value and expands
disclosures regarding fair value measurements. SFAS 157 does not require any new fair
value measurements but rather eliminates inconsistencies in guidance found in various
prior accounting pronouncements. SFAS 157 will be effective for the Company starting
January 1, 2008. Earlier adoption is permitted, provided the company has not yet issued
financial statements, including for interim periods, for that fiscal year. The Company is
currently evaluating the impact of SFAS 157 on its consolidated financial position, cash
flows and results of operations.

In February 2007, the FASB issued
SFAS No. 159 The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159), which permits entities to choose to measure many
financial assets and financial liabilities at fair value. Unrealized gains and losses on
items for which the fair value option has been elected are reported in earnings. SFAS 159
is effective for fiscal years beginning after November 15, 2007. The Company has not
yet

F-12



---

determined the impact that the
elective adoption of SFAS 159 may have on our results of operations or financial
position.

|3. |  | ACCOUNTS
RECEIVABLE, NET
|-- |  | ------------------------

The majority of the Companys
sales are on credit terms and in accordance with terms specified in the contracts
governing the relevant transactions. The Company evaluates the need of an allowance for
doubtful accounts based on specifically identified amounts that management believes to be
uncollectible. If actual collections experience changes, revisions to the allowance may
be required. Based upon the aforementioned criteria, the allowance for doubtful accounts
of $777,831 is provided for the year ended May 31, 2007.

|                                      | As of May 31,
|------------------------------------- | -------------
|
|
|                                      |              
|Accounts receivable, gross            |              
|                                      |              
|Less: allowance for doubtful accounts |              
|                                      |              
|                                      |              
|Accounts receivable, net              |              
|                                      |              

In July 2007, approximately
$1,610,681 (equivalent to RMB12,275,000) of the balance as of May 31, 2007 was
subsequently settled with the Company.

|4. |  | INVENTORIES
|-- |  | -----------

Inventories consisted of the
following:

|                   | As of May 31,
|------------------ | -------------
|
|
|                   |              
|Raw material       |              
|                   |              
|Packaging material |              
|                   |              
|                   |              
|                   |              

|5. |  | AMOUNT
DUE FROM A RELATED PARTY
|-- |  | -------------------------------

As of May 31, 2006, the amount due
from a related party was comprised of temporary advances made to Sun Group High
Technology Development Co., Ltd, a former owner of Sun Group. The balance was unsecured,
and non-interest bearing and was repayable within 12 months.

|6. |  | PROPERTY,
PLANT AND EQUIPMENT, NET
|-- |  | ----------------------------------

Property, plant and equipment, net
consisted of:

|                    | As of May 31,
|------------------- | -------------
|
|
|                    |              
|Building            |              
|                    |              
|Plant and machinery |              
|                    |              
|Office equipment    |              
|                    |              
|Motor vehicle       |              
|                    |              

F-13



---

|                                   | As of May 31,
|---------------------------------- | -------------
|
|
|                                   |              
|                                   |              
|Less: accumulated depreciation     |              
|                                   |              
|Property, plant and equipment, net |              
|                                   |              

Depreciation expense for the years
ended May 31, 2007 and 2006 was $365,346 and $233,366, respectively.

|7. |  | OTHER
PAYABLES AND ACCRUED LIABILITIES
|-- |  | --------------------------------------

Other payables and accrued
liabilities consisted of the followings:

|                        | As of May 31,
|----------------------- | -------------
|
|
|                        |              
|Welfare payable         |              
|                        |              
|Government levy payable |              
|                        |              
|Utility fee payable     |              
|                        |              
|Rental payable          |              
|                        |              
|                        |              
|                        |              

|8. |  | MINORITY
INTEREST
|-- |  | -----------------

In connection with the stock
exchange transaction as fully described in Note 1, the Company granted to Sun Groups
30%-controlling owners of the two (2) years option for the subscription and purchase of
the additional 10,000,000 new shares of common stock of CRFU in exchange for RMB
38,100,000, equivalent to 30% of the registered capital of Sun Group.

Proforma financial
information

The following summarized pro forma
results of operations for the years ended May 31, 2007 and 2006, assume that the stock
exchange transaction of 30% of the registered capital of Sun Group in exchange for the
additional 10,000,000 new shares of common stock of CRFU occurred as of June 1, 2005.
These pro forma results have been prepared for comparative purposes only and do not
purport to be indications of the result of operations which actually would have resulted
had the significant stock exchange occurred as of June 1, 2005.

|                                                                 | Years ended May 31,
|---------------------------------------------------------------- | -------------------
|
|
|                                                                 |                    
|Net income (loss) attributable to holders of common stock        |                    
|                                                                 |                    
|Weighted average ordinary shares outstanding - basic and diluted |                    
|                                                                 |                    
|Net income (loss) per share - basic and diluted                  |                    
|                                                                 |                    

F-14



---

|9. |  | INCOME
TAXES
|-- |  | ------------

The
Company is registered in the United States of America and has operations in two tax
jurisdictions: the United States of America and the PRC. The operation in the United
States of America has incurred net operating losses for income tax purposes. The Company
generated substantially its net income from its PRC operation through Sun Group, a
subsidiary in the PRC and has recorded an income tax provision for the year ended May 31,
2007.

The components of loss before income
taxes and minority interest separating U.S. and PRC operations are as follows:

|                                                        | Years ended May 31,
|------------------------------------------------------- | -------------------
|
|
|                                                        |                    
|Loss subject to U.S. operation                          |                    
|                                                        |                    
|Income (loss) subject to PRC operation                  |                    
|                                                        |                    
|                                                        |                    
|Income (loss) before income taxes and minority interest |                    
|                                                        |                    

United States of America

The Company is registered in the
State of North Carolina and is subjected to United States of America tax law.

As
of May 31, 2007, the U.S. operation incurred $530,913 of net operating losses available
for federal tax purposes, which are available to offset future taxable income. The net
operating loss carry forwards begin to expire in 2027. The Company has provided for a full
valuation allowance for any future tax benefits from the net operating loss carryforwards
as the management believes it is more likely than not that these assets will not be
realized in the future.

The PRC

The Companys PRC subsidiary,
Sun Group is subjected to the Enterprise Income Tax governed by the Income Tax Law of the
Peoples Republic of China, at a statutory rate of 33%, which comprises 30% national
income tax and 3% local income tax.

The reconciliation of income tax
rate to the effective income tax rate based on income (loss) before income taxes and
minority interest of PRC operation for the years ended
May 31, 2007 and 2006 are as follows:

|                                                                    | Years ended May 31,
|------------------------------------------------------------------- | -------------------
|
|
|                                                                    |                    
|Income (loss) before income taxes and minority interest             |                    
|                                                                    |                    
|Income tax rate                                                     |                    
|                                                                    |                    
|                                                                    |                    
|                                                                    |                    
|                                                                    |                    
|Add: items not deductible to taxes- Allowance for doubtful accounts |                    
|                                                                    |                    
|- Pre-operating expenses                                            |                    
|                                                                    |                    
|                                                                    |                    
|Income tax expenses                                                 |                    
|                                                                    |                    

F-15



---

The following table sets forth the
significant components of the aggregate net deferred tax assets of the Company as of May
31, 2007 and 2006:

|                                   | As of May 31,
|---------------------------------- | -------------
|
|
|Deferred tax assets:               |              
|- Net operating loss carryforwards |              
|                                   |              
|Less: valuation allowance          |              
|                                   |              
|                                   |              
|Deferred tax assets                |              
|                                   |              

As of May 31, 2007 and 2006,
valuation allowance of $175,201 and $113,504 was provided to the deferred tax assets due
to the uncertainty surrounding their realization.

|10. |  | NET
INCOME (LOSS) PER SHARE
|--- |  | ---------------------------

Basic net income (loss) per share is
computed using the weighted average number of the ordinary shares outstanding during the
year. Diluted net income (loss) per share is computed using the weighted average number
of ordinary shares and ordinary share equivalents outstanding during the year. Pursuant
to stock exchange transaction on December 11, 2006, the weighted average number of common
shares issued and outstanding was adjusted to account for the effects of the stock
exchange transaction as a reverse acquisition as more fully described in Note 1.

The following table sets forth the
computation of basic and diluted net income (loss) per share for the years ended May 31,
2007 and 2006:

|                                                            | Years ended May 31,
|----------------------------------------------------------- | -------------------
|
|
|                                                            |                    
|Basis and diluted net income (loss) per share calculation   |                    
|Numerator:                                                  |                    
|- Net income (loss) in computing basic net income per share |                    
|                                                            |                    
|                                                            |                    
|Denominator:                                                |                    
|- Weighted average ordinary shares outstanding              |                    
|                                                            |                    
|                                                            |                    
|Basic and diluted net income (loss) per share               |                    
|                                                            |                    

|11. |  | CAPITAL
TRANSACTIONS
|--- |  | --------------------

|1) |  | On
February 28, 2007, the Company completed a stock exchange transaction with           the
equity owners of Sun Group. 30,000,000 shares of common stock were issued in
          exchange for 70% interest in Sun Group and 9,500,000 shares of common stock
were           transferred from the former shareholder to a Sun Group owner, representing
93%           of CRFUs outstanding common stock.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2) |  | As
a result, the number of outstanding shares of the Companys common stock
          was 42,422,971.
|-- |  | -----------------------------------------------------------------------------------------------------

|12. |  | STOCK-BASED
COMPENSATION
|--- |  | ------------------------

On January 31, 2007, the Company
issued 1,000,000 restricted shares of common stock for business advisory services to
Greentree Financial Group, Inc. The fair value of this restricted stock issuance was
determined using the fair value of the Companys common stock on the grant date, at
a price of $0.45 per share. The Company recognized a stock-based compensation of $450,000
for the year ended May 31, 2007.

F-16



---

|13. |  | RELATED
PARTY TRANSACTION
|--- |  | -------------------------

For the year ended May 31, 2006, the
Company purchased raw material for an amount of $259,013 from its former owner, Sun Group
High-Tech Ltd at its current market price. There was no such transaction for the year
ended May 31, 2007.

|14. |  | CHINA
CONTRIBUTION PLAN
|--- |  | -----------------------

Under the PRC Law, full-time
employees of Sun Group, a subsidiary in the PRC are entitled to staff welfare benefits
including medical care, welfare subsidies, unemployment insurance and pension benefits
through a China government-mandated multi-employer defined contribution plan. The Companys
subsidiary in the PRC is required to accrue for these benefits based on certain
percentages of the employees salaries. The total contributions made for such
employee benefits were $90,696 and $70,258 for the years ended May 31, 2007 and 2006,
respectively.

|15. |  | CONCENTRATION
AND RISK
|--- |  | ----------------------

|(a) |  | Major
customers and vendors
|--- |  | ---------------------------

100% of the Companys assets
were located in the PRC and 100% of the Companys revenues were generated from
customers located in the PRC.

For the year ended May 31, 2007, the
customer and vendor who accounted for 10% or more of revenues and purchases of the
Company are presented as follows:

|           | Year ended May 31, 2007
|---------- | -----------------------
|
|Customer A |                        
|           |                        
|           |                        
|
|
|Vendor A   |                        
|           |                        
|           |                        

For the year ended May 31, 2006, the
customer and vendor who accounted for 10% or more of revenues and purchases of the
Company are presented as follows:

|           | Year ended May 31, 2006
|---------- | -----------------------
|
|Customer A |                        
|           |                        
|           |                        
|
|
|Vendor A   |                        
|           |                        
|           |                        

F-17



---

|(b) |  | Credit
risk
|--- |  | -----------

Financial instruments that
potentially subject the Company to significant concentrations of credit risk consist
principally of cash and trade accounts receivable. The Company performs ongoing credit
evaluations of its customers financial condition, but does not require collateral
to support such receivables.

|16. |  | COMMITMENT
AND CONTINGENCIES
|--- |  | ----------------------------

|(a) |  | Operating
lease commitment
|--- |  | --------------------------

The
Company leases an office premise under a non-cancelable operating lease. Costs incurred
under this operating lease are recorded as rental expense and totaled approximately $6,369
and $6,152 for the years ended May 31, 2007 and 2006.

Future
minimum rental payments due under a non-cancelable operating lease are as follows:

|                     | 
|-------------------- | 
|                     | 
|Years ending May 31: | 
|2008                 | 
|                     | 
|2009                 | 
|                     | 
|                     | 
|Total:               | 
|                     | 

|17. |  | SUBSEQUENT
EVENT
|--- |  | ----------------

|(a) |  | On
June 9, 2007, the Companys subsidiary, Sun Group entered into an           African
Mining Project Contract of Cooperation (the Purchase           Agreement)
with Shengbao Group and South African Shengbao Mining           Enterprises (Shengbao),
pursuant to which Sun Group purchased the           prospecting and mining rights of a
cobalt ore mine that is owned by Shengbao in           the Congo area, Africa. The
parties agreed that the purchase price would be           US$2,000,000, and that Sun
Group would give Shengbao 20% of its monthly ore           production each month for the
payment of the purchase price. Pursuant to the           Purchase Agreement, Shengbao
will provide Sun Group a mine of approximately 35           sq. km in the Congo area to
prospect and mine. Sun Group would provide the           necessary funding, equipment and
engineering staff for the mining and would           produce no less than twenty (20)
tons of ore per day. With regard to the product           ownership, Sun Group would own
eighty percent (80%) of the mining products, and           Shengbao would own twenty
percent (20%). Shengbao agreed to bear the risk of           losing part or all of the
US$2,000,000 if the mining production fails.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | On
August 24, 2007, the Company was reincorporated from North Carolina to           Delaware
and changed its name to China Sun Group High-Tech Co. The par value of           common
stock of China Sun Group High-Tech Co. is $0.001 per share.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-18



---

ITEM 8. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None
of the principal accountants reports on the financial statements for either of the
past two years contains an adverse opinion or disclaimer of opinion, or was modified as to
uncertainty, audit scope or accounting principles. There were no disagreements with Zhong
Yi (Hong Kong) C.P.A. Company Ltd. on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.

# ITEM 8A. CONTROLS AND
PROCEDURES

As
of the end of the period covered by this Annual Report, our management, with the
participation of our Chief Executive Officer (principal executive officer) and our Chief
Financial Officer (principal financial officer), evaluated the effectiveness of our
disclosure controls and procedures, as defined in Rule 13a-15(e) under the
Exchange Act. Based on that evaluation, these officers concluded that, as of May 31, 2007,
our disclosure controls and procedures were effective.

During
the year ended May 31, 2007, there were no changes in our internal control over financial
reporting that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

# ITEM 8B. OTHER
INFORMATION

None.

-20-



---

# PART III

# ITEM 9. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT.

(a)    Directors and
Executive Officers

Each
director is elected for a one year term until the next annual meeting of shareholders and
their successors are elected and qualified.

The
following is a list of the names and ages of our directors and executive officers:

|Name              | Age | Position | Date of Incumbency
|----------------- | --- | -------- | ------------------
|Mr. Wang, Bin     |     | 42       |                   
|Mr. Wang, Yu Long |     | 43       |                   
|Ms. Liu, Ming Fen |     | 55       |                   
|Ms. Li, Zhi       |     | 36       |                   
|Ms. Wang, Jiao    |     | 23       |                   
|Mr. Sui, Fudong   |     | 52       |                   
|Mr. Li, Gang      |     | 28       |                   
|Ms. Liu, Yefei    |     | 30       |                   
|Mr. Ren, Fuqiu    |     | 42       |                   

Mr.
          Bin Wangserves as our President, Chief Executive Officer, and the Chairman
          of the Board. Since 2000, Mr. Wang has served as the President of DLX. He
          received his Bachelor degree from Harbin University of Science and Technology
          with a major in Business Management. Mr. Wang is an economist with a strong
          background in business management. He is the founder of Da Lian Xin Yang
          High-Tech Development Co., Ltd., our majority owned subsidiary, which is
          dedicated to industrial investment, high technology, utilities, real estate, and
          education.

Mr.
          Yu-long Wang serves as our Vice President. Since 1999, Mr. Wang has served
          in various capacities at DLX. In 2002, Mr. Wang began has serving as the Vice
          President where he was in charge of production, Research and Development, and
          sales management. From 2000 to 2002, he acted as the assistant to the Chairman
          and from 1999 to 2000, he was the director of marketing. He obtained his
          bachelors degree in Business Administration from Heilongjiang University.

Ms.
          Ming Fen Liu serves as our Chief Financial Officer. Since 2004, Ms. Liu has
          been the Chief Financial Officer of DLX. Prior to that, in 2003, Ms Liu was the
          financial manager of Sun Group Investment Company. From 2001 and 2002, Ms. Liu
          served as the financial supervisor for the Dalian Chemical Industry Group, a
          chemical fertilizer plant. She is a Certified Public Accountant in China and
          earned her bachelors degree in finance from Dongbei Finance & Economics
          University. Ms. Liu has experience in financial regulations, company management,
          and raising capital.

Ms.
          Zhi Li serves as a Director of our Board. Since 2000, Ms. Li has also been a
          Director of DLX. Prior to that, she worked in the accounting department of
          a state-owned company. She is a Certified Public Accountant in China and
          graduated from the Heilongjiang Commerce College, where she majored in
          Accounting.

Ms.
          Li is married to Mr. Wang, our President, Chief Executive Officer, and Chairman
          of the Board.

Ms.
          Jiao Wang serves as a Director of our Board. Since 2003, Ms. Wang has also
          been a Director of DLX. Ms. Wang graduated from Dongbei Finance & Economics
          University, where she majored in Administrative Management. Ms. Wang has a
          background in marketing strategy and management.

-21-



---

Ms.
          Wang is the daughter of Mr. Wang Bin and Ms Li Zhi.

Mr.
          Fudong Sui has served as a Vice President at Dalian Household Things Co.,
          Ltd. which since February 2006 produces consumer products such as detergent and
          air fresheners. From October 1998 to December 2005, he was the Administrative
          President at Liaoning North Group, which participates in the chemical industry.
          Mr. Wang has received undergraduate and graduate degrees in Management
          Administration from the Heilongjiang University.

Mr.
          Gang Li has served as an Investment Analyst at Heilongjiang Chenneng
          Investment Management Co., Ltd., specializing in the energy industry since
          August 2005. Mr. Li received a master degree in finance from Liaoning University
          and attached Shanxi Finance and Economy College for his undergraduate education.

Ms.
          Yefei Liu has served as an Accounting Supervisor in the Dalian Branch of the
          Liaoning Decoration Engineering Corporation since September 2006 and as a staff
          accountant from January 2004 to September 2006. From August 2001 to November
          2003 Ms. Liu served as a treasurer at the Dalian Keyang Shoe Co., Ltd. Ms. Liu
          received Bachelor of Accounting from the Shenyang Agricultural University. She
          is also a public accountant certified in the Peoples Republic of China.

Mr.
          Ren Fuqiu has served as a Manager in the Overseas Investment Section of
          Shanghai Anhemeina Investment Co., Ltd. since September 2005, as a Manager in
          the Financial Department from April 1996 to June 2002, and as a Director in the
          Financial Department from August 1990 to March 1996. Mr. Ren received Bachelor
          in Finance from Dongbei University of Finance and Economics, and Master in
          International Finance from Dongbei University of Finance and Economics.

(b)    Audit Committee
Financial Expert

Our
Board of Directors has determined that Mr. Ren Fuqiu qualifies as an independent financial
expert serving on its audit committee. This qualification is based upon his education and
experience, more fully described above in his biography.

(c)    Section 16 (a)
Compliance

Section
16 (a) of the Exchange Act requires our directors, executive officers and holders of more
than 10% of our common stock to file with the SEC initial reports of ownership and reports
of changes in ownership of our common stock and other of our equity securities.

To
our knowledge, based solely on review of the Forms 3 and 4 furnished to us during the year
ended May 31, 2007, our acting officers, directors and holders of more than 10% of its
outstanding common stock complied with all Section 16(a) filing requirements, except for
the following: Mr. Wang failed to timely file one Form 3 and one Form 4 reporting one
transaction, both of which were filed in July 2007, Ms. Wang failed to timely file one
Form 3, which was filed in July 2007, and Ms. Li failed to timely file one Form 3, which
was filed in August 2007. We were not furnished any Forms 5 with respect to fiscal 2006.

(d)    Code of Ethics

We
have adopted a code of ethics that applies to our principal chief executive officer,
principal financial officer, principal accounting officer or controller, or persons
performing similar functions (the Code of Ethics). The Code of Ethics is
designed to deter wrongdoing, and to promote the following:

| |  |  | Honest
and ethical conduct, including the ethical handling of actual or apparent conflicts of
interest between personal and                   professional relationships.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-22-



---

| |  |  | Full,
fair, accurate, timely and understandable disclosure in reports and documents that a
small business issuer files with, or                   submits to, the Commission and in
other public communications made by the small business issuer.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Compliance
with applicable governmental laws, rules and regulations.
| | - |  | --------------------------------------------------------------------

| |  |  | The
prompt internal reporting of violations of the code to an appropriate person or persons
identified in the code.
| | - |  | -------------------------------------------------------------------------------------------------------------------

| |  |  | Accountability
for adherence to the code.
| | - |  | -----------------------------------------

(e)    Nomination Procedures

There
were no material changes to the procedures by which security holders may recommend
nominees to our board of directors since filing the proxy statement on Form 14A with the
SEC on August 1, 2007.

# ITEM 10. EXECUTIVE
COMPENSATION

Mr.  David Koran acted as our Chief Executive
Officer from February 2004 through September 29, 2006 and Mr. Wang Bin from September 30,
2006 to the current date. Therefore, for purposes of this disclosure, Mr. Koran was our
only named executive officer in fiscal 2006 and Mr. Wang was our only
named executive officer in fiscal 2007.

Mr.
          Koran did not receive any compensation during the fiscal year ended on May 31,
          2006. Mr. Koran and Mr. Bin Wang did not receive any compensation during the fiscal year ended
          on May 31, 2007.

# Employment Agreements

DLX
entered into Labor Contracts with each of Ms. Ming Fen Liu and Mr. Yu-long Wang on January
15, 2004. Pursuant to such agreements, Ms. Liu was hired as Chief Financial Officer and Mr. Wang was hired as
Vice President. The term of their employment is 5 years and will expire on January 15,
2009. Their monthly compensation is RMB 15,000 each. Mr. Bin Wang has no formal employment agreement
with DLX.  From February 2004, inception, through May 31, 2007, we have not issued
any stock options.

# Compensation of Directors

|           | Director Compensation
|---------- | ---------------------
|
|Bin Wang   |                      
|          
|Zhi Li     |                      
|          
|Jiao Wang  |                      
|          
|Fudong Sui |                      
|          
|Yefei Liu  |                      
|          
|Gang Li    |                      
|          
|Fuqiu Ren  |                      

-23-



---

Director
compensation is currently set at $1,500 a year. Mr. Bin Wang has received no compensation
for his service as a director. Directors do not receive other compensation for attending
meetings.

# Director Compensation
Arrangements

No
written agreements were entered for the director compensation. The directors orally agreed
to be paid $1,500 a year for their services as directors. The term of the oral agreements
is one year and will be changed and approved each year on the annual shareholder meeting.

ITEM 11. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The
following table sets forth certain information regarding beneficial ownership of our
common stock as of August 15, 2007, by (i) each person who beneficially owns
more than 5% of all outstanding shares of common stock, (ii) each director and the
executive officer identified above in Item 10, and (iii) all directors and the executive
officers as a group. Unless otherwise indicated, the address for each beneficial owner is
c/o China Sun Group High-Tech Co., 1 Hutan Street, Zhongshan District, Dalian,
Peoples Republic of China.

|Directors and Executive Officers:             |  | Amount and Nature
of Beneficial Ownership (1) |     | Percentage of Class (2) | 
|--------------------------------------------- |  | --------------------------------------------- | --- | ----------------------- | 
|Bin Wang                                      |  | 25,500,000                                    | (3) | 58.7%(3)                | 
|Yu Long Wang                                  |  | 260,000                                       |     | *                       | 
|Ming Fen Liu                                  |  | 10,000                                        |     | *                       | 
|Zhi Li                                        |  | 25,500,000                                    | (3) | 58.7%(3)                | 
|Jiao Wang                                     |  | 25,500,000                                    | (3) | 58.7%(3)                | 
|Fudong Sui                                    |  | 7,000                                         |     | *                       | 
|Gang Li                                       |  | 7,000                                         |     | *                       | 
|Yefei Liu                                     |  | 14,000                                        |     | *                       | 
|Fuqiu Ren                                     |  | -                                             |     | -                       | 
|Officers and directors as a group (5 persons) |  | 25,798,000                                    |     | 59.4%                   | 

_________________

|* | Represents
less than 1%
|- | -----------------------

|(1) | As used herein, a person is deemed to be the beneficial owner of a
          security if he or she has voting or investment power with respect to such
          security or has the right to acquire such ownership within sixty (60) days. As
          used herein, voting power includes the power to vote or to direct
          the voting of shares, and investment power includes the power to
          dispose or to direct the disposition of shares, irrespective of any economic
          interest therein.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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---

|(2) | Percentage ownership for a given individual or group is calculated on the basis
          of (i) the amount of outstanding shares owned as of July 24, 2007 plus, (ii) the
          number of shares that such individual or group has the right to acquire within
          sixty (60) days pursuant to options, warrants, conversion privileges or other
          rights, if applicable.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | This includes 9,500,000 shares owned by Mr. Bin Wang, our President and Chief
          Executive Officer, 8,000,000 shares owned by Ms. Zhi Li, Mr. Bin Wangs
          spouse, and 8,000,000 shares owned by Ms. Jiao Wang, Mr. Wangs daughter.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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---

# ITEM 12. CERTAIN
RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

(a) Related Party Transactions

Related Party Transactions

On
February 28, 2007, we completed the Exchange pursuant to the Agreement. Under the
Agreement, our shareholders, who now own an aggregate of approximately 93% of our common
stock issued and outstanding, received (1) 9,500,000 shares of our common stock from Mr.
Koran, our former President and Chief Executive Officer and a Director at the time we
entered into the Agreement, for $600,000, and (2) an additional 30,000,000 shares of our
newly issued common stock in exchange for a 70% interest in us, now our subsidiary.

On
July 18, 2006, we purchased $258,784 in raw materials from the Sun Group High Technology
Development Co., Ltd, the former parent company to DLX.

From
2004 through 2006, we loaned the Sun Group High Technology Development Co., Ltd, its
former parent company to us, $683,587 in the form of an unsecured, non-interest bearing
loan, repayable within 12 months.

Transactions with
Promoters

Capital Resource Funding, Inc.

On
or about June 23, 2004, we increased our authorized shares of common of stock to
100,000,000, kept the par value at $0.00000005 per share at the time and effectuated a
20,000 to 1 forward split our common stock. As a result, Mr. Korans 500 shares were
exchanged for 10,000,000 Shares of our common stock. In addition, we authorized 10,000,000
shares of convertible preferred stock, par value $0.00000005 par share, to be issued. Each
share of preferred stock is convertible into ten shares of our common stock. On March 14,
2005, we amended our articles of incorporation to change the par value per share of our
common stock and convertible preferred stock to $0.00000005.

On
June 23, 2004, we entered into a Financial Advisory Services Agreement with Greentree
Financial Group, Inc. In exchange for the following services, we paid Greentree Financial
Group, 490,000 shares of our common stock and $10,000 cash: assistance with the
preparation of our Form SB-2 registration statement, state Blue-Sky compliance, selection
of an independent stock transfer agent, and Edgar services.

The
490,000 shares of our common stock issued to Greentree Financial Group were valued at the
estimated value for the services received which was $122,500, or $0.25 per share.

The
shares issued to Greentree Financial Group, Inc. were issued in reliance upon an exemption
from registration provided by Section 4(2) of the Securities Act of 1933, as amended,
inasmuch as Greentree Financial Group is a sophisticated investor which is able to bear
the financial risk of its investment, it was provided with access to information about us
and there was no general solicitation or advertising in connection with the offering. In
addition, Greentree Financial Group is an accredited investor within the
meaning of the Securities Act of 1933, as amended and the rules promulgated thereunder.

On
June 24, 2004, we issued a promissory note in the amount of $40,000 to Greentree Financial
Group, representing a principal amount of $38,835 and interest of $1,165. Interest on the
promissory note accrues at a rate of $6% per annum. All outstanding principal and accrued
and unpaid interest on the promissory note was due on December 24, 2004. The 6-month,
nonassumable promissory note with Greentree Financial Group, Inc. was signed on June 24,
2004. As of December 24, 2004, the loan has been repaid in full.

-26-



---

On
or about February 2, 2004, we sold 500 pre-split shares (10,000,000 post-split) of stock
to our former President, David Koran for $100 pursuant to an offering that was exempt
under Section 4(2) of the Securities Act.

On
or about December 22, 2004, we issued the following shares of our common stock to three of
our former officers, as compensation for services rendered: Laura Koran, Chief Financial
Officer, 150,000 shares; Steven Moore, Chief Operating Officer, 75,000 shares; and Richard
Koran, Vice President, 75,000 shares. All three issuances were exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof.

In
January 2007, we issued 1,000,000 shares of our common stock to Greentree Financial Group,
as compensation for services rendered which were valued at $300,000. This issuance was
exempt from the registration requirements of the Securities Act pursuant to Section 4(2)
thereof.

Da Lian Xin Yang High-Tech
Development Co. Ltd.

On June
6, 2005, we issued 94.8% of the ownership interests in our company in exchange for
$13,126,609 cash, paid by the Sun Group High Technology Development Co., Ltd., Da Lian Xin
Yang High-Tech Development Co. Ltd.s former parent, and Zhi Li, and Jiao Wang,
currently Directors on our Board.

We
have agreed to pay each of our directors a compensation of $1,500 a year. For additional
details on the director compensation arrangements, see Item 10, Executive Compensation.

(b)    Parent Information

We
do not have a parent company.

(c)    Directors

Fudong
Sui, Gang Li, Yefei Liu, and Fuqiu Ren are independent directors as defined by the Nasdaq
Marketplace Rules. Wang Bin, Zhi Li, and Jiao Wang, who are not independent directors, are
not members of any Committees of our Board of Directors.

-27-



---

# Item 13. Exhibits

|Exhibit
Number | Exhibit Description                                                                                                                     | Footnote Reference
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ------------------
|3.1            | Articles of Incorporation of Capital Resource Funding, Inc. filed on February 6, 2004                                                   | (1)               
|              
|3.2            | Amendment to the Articles of Incorporation of Capital Resource Funding, Inc. filed March 21, 2005.                                      | (2)               
|              
|3.3            | Bylaws of Capital Resource Funding, Inc.                                                                                                | (1)               
|              
|10.1           | Consulting Agreement between Capital Resource Funding, Inc. and Greentree Financial Group, Inc.                                         | (1)               
|              
|10.2           | Promissory Note with Greentree Financial Group, Inc.                                                                                    | (1)               
|              
|10.3           | Letter of Intent between Capital Resource Funding, Inc. and HairMax International, Inc.                                                 | (1)               
|              
|10.4           | Plan of Exchange dated September 6, 2006 by and among Capital Resource Funding, Inc., Da Lian Xin Yang                                  | (4)               
|               | High-Tech Development Co. Ltd., the shareholders of Sun Group, and David Koran.                                                         |                   
|              
|10.5           | Escrow Agreement by and among Capital Resource Funding, Inc., David Koran,                                                              | (3)               
|               | Da Lian Xin Yang High-Tech Development Co., Ltd., the Shareholders of Da Lian Xin Yang High-Tech                                        |                   
|               | Development Co., Ltd., and Greentree Financial Group, Inc.                                                                              |                   
|              
|10.6           | Lock-up Agreement with David Koran date September 7, 2006.                                                                              | (3)               
|              
|10.7           | Lock-up Agreement with Laura Koran date September 7, 2006.                                                                              | (3)               
|              
|10.8           | Lock-up Agreement with Richard Koran date September 7, 2006.                                                                            | (3)               
|              
|10.9           | Labor Contract between Capital Resource Funding, Inc. and Ming Fen Liu dated January 15, 2004                                           |                   
|              
|10.10          | Labor Contract between Capital Resource Funding, Inc, and Yu-long Wang dated January 15, 2004                                           |                   
|              
|14             | Code of Ethics                                                                                                                          | (5)               
|              
|23.1           | Consent of Zhong Yi (Hong Kong) C.P.A. Company Ltd.                                                                                     | *                 
|              
|31.1           | Rule 13a 14a/15d 14(a) Certification.                                                                                                   | *                 
|              
|31.2           | Rule 13a 14a/15d 14(a) Certification.                                                                                                   | *                 
|              
|32             | Certification of principal executive officer and principal financial officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | *                 

|* |  | Filed
herewith.
|- |  | ---------------

-28-



---

|(1) |  | Incorporated by reference from the Registration Statement on Form SB-2 of
               Capital Resource Funding, Inc. filed with the Securities and Exchange Commission
               on August 16, 2004. File no. 333-118259.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated by reference from the Amendment No. 4 to the Registration Statement
               on Form SB-2/A of Capital Resource Funding, Inc. filed with the Securities and
               Exchange Commission on March 15, 2005. File no. 333-118259.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated by reference from the Current Report on Form 8-K of Capital
               Resource Funding, Inc. filed with the Securities and Exchange Commission on
               March 6, 2007.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated by reference from the Current Report on Form 8-K of Capital
               Resource Funding, Inc. filed with the Securities and Exchange Commission on
               September 7, 2006.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Incorporated by reference from the Annual Report on Form 10-KSB of Capital
               Resource Funding, Inc. filed with the Securities and Exchange Commission on
               August 4, 2006.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-29-

---

# ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES

For
the fiscal years ended May 31, 2007 and May 31, 2006, Zhong Yi (Hong Kong) C.P.A. Company
Ltd. has billed us the following fees for services rendered in connection with the audit
and other services in respect to these years:

|               | 2007 |         | 2006 |        
|-------------- | ---- | ------- | ---- | -------
|Audit Fees (1) |      | $39,000 |      | $40,000
|               |     
|Tax Fees       |      | -       |      | -      
|               |     
|All Other Fees |      | -       |      | -      
|               |     
|Total          |      | $39,000 |      | $40,000

|(1) | Services rendered for the audit of our annual financial statements included in
          our report on Form 10-KSB and the reviews of the financial statements included
          in our reports on Form 10-QSB filed with the SEC.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

None
of the fees described above were approved by our Audit Committee. We established an Audit
Committee after the end of fiscal 2007, on August 17, 2007.

The
Audit Committee currently does not have any pre-approval policies.

-30-



---

# Signatures

In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|                         |                                 
|------------------------ | --------------------------------
|                         | China Sun Group High-Tech Co.   
|                        
|Dated: September 6, 2007 | By: /s/ Bin Wang                
|                         | Name: Bin Wang                  
|                         | Title:   Chief Executive Officer
|                         | (Principal Executive Officer)   

In
accordance with the Exchange Act, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the dates indicated.

|                                    |                                                                                 |                  
|----------------------------------- | ------------------------------------------------------------------------------- | -----------------
|                                    |                                                                                 |                  
|/s/ Bin Wang
      Bin Wang         | Chief Executive Officer and Chairman of the Board
(Principal Executive Officer) | September 6, 2007
|                                   
|                                   
|/s/ Ming Fen Liu
      Ming Fen Liu | Chief Financial Officer
(Principal Financial and Accounting Officer)            | September 6, 2007
|                                   
|                                   
|                                    | Director                                                                        | September 6, 2007
|/s/ Zhi Li                          |                                                                                 |                  
|Zhi Li                              |                                                                                 |                  
|                                    | Director                                                                        | September 6, 2007
|/s/ Jiao Wang                       |                                                                                 |                  
|Jiao Wang                           |                                                                                 |                  
|                                    | Director                                                                        | September 6, 2007
|/s/ Fudong Sui                      |                                                                                 |                  
|Fudong Sui                          |                                                                                 |                  
|                                    | Director                                                                        | September 6, 2007
|/s/ Gang Li                         |                                                                                 |                  
|Gang Li                             |                                                                                 |                  
|                                    | Director                                                                        | September 6, 2007
|/s/ Yefei Liu                       |                                                                                 |                  
|Yefei Liu                           |                                                                                 |                  
|                                    | Director                                                                        | September 6, 2007
|/s/ Fuqiu Ren                       |                                                                                 |                  
|Fuqiu Ren                           |                                                                                 |                  

-31-