**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-Q**





(Mark
      One)





x
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934** For the quarterly period ended March
              31,
              2008





 ̈
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934** For the transition period from N/A
              to
              N/A





Commission
      File Number 000-25161





**MODTECH
      HOLDINGS, INC.**


**(Exact
      name of registrant as specified in its charter)**




**Delaware**
            **33
                - 0825386****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            **(I.R.S.
                Employer**
              **Identification
                No.)****2830
                Barrett Avenue, Perris, CA**
            **92571****(Address
                of principal executive office)**
            **(Zip
                Code)**





**(951)
      943-4014**


**(Registrant’s
      telephone number including area code)**




Indicate
      by check mark, whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No  ̈





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


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





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





As
      of May
      13, 2008 there were 21,419,415 Shares of the Registrant’s Common Stock
      outstanding.















**Modtech
      Holdings, Inc.**


**Index
      to Form 10-Q**




**Page** **#****PART
                I.**
            **FINANCIAL
                INFORMATION**Item 1.
            Financial
                Statements (Unaudited)Condensed
                  Consolidated Balance Sheets As of March 31, 2008 and December 31,
                  2007
            3Condensed
                  Consolidated Statements of Operations For the Three Months Ended
                  March 31, 2008 and 2007
            4Condensed
                  Consolidated Statements of Cash Flows For the Three Months Ended
                  March 31, 2008 and 2007
            5Notes
                to Interim Condensed Consolidated Financial Statements
            6-15Item 2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            16-21Item 3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            22Item 4T.
            Controls
                and Procedures
            23**PART
                II. OTHER INFORMATION**Item 1.
            Legal
                Proceedings
            24Item
                1A.
            Risk
                Factors
            24Item 2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            24Item 3.
            Defaults
                upon Senior Securities
            24Item 4.
            Submission
                of Matters to a Vote of Security Holders
            24Item 5.
            Other
                Information
            24Item 6.
            Exhibits
            25-28Signatures
            
            29





2


**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements**





**MODTECH
      HOLDINGS INC. AND SUBSIDIARIES**


Condensed
      Consolidated Balance Sheets


(Unaudited)




**March 31,**
            
            **December 31,****2008**
            
            **2007**AssetsCurrent
                assets:Cash
                and cash equivalents
            
            $
            2,447,000
            
            $
            409,000Restricted
                cash
            
            
            3,374,000
            
            
            3,377,000Contracts
                receivable, less allowance for contract adjustments of $2,106,000
                and $2,251,000 in 2008 and 2007, respectively
            
            
            13,814,000
            
            
            14,056,000Costs
                and estimated earnings in excess of billings on contracts
            
            
            6,201,000
            
            
            7,289,000Inventories
            
            
            4,396,000
            
            
            5,923,000Prepaid
                assets
            
            
            122,000
            
            
            617,000Insurance
                receivable
            
            
            1,579,000
            
            
            2,955,000Other
                current assets
            
            
            20,000
            
            
            22,000Total
                current assets
            
            
            31,953,000
            
            
            34,648,000Property
                and equipment, net
            
            
            9,617,000
            
            
            9,928,000Debt
                issuance costs, net
            
            
            620,000
            
            
            740,000Other
                assets
            
            
            1,881,000
            
            
            1,904,000Total
                assets
            
            $
            44,071,000
            
            $
            47,220,000Liabilities
                and Shareholders’ EquityCurrent
                liabilities:Accounts
                payable
            
            $
            13,570,000
            
            $
            13,209,000Accrued
                liabilities
            
            
            5,466,000
            
            
            6,292,000Billings
                in excess of costs and estimated earnings on contracts
            
            
            2,637,000
            
            
            1,686,000Current
                maturities of long-term debt, net
            
            
            819,000
            
            
            1,315,000Total
                current liabilities
            
            
            22,492,000
            
            
            22,502,000Long-term
                debt, net, excluding current portion
            
            
            9,629,000
            
            
            10,209,000Other
                long-term liabilities
            
            
            1,417,000
            
            
            1,437,000Total
                liabilities
            
            
            33,538,000
            
            
            34,148,000Shareholders’
                equity:Series
                A preferred stock, $0.01 par value. Authorized 5,000,000 shares;no
                shares issued and outstanding in 2008 and 2007, respectively
            
            
            -
            
            
            -Series
                B convertible preferred stock, $0.01 par value. Authorized 50,000
                shares;14,190
                and zero shares issued and outstanding in 2008 and 2007, respectively
            
            
            -
            
            
            -Series
                C convertible preferred stock, $0.01 par value. Authorized 50,000
                shares;2,206
                and zero shares issued and outstanding in 2008 and 2007, respectively
            
            
            -
            
            
            -Common
                  stock, $0.01 par value. Authorized 55,000,000 shares; issued
                  and outstanding 21,419,415 in both 2008 and 2007
            
            
            214,000
            
            
            214,000Additional
                paid-in capital
            
            
            138,761,000
            
            
            136,706,000Accumulated
                deficit
            
            
            (128,442,000
            )
            
            (123,848,000
            )Total
                shareholders’ equity
            
            
            10,533,000
            
            
            13,072,000Total
                liabilities and shareholders’ equity
            
            $
            44,071,000
            
            $
            47,220,000





*See
      accompanying notes to interim condensed consolidated financial
      statements.*




3


**MODTECH
      HOLDINGS INC. AND SUBSIDIARIES**


Condensed
      Consolidated Statements of Operations


(Unaudited)





**Three Months Ended****March 31,****2008**
            
            **2007**Net
                sales
            
            $
            12,722,000
            
            $
            27,500,000Cost
                of goods sold
            
            
            14,062,000
            
            
            26,411,000Gross
                (loss) profit
            
            
            (1,340,000
            )
            
            1,089,000Selling,
                general and administrative expenses
            
            
            3,094,000
            
            
            3,645,000Loss
                from operations
            
            
            (4,434,000
            )
            
            (2,556,000
            )Other
                (expense) income:Interest
                expense
            
            
            (343,000
            )
            
            (561,000
            )Interest
                income
            
            
            29,000
            
            
            77,000Gain
                on warrant and embedded derivatives
            
            
            846,000
            
            
            4,838,000Amortization
                of debt issuance costs
            
            
            (121,000
            )
            
            (264,000
            )Accretion
                of debt discount
            
            
            (583,000
            )
            
            (1,018,000
            )Other
                income, net
            
            
            12,000
            
            
            12,000(160,000
            )
            
            3,084,000(Loss)
                income before income taxes
            
            
            (4,594,000
            )
            
            528,000Income
                tax benefit
            
            
            -
            
            
            -Net
                (loss) income
            
            $
            (4,594,000
            )
            $
            528,000Basic
                (loss) income per common share
            
            $
            (0.21
            )
            $
            0.02Basic
                weighted-average shares outstanding
            
            
            21,419,000
            
            
            21,159,000Diluted
                (loss) income per common share
            
            $
            (0.21
            )
            $
            0.02Diluted
                weighted-average shares outstanding
            
            
            21,419,000
            
            
            21,582,000





*See
      accompanying notes to interim condensed consolidated financial
      statements.*




4





**MODTECH
      HOLDINGS INC. AND SUBSIDIARIES**


Condensed
      Consolidated Statements of Cash Flows


(Unaudited)





**Three Months Ended March 31,****2008**
            
            **2007**Cash flows
                from operating activities:Net
                (loss) income
            
            $
            (4,594,000
            )
            $
            528,000Adjustments
                to reconcile net (loss) income to net cash provided by (used in)
operating
                activities:Depreciation
                and amortization
            
            
            519,000
            
            
            664,000Gain
                on sale of equipment
            
            
            -
            
            
            (12,000
            )Stock
                compensation expense
            
            
            415,000
            
            
            428,000Gain
                on derivative liability
            
            
            (846,000
            )
            
            (4,838,000
            )Accretion
                of debt discount
            
            
            583,000
            
            
            1,018,000Decrease
                (increase) in assets:Restricted
                cash
            
            
            -
            
            
            527,000Contracts
                receivable
            
            
            242,000
            
            
            4,873,000Costs
                and estimated earnings in excess of billings on contracts
            
            
            1,088,000
            
            
            1,097,000Inventories
            
            
            1,527,000
            
            
            442,000Other
                current and non-current assets
            
            
            1,896,000
            
            
            (610,000
            )Increase
                (decrease) in liabilities:Accounts
                payable
            
            
            361,000
            
            
            (7,263,000
            )Accrued
                liabilities
            
            
            (889,000
            )
            
            (957,000
            )Billings
                in excess of costs and estimated earnings on contracts
            
            
            951,000
            
            
            (842,000
            )Net
                cash provided by (used in) operating activities
            
            
            1,253,000
            
            
            (4,945,000
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (108,000
            )
            
            (322,000
            )Proceeds
                from sale of property and equipment
            
            
            -
            
            
            20,000Net
                cash used in investing activities
            
            
            (108,000
            )
            
            (302,000
            )Cash
                flows from financing activities:Principal
                payments on long-term debt
            
            
            (750,000
            )
            
            (271,000
            )Decrease
                in restricted cash
            
            
            3,000
            
            
            3,241,000Net
                proceeds from issuance of preferred stock
            
            
            1,640,000
            
            
            -Net
                cash provided by financing activities
            
            
            893,000
            
            
            2,970,000Net
                increase (decrease) in cash and cash equivalents
            
            
            2,038,000
            
            
            (2,277,000
            )Cash
                and cash equivalents at beginning of period
            
            
            409,000
            
            
            6,292,000Cash
                and cash equivalents at end of period
            
            $
            2,447,000
            
            $
            4,015,000Supplemental
                disclosure of cash flow information:Cash
                paid for interest
            
            $
            364,000
            
            $
            546,000Cash
                paid for taxes
            
            $
            -
            
            $
            -Non-cash
                financing activity:Conversion
                of convertible debt to common stock
            
            $
            -
            
            $
            1,466,000Debt
                discount recorded in connection with debt modification
            
            $
            750,000
            
            $
            -Warrant
                derivative liability recorded in connection with debt modification
            
            $
            909,000
            
            $
            -




*See
      accompanying notes to interim condensed consolidated financial
      statements*




5


**MODTECH
      HOLDINGS, INC. AND SUBSIDIARIES**


Notes
      to
      Interim Condensed Consolidated Financial Statements


March
      31,
      2008





**1)**
            **Description
                of Business and Basis of
                Presentation**





***Description
      of Business***





Modtech
      Holdings, Inc. and its subsidiaries (“Modtech”, “we”, “our”, or the “Company”)
      design, manufacture, market and install modular and relocatable classrooms,
      commercial and light industrial modular buildings, and custom residential
      modular houses.





Our
      classrooms are sold primarily to California school districts. Our modular
      classrooms include standardized units prefabricated at our manufacturing
      facilities, as well as customized units that are modular in design but
      constructed on site using components we manufacture. We also sell both standard
      and custom classrooms outside California, principally in Florida and
      Nevada.





We
      also
      design and manufacture modular, portable buildings to customer specifications
      for a wide array of uses, including governmental, military, healthcare,
      educational, airport and correctional facilities; office and retail space;
      daycare centers, libraries, churches, construction trailers, golf clubhouses,
      police stations, convenience stores, fast food restaurants, sales offices,
      motels and custom single family houses. The buildings are sold direct through
      an
      internal sales group, through leasing companies and through a dealer network
      to
      a wide range of end users.





*Basis
      of Presentation*




The
      condensed consolidated financial statements included herein have been prepared
      by Modtech, without audit, pursuant to the rules and regulations of the U.S.
      Securities and Exchange Commission (“SEC”). Certain information normally
      included in consolidated financial statements prepared in accordance with
      accounting principles generally accepted in the United States of America has
      been omitted pursuant to such rules and regulations. However, we believe that
      the condensed consolidated financial statements, including the disclosures
      herein, are adequate to make the information presented not misleading. The
      condensed consolidated balance sheet as of December 31, 2007 was derived from
      the Company’s audited financial statements. The results of operations for the
      three months ended March 31, 2008 and 2007 are not necessarily indicative of
      the
      results to be expected for the full fiscal years. The condensed consolidated
      financial statements should be read in conjunction with our consolidated
      financial statements and notes thereto included in our Annual Report on Form
      10-K for the year ended December 31, 2007, as filed with the U.S. Securities
      and
      Exchange Commission.





***Reclassification***





Certain
      prior year amounts have been reclassified to conform to the 2008
      presentation.





***Reporting
      of Taxes Included in Sales***





The
      Company has historically presented and will continue to present sales taxes
      on a gross sales
      basis.
      For the
      three months ended March 31, 2008 and 2007, such amounts totaled $105,000 and
      $378,000, respectively.





**2)**
            **Restricted
                Cash**





Restricted
      cash as of March 31, 2008 includes approximately $3.1 million in cash collateral
      required for certain letters of credit and $0.3 million in an escrow account
      related to a settlement agreement. The amounts as of March 31, 2008 are
      classified as current assets.




6





**3)**
            **Inventories**





Inventories
      consist of the following:




**March 31,**
            
            **December 31,****2008**
            
            **2007**Raw materials
            
            $
            4,006,000
            
            $
            4,715,000Work-in-process
            
            
            285,000
            
            
            584,000Finished
                goods
            
            
            105,000
            
            
            624,000$
            4,396,000
            
            $
            5,923,000











**4)**
            **Accrued
                Liabilities**





Accrued
      liabilities consist of the following:





**March 31,**
              
              **December 31,****2008**
              
              **2007**Accrued compensation
              
              $
              1,181,000
              
              
              1,221,000Accrued
                  insurance expense
              
              
              1,262,000
              
              
              1,517,000Provision
                  for estimated losses on contracts
              
              
              357,000
              
              
              588,000Warrant
                  derivative liability
              
              
              575,000
              
              
              512,000Accrued
                  warranty
              
              
              804,000
              
              
              975,000Accrued
                  sales taxes
              
              
              600,000
              
              
              666,000Other
                  accrued liabilities
              
              
              687,000
              
              
              813,000$
              5,466,000
              
              $
              6,292,000





**5)**
            **Long-term
                Debt**





Long-term
      debt consists of the following term-loans:





**March 31,**
            
            **December 31,****2008**
            
            **2007**Term
                Loans due in 2009
            
            $
            14,354,000
            
            $
            14,354,000Long-term
                debt
            
            
            14,354,000
            
            
            14,354,000Less:
                unamortized discount on Term Loans
            
            
            (3,906,000
            )
            
            (2,830,000
            )Long-term
                debt, net
            
            
            10,448,000
            
            
            11,524,000Less:
                current portion of Term Loans, net
            
            
            (819,000
            )
            
            (1,315,000
            )Long-term
                debt
            
            $
            9,629,000
            
            $
            10,209,000





*Term
      Loans*





We
      have
      two term notes as of March 31, 2008 (the “Notes”) with an aggregate principal
      balance of approximately $14.4 million as of that date. The Notes are held
      by
      Laurus Master Fund, Ltd. (“Laurus”), Valens U.S. SPV I, LLC (“Valens U.S.”) and
      Valens Offshore SPV I, Ltd (“Valens Offshore”). The original principal amounts
      of the Notes were $5 million and $13 million, respectively, and the Notes were
      originally issued on December 28, 2006 and October 31, 2006, respectively.
      The
      $5 million Note and the $13 million Note bear interest at an adjustable rate
      equal to the prime rate as published in the Wall Street Journal, plus 2.5%
      and
      3.75%, respectively (the “Contract Rates”). These interest rates adjust with
      each adjustment in the prime rate. Principal payments of $271,000 commenced
      under the $13 million Note on February 28, 2007 and continue on the same day
      of
      each month thereafter. Principal payments of $104,000 commenced under the $5
      million Note on April 1, 2007 and continue on the same day of each month
      thereafter. The maturity dates of the $13 million Note and the $5 million Note
      are October 31, 2009 and December 28, 2009, respectively. The Notes may be
      prepaid in whole, but not in part or separately, at any time by paying the
      holders of the Notes 124% of the then aggregate outstanding principal balance
      and accrued interest. The Notes are secured by substantially all of our
      assets.





7


Amounts
      owed under the Notes may be accelerated and are subject to default rate interest
      charges under various circumstances, including, but not limited to, the failure
      to make principal or interest payments when due under the Notes, breaches of
      certain covenants, representations, conditions and warranties set forth in
      the
      Notes and the purchase agreement pursuant to which they were issued, including,
      without limitation, the failure to maintain on a monthly basis at least $9
      million in cash and eligible accounts receivable (the “Minimum Balance”), the
      occurrence of certain insolvency or bankruptcy events affecting us, a change
      of
      control in the Company, and certain judgments, liens and attachments in excess
      of permitted amounts.





*2008
      Amendment and Waiver Agreement*





On
      February 26, 2008, we were notified by Laurus, Valens U.S. and Valens Offshore
      that an “Event of Default” occurred under the Notes as a result of a failure to
      meet the Minimum Balance requirement.





On
      February 29, 2008, Modtech entered into an Amendment and Waiver Agreement (the
      “Waiver”) with Laurus, Valens US and Valens Offshore, which cured the Event of
      Default.





Pursuant
      to the Waiver, Modtech issued to Laurus, Valens U.S. and Valens Offshore three
      separate warrants on March 21, 2008 to purchase an aggregate of 3,000,000 shares
      of Modtech’s common stock at an exercise price of $0.40 per share (the
“Warrants”) and three separate promissory notes in the aggregate principal
      amount of $750,000 (the “Additional Notes”). In return, Laurus, Valens U.S. and
      Valens Offshore agreed to defer the aggregate principal payments of $375,000
      per
      month under the original Notes for the period March 1, 2008 through June 30,
      2008, for a total deferral of $1.5 million, eliminate the Minimum Balance
      requirement as of December, 31, 2007 through February 29, 2008, reduce the
      Minimum Balance from $9 million to $5.4 million for the period March 1, 2008
      through March 31, 2008 and to $6.6 million for the period April 1, 2008 through
      June 30, 2008. The aggregate monthly interest payments on the original Notes
      of
      approximately $110,000 per month will continue without deferral or abatement
      and, commencing July 1, 2008, the monthly principal payments will resume on
      the
      original Notes and the Minimum Balance will again be $9 million.





The
      Waiver revised the optional redemption rate to 105% if the Notes and the
      Additional Notes are prepaid in full by February 28, 2009. The Waiver also
      required that proceeds of at least $1.5 million from the issuance of preferred
      stock of the Company be received by no later than March 10, 2008, the failure
      of
      which would be considered an Event of Default. The Company completed an issuance
      of preferred stock, receiving proceeds of $1.6 million by March 10, 2008 (see
      Note 6).





The
      Additional Notes were issued to Laurus, Valens U.S. and Valens Offshore in
      the
      principal amounts of $634,414.36, $48,983.58 and $66,602.06, respectively.
      The
      principal amounts of the Additional Notes are due and payable December 28,
      2009.
      Interest shall accrue on the principal of the Additional Notes at the greater
      of
      8% per annum or a rate per annum equal to the prime rate published by The Wall
      Street Journal, plus 2.5%. Interest on the Additional Notes shall be payable
      monthly in arrears.





The
      Warrants issued to Laurus, Valens U.S. and Valens Offshore were for 2,537,657
      shares, 195,935 shares, and 266,408 shares, respectively. Modtech entered into
      separate registration rights agreements on February 29, 2008 with Laurus, Valens
      U.S. and Valens Offshore, pursuant to which it agreed to register for resale
      the
      common stock to be issued upon exercise of the Warrants (the “Warrant
      Registration Rights Agreement”). The Warrant Registration Rights Agreement
      provide for liquidated damages of 1%, not to exceed a maximum of 10%, of the
      original principal amount of the Additional Notes for every 30 days that a
      registration statement is not filed by the required filing date of May 29,
      2008
      or not declared effective by the required effective date of August 27, 2008.
      Liquidated damages could also be incurred if the registration agreement for
      the
      Warrants ceases to be effective or if the common stock is not listed or quoted,
      or is suspended from trading on any trading market, as defined, for a period
      of
      three consecutive trading days (provided the Company shall not have been able
      to
      cure such trading suspension within thirty days of notification or list the
      common stock on another trading market) prior to the Warrants being exercised.
      At its option, the Company may pay up to 50% of the liquidated damages (“Equity
      Damage Amount”) by delivering additional warrants at an exercise price at par
      value to purchase the equivalent number of shares of common stock whose
      aggregate fair market value, as defined, equals the Equity Damage Amount. The
      registration statement was filed with the SEC on May 7, 2008, but has not yet
      been declared effective by the SEC.





8


On
      February 29, 2008, Modtech also entered into a Reaffirmation and Ratification
      Agreement with Laurus, Valens U.S. and Valens Offshore with respect to the
      original Notes and the related agreements ratifying and confirming the original
      Notes and related agreements, except as modified by the Waiver, Additional
      Notes, Warrants and the Warrant Registration Rights Agreements. Laurus, Valens
      U.S. and Valens Offshore agreed, pursuant to a letter agreement entered into
      the
      same date, to refrain until May 1, 2008 from selling on any trading day shares
      of Modtech’s common stock that exceed 20% of the daily trading volume.





The
      Waiver was accounted for under the provisions of EITF No. 96-19 “Debtor’s
      Accounting for a Modification or Exchange of Debt Instruments” (“EITF 96-19”).
      In accordance with EITF 96-19, the Waiver was determined to be a debt
      modification.





We
      evaluated the new Warrants pursuant to EITF Issue No. 00-19, “Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock” (“EITF 00-19”) which states the criteria which must be met
      in order to classify warrants issued in a company’s own stock as either equity
      or as a derivative liability. Evaluation of these criteria resulted in the
      determination that the warrants should be classified as derivative
      liabilities.





In
      accordance with EITF 00-19, we valued the new Warrants as of February 29, 2008,
      determined as the measurement date, using a Black-Scholes-Merton option pricing
      model using the following assumptions: expected dividend yield of 0.0%, expected
      stock price volatility of 63.1%, risk free interest rate of 2.76% and a
      remaining contractual life of 6.92 years. The valuation resulted in an initial
      fair value of $909,000, with a corresponding increase in the warrant derivative
      liability, which is included as a component of accrued liabilities. See also
      Note 8 - Warrants and Warrant Derivative Liability.





In
      accordance with EITF 96-19, the fair value of the Warrants and the Additional
      Notes were recorded as an additional debt discount on the original Notes and
      will be accreted to interest expense over the remaining term of the original
      Notes using the effective interest method.





**6)**
            **2008
                Equity Financing**





On
      March
      10, 2008, Modtech issued 14,190 shares of its Series B Preferred Stock to
      existing shareholders and new investors and 2,206 shares of its Series C
      Preferred Stock (collectively the “Preferred Shares”) to its officers, directors
      and executives for an aggregate purchase price of $1.6 million.





The
      Series B Preferred Stock is convertible into the company’s common stock at $0.40
      per share and accrues dividends at 8% per annum, payable in additional shares
      of
      Series B Preferred Stock. The Series C Preferred Stock is convertible into
      Modtech common stock at $0.49 per share. Dividends do not accrue on the Series
      C
      Preferred Stock.





The
      Preferred Shares are convertible into an aggregate of 3,997,704 shares of
      Modtech’s common stock. The Preferred Shares may be converted at any time, in
      whole or in part, at the election of the holders and are subject to redemption
      at Modtech’s option at any time after the closing price of Modtech’s common
      stock has been $2.00 or more for 20 consecutive trading days.





Pursuant
      to a Registration Rights Agreement with the buyers, Modtech agreed to register
      for resale the shares of its common stock to be issued upon conversion of the
      Preferred Shares (“Preferred Stock Registration Rights Agreement”). The
      Preferred Stock Registration Rights Agreement provide for liquidated damages
      payable in cash of 1.5% of the aggregate amount invested by each preferred
      stockholder for every 30 days, or pro rata for any portion thereof, that a
      registration statement is not filed by the required filing date of April 7,
      2008
      or not declared effective by the required effective date of June 7, 2008.
      Liquidated damages could also be incurred if the registration statement for
      the
      Preferred Shares ceases to be effective prior to the sale of any of the
      converted common stock by the buyer, or if a buyer cannot sell the converted
      common stock due to market conditions. The registration statement was filed
      on
      May 7, 2008 with the SEC, but has not yet been declared effective by the
      SEC.





**7)**
            **Income
                Taxes**





On
      July
      13, 2006, the Financial Accounting Standards Board (“FASB”) issued
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - An
      Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the
      accounting for uncertainty in income taxes recognized in an entity’s financial
      statements in accordance with FASB Statement No. 109, “Accounting for Income
      Taxes” and prescribes a recognition threshold and measurement attributes for
      financial statement disclosure of tax positions taken or expected to be taken
      on
      a tax return. Under FIN 48, the impact of an uncertain income tax position
      on
      the income tax return must be recognized at the largest amount that is
      more-likely-than-not to be sustained upon audit by the relevant taxing
      authority. An uncertain income tax position will not be recognized if it has
      less than a 50% likelihood of being sustained. Additionally, FIN 48 provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. FIN 48 is effective for fiscal
      years
      beginning after December 15, 2006.





9




The
      Company adopted the provisions of FIN 48 on January 1, 2007. We had no material
      unrecognized tax benefits as of the date of adoption or as of December 31,
      2007.
      As a result of the implementation of FIN 48, the Company did not recognize
      a
      decrease in net deferred tax assets.




The
      Company’s practice is to recognize interest and/or penalties related to income
      tax matters in income tax expense. During the years ended December 31, 2007,
      2006 and 2005, the Company did not recognize any interest or penalties. Upon
      adoption of FIN 48 on January 1, 2007, the Company did not record any interest
      or penalties.





The
      Company is subject to taxation in the U.S. and various state jurisdictions
      and
      is subject to examination due to the carryforward of unutilized net operating
      losses. During 2006, the Company satisfactorily completed an Internal Revenue
      Service tax audit covering the tax years 2002, 2003 and 2004, leaving the tax
      years for 2005 and forward subject to examination by the Internal Revenue
      Service. The Company’s tax years for 2002 and forward are subject to examination
      by California tax authorities.





The
      adoption of FIN 48 did not impact the Company’s consolidated financial
      condition, results of operations or cash flows. At March 31, 2008, the Company
      had net deferred tax assets of $27.5 million. The deferred tax assets are
      primarily composed of federal and state tax net operating loss (“NOL”)
      carryforwards. Due to uncertainties surrounding the Company’s ability to
      generate future taxable income to realize these assets, a full valuation has
      been established to offset our net deferred tax assets. Additionally, the future
      utilization of our NOL carryforwards to offset future taxable income may be
      subject to a substantial annual limitation as a result of ownership changes
      that
      may have occurred previously or that could occur in the future (“Section 382”).
      The Company recently completed an ownership change analysis study under
      Section 382 regarding the limitation of our NOL carryforwards. This
      analysis determined that for purposes of Section 382 there was an ownership
      change, but that it is more likely than not that our NOL carryforwards would
      not
      be limited to offset future taxable income. The results of this analysis did
      not
      affect our unrecognized tax benefits under FIN 48.





**8)**
            **Warrants
                and Warrant Derivative
                Liability**





We
      granted 3,000,000 new Warrants pursuant to the Waiver agreement (Note 5). No
      warrants were exercised or forfeited for the three months ended March 31, 2008.
      As of March 31, 2008, outstanding warrants to purchase our common stock totaled
      6,943,704 at a weighted-average exercise price of $4.15 per share.





EITF
      00-19 requires quarterly analysis of criteria which must be met in order to
      classify warrants issued in a company’s own stock as either equity or as a
      derivative liability. Evaluation of these criteria as of March 31, 2008 resulted
      in the determination that the outstanding warrants, including the new Warrants,
      should continue to be classified as derivative liabilities.





In
      accordance with EITF 00-19, warrants which are determined to be classified
      as
      derivative liabilities are marked-to-market each reporting period, with a
      corresponding non-cash gain or loss charged to the current period. We valued
      all
      warrant derivative liabilities as of March 31, 2008 using a Black-Scholes-Merton
      option pricing model using the following assumptions: expected dividend yield
      of
      0.0%, expected stock price volatility ranging from 67.9% to 111.6%, risk free
      interest rate ranging from of 1.58% to 2.76% and a remaining contractual life
      ranging from 1.75 to 6.92 years. Due primarily to the decrease in our stock
      price from $0.89 at December 31, 2007 to $0.28 at March 31, 2008, the valuation
      conducted as of March 31, 2008 resulted in a non-cash gain of $0.8 million
      for the three month period ended March 31, 2008, with a corresponding decrease
      in the warrant derivative liability, which is included as a component of accrued
      liabilities at March 31, 2008. As of March 31, 2008, the total fair value of
      the
      warrant derivative liability is approximately $0.6 million.





10




The
      warrant activity for the period ended March 31, 2008 is summarized
      below:


**Number of**
              
              **Weighted-Average****Shares**
              
              **Exercise Price**Outstanding warrants at
                  December 31, 2007
              
              
              3,943,704
              
              $
              7.00Granted
              
              
              3,000,000
              
              
              0.40Exercised
              
              
              -
              
              
              -Forfeited
              
              
              -
              
              
              -Outstanding
                  warrants at March 31, 2008
              
              
              6,943,704
              
              $
              4.15





**9)**
            **Basic
                and Diluted Net (Loss) income per
                Share**




Basic
      net
      (loss) income per share is computed using the weighted average number of common
      shares outstanding during the period, excluding any unvested restricted stock.
      Diluted net (loss) income per share is computed using the weighted average
      number of common shares and, if dilutive, potential common shares outstanding
      during the period. Potential common shares consist of unvested restricted stock
      (using the treasury stock method), the incremental common shares issuable upon
      the exercise of stock options and warrants (using the treasury stock
      method).





The
      following table sets forth the computation of basic and diluted net (loss)
      income per share:


**Three
                  Months Ended****March
                  31,****2008**
              
              **2007**Basic
                  and diluted net (loss) income per share:Numerator:Net
                  (loss) income
              
              $
              (4,594,000
              )
              $
              528,000Denominator:Weighted
                    average common shares outstanding (denominator for basic
                    calculation)
              
              
              21,419,000
              
              
              21,159,000Shares
                  issuable through stock based compensation arrangements
              
              
              -
              
              
              423,000Denominator
                  for diluted calculation
              
              
              21,419,000
              
              
              21,582,000Basic
                  (loss) income per common share
              
              $
              (0.21
              )
              $
              0.02Diluted
                  (loss) income per common share
              
              $
              (0.21
              )
              $
              0.02





Due
      to
      the net losses reported for the three month period ended March 31, 2008, basic
      and diluted net loss per common share are the same, as the effect of any
      potential dilutive shares would be anti-dilutive to reported loss per common
      share. Therefore, for the three month period ended March 31, 2008, 8,973,155
      options and warrants to purchase common stock were excluded from diluted loss
      per share. Diluted loss per share also excludes 3,977,704 shares for the three
      months ended March 31, 2008, for shares issuable upon conversion of convertible
      preferred stock. Additionally, 507,087 shares in unvested restricted stock
      are
      excluded from diluted loss per share for the three months ended March 31,
      2008.





**10)**
            **Stock-Based
                Compensation**





***Stock
      options***





Our
      stock-based compensation consists of various stock option plans which grant
      stock options to employees, non-employee officers and directors, consultants,
      vendors, customers and others expected to provide significant services to the
      Company.





11




The
      per
      share weighted-average fair value of stock options granted during the three
      months ended March 31, 2008 was $0.19. We use the Black-Scholes-Merton (“BSM”)
      option pricing model to estimate the fair value of stock-based awards, with
      the
      following weighted-average assumptions for the periods ended March 31, 2008
      and
      2007:




**Three
                Months Ended****March
                31,****2008**
            
            **2007**Expected
                dividend yield
            
            
            0
            %
            
            0
            %Average
                risk-free interest rate
            
            
            2.54
            %
            
            4.42
            %Expected
                volatility
            
            
            66.19
            %
            
            45.73
            %Expected
                life of options (in years)
            
            
            5.75
                years
            
            
            5.75
                yearsForfeiture
                rate
            
            
            35
            %
            
            35
            %





The
      assumptions above are based on multiple factors, including historical exercise
      patterns of employees in relatively homogeneous groups with respect to exercise
      and post-vesting employment termination behaviors, expected future exercising
      patterns for these same homogeneous groups and the implied volatility of our
      stock price.





The
      following table represents stock option activity for the three months ended
      March 31, 2008:




**Number
                  of**
              
              **Weighted-Average****Shares**
              
              **Exercise Price**Outstanding
                  options at December 31, 2007
              
              
              1,106,951
              
              $
              6.66Granted
              
              
              925,000
              
              
              0.31Exercised
              
              
              -
              
              
              -Forfeited
              
              
              (2,500
              )
              
              1.59Outstanding
                  options at March 31, 2008
              
              
              2,029,451
              
              $
              3.77





There
      were no options exercised during the three months ended March 31, 2008.
      Therefore, the aggregate intrinsic value of options exercised was zero for
      the
      three months ended March 31, 2008.





Shares
      available for future stock option grants were 116,381 at March 31, 2008. At
      March 31, 2008, there was no intrinsic value for options outstanding or for
      options exercisable.





***Restricted
      Stock Rights***





The
      rights to acquire shares of restricted stock are granted to certain officers
      and
      members of the management team and vest following the completion of a number
      of
      years of employment. The restricted stock activity for the three months ended
      March 31, 2008, is summarized below:




**Weighted-Average****Number
                of**
            
            **Grant-Date****Shares**
            
            **Fair
                Value**Outstanding
                restricted stock grants at December 31, 2007
            
            
            507,087
            
            $
            6.63Granted
            
            
            -
            
            
            -Canceled
            
            
            -
            
            
            -Outstanding
                restricted stock grants at March 31, 2008
            
            
            507,087
            
            $
            6.63





During
      the three months ended March 31, 2008 and 2007, we recognized $415,000 and
      $428,000, respectively, in stock-based compensation expense, and as of March
      31,
      2008, there was $3.2 million in unrecognized compensation cost related to
      share-based payments which is expected to be recognized over a weighted average
      period of 1.7 years.





12




**11)**
            **Recent
                Accounting
                Pronouncements**




*Business
      Combinations*





In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      141 (Revised 2007), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R)
      establishes principles and requirements for how an acquirer in a business
      combination recognizes and measures in its financial statements the identifiable
      assets acquired, liabilities assumed, and any noncontrolling interests in the
      acquiree, as well as the goodwill acquired. Significant changes from current
      practice resulting from SFAS 141(R) include the expansion of the definitions
      of
      a “business” and a “business combination.” For all business combinations
      (whether partial, full or step acquisitions), the acquirer will record 100%
      of
      all assets and liabilities of the acquired business, including goodwill,
      generally at their fair values; contingent consideration will be recognized
      at
      its fair value on the acquisition date and, for certain arrangements, changes
      in
      fair value will be recognized in earnings until settlement; and
      acquisition-related transaction and restructuring costs will be expensed rather
      than treated as part of the cost of the acquisition. SFAS 141(R) also
      establishes disclosure requirements to enable users to evaluate the nature
      and
      financial effects of the business combination. SFAS 141(R) applies prospectively
      to business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after December
      15, 2008. The Company does not expect SFAS 141(R) to have a material impact
      on
      its financial statements.





*Noncontrolling
      Interests in Consolidated Financial Statements*





In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      160, “Noncontrolling Interests in Consolidated Financial Statements — An
      Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to establish
      accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
      noncontrolling interest in a subsidiary, which is sometimes referred to as
      minority interest, is a third-party ownership interest in the consolidated
      entity that should be reported as a component of equity in the consolidated
      financial statements. Among other requirements, SFAS 160 requires consolidated
      statement of operations to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interest. SFAS 160 also
      requires disclosure, on the face of the consolidated income statement, of the
      amounts of consolidated net income attributable to the parent and to the
      noncontrolling interest. SFAS 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008.
      Earlier adoption is prohibited. The Company does not expect SFAS 160 to have
      a
      material impact on its financial statements.





*Disclosures
      about Derivative Instruments and Hedging Activities*





In
      March
      2008, the FASB issued Statement of Financial Accounting Standards No. 161,
      “Disclosures about Derivative Instruments and Hedging Activities - an amendment
      of FASB Statement No. 133,” (“SFAS 161”), which requires enhanced disclosures
      about an entity’s derivative and hedging activities and thereby improves the
      transparency of financial reporting. Disclosing the fair values of derivative
      instruments and their gains and losses in a tabular format provides a more
      complete picture of the location in an entity’s financial statements of both the
      derivative positions existing at period end and the effect of using derivatives
      during the reporting period. Entities are required to provide enhanced
      disclosures about (a) how and why an entity uses derivative instruments, (b)
      how
      derivative instruments and related hedged items are accounted for under
      Statement 133 and its related interpretations, and (c) how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. SFAS 161 is effective for financial
      statements issued for fiscal years and interim periods beginning after November
      15, 2008. Early adoption is permitted. The Company does not expect SFAS 161
      to
      have a material impact on its financial statements.




13




**12)**
            **Adoption
                of Statement of Financial Accounting Standards No. 157 and
                159**





*Fair
      Value Measurements*





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value as used
      in numerous accounting pronouncements, establishes a framework for measuring
      fair value in U.S. GAAP, and expands disclosures related to the use of fair
      value measures in financial statements. SFAS 157 does not expand the use of
      fair
      value measurements in financial statements, but standardizes its definition
      and
      guidance in U.S. GAAP. SFAS 157 emphasizes that fair value is a market-based
      measurement and not an entity-specific measurement, based on an exchange
      transaction in which the entity sells an asset or transfers a liability (exit
      price). SFAS 157 establishes a fair value hierarchy from observable market
      data
      as the highest level to an entity’s own fair value assumptions about market
      participant assumptions as the lowest level. In February 2008, the FASB issued
      FSP FAS 157-2, to defer the effective date of SFAS 157 for all nonfinancial
      assets and liabilities, except those items recognized or disclosed at fair
      value
      on an annual or more frequently recurring basis, until years beginning after
      November 15, 2008. We adopted SFAS 157 for our financial assets and liabilities
      effective January 1, 2008 (See Note 13 - Fair Value Measurements for more
      information related to the adoption of SFAS 157 for financial assets and
      liabilities). We are currently reviewing the adoption requirements related
      to
      our nonfinancial assets and liabilities and have not yet determined the impact,
      if any, on our financial position or results of operations.





*The
      Fair Value Option for Financial Assets and Financial
      Liabilities*





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, The Fair Value Option for Financial Assets and Financial Liabilities -
      Including an amendment to FASB Statement No. 115 (“SFAS 159”). This statement
      permits companies to choose to measure many financial instruments and other
      items at fair value. The objective is to improve financial reporting by
      providing entities with the opportunity to mitigate volatility in reported
      earnings caused by measuring related assets and liabilities differently without
      having to apply complex hedge accounting provisions. This Statement is expected
      to expand the use of fair value measurement of accounting for financial
      instruments. This statement applies to all entities, including not for profit.
      The fair value option established by this statement permits all entities to
      measure eligible items at fair value at specified election dates. We adopted
      SFAS 159 as of January 1, 2008. The adoption of SFAS 159 did not have a material
      effect on our condensed consolidated financial statements.





**13)**
            **Fair
                Value Measurements**





We
      adopted SFAS 157 effective January 1, 2008 for financial assets and liabilities
      measured on a recurring basis. On February 6, 2008, the FASB deferred the
      effective date of SFAS 157 for all nonfinancial assets and nonfinancial
      liabilities, except those that are recognized or disclosed at fair value in
      the
      financial statements on a recurring basis. SFAS 157 defines fair value,
      establishes a framework for measuring fair value and generally accepted
      accounting principles and expands disclosures about fair value measurements.
      This standard applies in situations where other accounting pronouncements either
      permit or require fair value measurements. SFAS 157 does not require any new
      fair value measurements.





Fair
      value is defined in SFAS 157 as the price that would be received to sell an
      asset or paid to transfer a liability in an orderly transaction between market
      participants at the measurement date. Fair value measurements are to be
      considered from the perspective of a market participant that holds the asset
      or
      owes the liability. SFAS 157 also establishes a fair value hierarchy which
      requires an entity to maximize the use of observable inputs and minimize the
      use
      of unobservable inputs when measuring fair value.





The
      standard describes three levels of inputs that may be used to measure fair
      value:





Level
              1:
            Quoted
                prices in active markets for identical or similar assets and liabilities.





Level
              2:
            Quoted
                prices for identical or similar assets and liabilities in markets
                that are
                not active or observable inputs other than quoted prices in active
                markets
                for identical or similar assets and liabilities.





Level
              3:
            Unobservable
                inputs that are supported by little or no market activity and that
                are
                significant to the fair value of the assets or liabilities.





At
      March
      31, 2008, we had outstanding warrants to purchase common shares of our stock
      with a fair value of $575,000. The warrants are classified current liabilities,
      in Level 3, because there are significant unobservable inputs associated with
      them. We consider the warrants to be derivatives and classified as a derivative
      liability in accordance with EITF 00-19 (see Note 8 - Warrants and Warrant
      Derivative Liability), and follow Statement of Financial Accounting Standards
      No. 133, Accounting for Derivative Instruments and Hedging Activities, as
      amended and interpreted (“SFAS 133”), which requires that all derivatives be
      carried at fair value. In accordance with SFAS 133 these embedded derivatives
      are marked-to-market each reporting period, with a corresponding non-cash gain
      or loss charged to the current period.





The
      carrying value of our other financial assets and liabilities, including cash,
      accounts receivable, accounts payable and short-term loans payable approximate
      fair value, without being discounted, due to the short periods during which
      these amounts are outstanding.




14




The
      Company adopted SFAS 159 effective January 1, 2008. This statement provides
      companies with an option to report selected financial assets and liabilities
      at
      fair value. The Company did not elect the fair value option for any of such
      eligible financial assets or financial liabilities as of March 31,
      2008.




15




**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





**Cautionary
      Statement**





You
      should read the following discussion and analysis with our audited Consolidated
      Financial Statements, and related notes thereto, and Management’s Discussion and
      Analysis of Financial Condition and Results of Operations contained in our
      Form
      10-K for the year ended December 31, 2007, and the Unaudited Condensed
      Consolidated Financial Statements and related notes thereto contained elsewhere
      in this report. We urge you to carefully review and consider the various
      disclosures made in this report and in our other reports filed with the
      Securities and Exchange Commission.





**Forward
      Looking Statements**





This
      quarterly report contains statements which, to the extent that they are not
      recitations of historical fact, constitute forward-looking statements within
      the
      meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.
      The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,”
“plan,” “outlook,” “forecast,” “may,” “will,” “should,” “continue,” “predict”
and similar expressions are intended to identify forward-looking statements.
      Such forward-looking statements are intended to be subject to the safe harbor
      protection within the meaning of that term in Section 27A of the Securities
      Act
      of 1933 and Section 21E of the Securities Exchange Act of 1934. Future events
      and actual results could differ materially from those set forth in, contemplated
      by, or underlying the forward-looking statements. Statements in this report,
      including the Notes to the Condensed Consolidated Financial Statements and
      in
      the “Management’s Discussion and Analysis of Financial Condition and Results of
      Operations,” describe factors, among others, that could contribute to or cause
      such differences. In addition, the accuracy of such forward looking statements
      may be impacted by a number of business risks and uncertainties that could
      cause
      actual results to differ materially from those projected or anticipated,
      including but not limited to: unanticipated delays in the awarding of contracts
      on jobs bid on by the Company; customer delays in placing orders under awarded
      contracts; customer cancellations or deferrals of contracts; declining school
      enrollments; the inability to adequately pass through to customers unanticipated
      future increases in raw material costs; an unanticipated change in the types
      of
      classrooms required by school districts; declines in available funding for
      modular classroom construction and other risks and uncertainties that are
      described elsewhere in this report and in our other filings with the Securities
      and Exchange Commission, including our reports on Form 10-K. Although we believe
      the expectations reflected in our forward-looking statements are based upon
      reasonable assumptions, there is no assurance that our expectations will be
      attained. The forward-looking statements are current only as of the date of
      this
      report. We do not undertake any obligation to update or revise publicly any
      forward-looking statements, even though our situation may change in the future.
      We qualify all of our forward-looking statements by these cautionary
      statements.





**Use
      of Estimates and Critical Accounting Policies**





In
      the
      preparation of our consolidated financial statements, we are required to make
      estimates and assumptions that affect the amount of assets, liabilities, revenue
      and expense reported in the statements. We base our estimates and assumptions
      on
      historical experience and other factors believed to be reasonable under the
      circumstances and continually evaluate our estimates and assumptions,
      nevertheless, estimates are inherently uncertain and actual results could
      significantly differ from our estimates. We believe that the following
      discussion addresses our most significant accounting policies.





***Allowances
      for Contract Adjustments***





We
      maintain allowances for contract adjustments that result from the inability
      of
      our customers to make their required payments. Management bases its allowances
      on analysis of the aging of accounts receivable, by account, at the date of
      the
      financial statements, assessments of historical collection trends, and an
      evaluation of the impact of current economic conditions. If the financial
      condition of our customers were to deteriorate, resulting in an impairment
      of
      their ability to make payments, additional allowances may be
      required.





***Accrual
      for Worker’s Compensation Reserve***





Prior
      to
      July 31, 2006, we were self-insured for workers compensation under a high
      deductible program. Management bases its accrual estimate on input from the
      insurance carrier which includes information regarding open and closed cases,
      historical costs associated with those claims, certain developed costs and
      an
      estimate of Incurred But Not Reported claims. Variation from the estimates
      of
      future liability claims from the pre-July 31, 2006 claims is not only possible,
      but probable. The inherent variability may result in actual costs being either
      above or below the estimates recorded on our consolidated financial
      statements.





16





***Revenue
      Recognition on Construction Contracts***





Contracts
      are recognized using the percentage-of-completion method of accounting and,
      therefore, take into account the costs, estimated earnings and revenue to date
      on contracts not yet completed. Revenue recognized is that percentage of the
      total contract price that cost incurred to date bears to the anticipated final
      total cost, based on current estimates of the cost to complete. The
      percentage-of-completion methodology generally results in the recognition of
      reasonably consistent profit margins over the life of a contract. Cumulative
      revenues recognized may be less or greater than cumulative costs and profits
      billed at any point in time during a contract’s term. The resulting difference
      is recognized as unbilled or deferred revenue.





Any
      estimation process, including that used in preparing contract accounting models,
      involves inherent risk. We attempt to reduce the inherent risk relating to
      revenue and cost estimates in percentage-of-completion models through corporate
      policy, approval and monitoring processes. Risks relating to project delivery,
      productivity and other factors are considered in the estimation process. Our
      estimates of revenues and costs on construction contracts change periodically
      in
      the normal course of business due to factors such as productivity and
      modifications of contractual arrangements. Such changes are reflected in the
      results of operations as a change in accounting estimate in the period the
      revisions are determined. Provisions for estimated losses are made in the period
      in which the loss first becomes apparent.





***Revenue
      Recognition for Other Product Sales***





Sales
      of
      other products are recognized when products are shipped and the customer takes
      ownership and assumes risk of loss, collection of the related accounts
      receivable is probable, persuasive evidence of an arrangement exists and the
      sales price is fixed or determinable.





***Valuation
      of the Embedded and Warrant Derivatives***





The
      valuation of our warrant derivatives are determined primarily by the
      Black-Scholes option pricing model. In accordance with FASB Statement No. 133,
      as amended, Accounting for Derivative Instruments and Hedging Activities, these
      embedded derivatives are marked-to-market each reporting period, with a
      corresponding non-cash gain or loss charged to the current period. A warrant
      derivative liability is determined in accordance with Emerging Issues Task
      Force
      (“EITF”) Issue No. 00-19, “Accounting for Derivative Financial Instruments
      Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”).
      Based on EITF 00-19, warrants which are determined to be classified as
      derivative liabilities are marked-to-market each reporting period, with a
      corresponding non-cash gain or loss charged to the current period. The practical
      effect of this has been that when our stock price increases so does our
      derivative liability, resulting in a non-cash loss charge that reduces our
      earnings and earnings per share. When our stock price declines, we record a
      non-cash gain, increasing our earnings and earnings per share.





Certain
      factors are used to determine the fair value of our warrant derivatives, which
      include our period end stock price, historical stock volatility, risk free
      interest rate and derivative term. The fair value recorded for the derivative
      liability varies from period to period. This variability may result in the
      actual derivative liability for a period either above or below the estimates
      recorded on our consolidated financial statements, resulting in significant
      fluctuations in other income (expense) because of the corresponding non-cash
      gain or loss recorded.





**New
      Accounting Standards**





In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      141 (Revised 2007), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R)
      establishes principles and requirements for how an acquirer in a business
      combination recognizes and measures in its financial statements the identifiable
      assets acquired, liabilities assumed, and any noncontrolling interests in the
      acquiree, as well as the goodwill acquired. Significant changes from current
      practice resulting from SFAS 141(R) include the expansion of the definitions
      of
      a “business” and a “business combination.” For all business combinations
      (whether partial, full or step acquisitions), the acquirer will record 100%
      of
      all assets and liabilities of the acquired business, including goodwill,
      generally at their fair values; contingent consideration will be recognized
      at
      its fair value on the acquisition date and, for certain arrangements, changes
      in
      fair value will be recognized in earnings until settlement; and
      acquisition-related transaction and restructuring costs will be expensed rather
      than treated as part of the cost of the acquisition. SFAS 141(R) also
      establishes disclosure requirements to enable users to evaluate the nature
      and
      financial effects of the business combination. SFAS 141(R) applies prospectively
      to business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after December
      15, 2008. The Company does not expect SFAS 141(R) to have a material impact
      on
      its financial statements.





17





In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      160, “Noncontrolling Interests in Consolidated Financial Statements — An
      Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB 51 to establish
      accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
      noncontrolling interest in a subsidiary, which is sometimes referred to as
      minority interest, is a third-party ownership interest in the consolidated
      entity that should be reported as a component of equity in the consolidated
      financial statements. Among other requirements, SFAS 160 requires consolidated
      statement of operations to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interest. SFAS 160 also
      requires disclosure, on the face of the consolidated income statement, of the
      amounts of consolidated net income attributable to the parent and to the
      noncontrolling interest. SFAS 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008.
      Earlier adoption is prohibited. The Company does not expect SFAS 160 to have
      a
      material impact on its financial statements.





In
      March
      2008, the FASB issued Statement of Financial Accounting Standards No. 161,
      “Disclosures about Derivative Instruments and Hedging Activities - an amendment
      of FASB Statement No. 133,” (“SFAS 161”), which requires enhanced disclosures
      about an entity’s derivative and hedging activities and thereby improves the
      transparency of financial reporting. Disclosing the fair values of derivative
      instruments and their gains and losses in a tabular format provides a more
      complete picture of the location in an entity’s financial statements of both the
      derivative positions existing at period end and the effect of using derivatives
      during the reporting period. Entities are required to provide enhanced
      disclosures about (a) how and why an entity uses derivative instruments, (b)
      how
      derivative instruments and related hedged items are accounted for under
      Statement 133 and its related interpretations, and (c) how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. SFAS 161 is effective for financial
      statements issued for fiscal years and interim periods beginning after November
      15, 2008. Early adoption is permitted. The Company does not expect SFAS 161
      to
      have a material impact on its financial statements.





**Overview**





Modtech
      manufactures and sells modular relocatable classrooms and commercial and light
      industrial modular buildings. We are a leading provider of modular classrooms
      in
      California and Florida and a significant provider of commercial and light
      industrial modular buildings in California, Florida, Arizona, Nevada and other
      neighboring states.





In
      California and Florida, we market and sell our modular classrooms to school
      districts. Virtually all of our classroom sales are dependent upon public
      funding. Such funding is sourced in multiple ways which are strongly influenced
      by educational policies that are subject to political factors.





The
      modular relocatable classroom industry is highly competitive with the market
      divided among a number of privately-owned companies whose share of the market
      is
      smaller than ours. The nonresidential modular building industry is highly
      competitive and fragmented. It is composed primarily of regionally based private
      companies, each with a single manufacturing facility.





Revenues
      were $12.7 million for the three months ended March 31, 2008, down 53.7% from
      the corresponding period of the prior year. The decline was due primarily to
      a
      general slowdown in the California education and commercial markets, customer
      imposed delays on certain large educational projects, increased competitive
      pressure in all markets, and declining school enrollment in Florida.





As
      of
      April 30, 2008, the backlog of sales orders was $85.1 million, up from $45.3
      million at April 30, 2007. The backlog by region as of April 30, 2008 was as
      follows: California - $79.8 million; Arizona - $1.5 million; and Florida -
      $3.8
      million. This compares to the backlog by region as of April 30, 2007, which
      was
      as follows: California - $38.2 million; Arizona - $3.0 million; and Florida
      -
      $4.1 million. The increase in backlog is primarily due to increased residential
      and military orders in California.




18





**Results
      of Operations**





The
      following table sets forth, for the periods indicated, the percentages of net
      sales represented by certain items in our statements of operations.





**Percent of Net Sales****Three Months Ended March 31,****2008**
            
            **2007**Net
                sales
            
            
            100.0
            %
            
            100.0
            %Cost
                of goods sold
            
            
            110.5
            
            
            96.0Gross
                (loss) profit
            
            
            (10.5
            )
            
            4.0Selling,
                general and administrative expenses
            
            
            24.3
            
            
            13.3Loss
                from operations
            
            
            (34.9
            )
            
            (9.3
            )Other
                (expense) income:Interest
                expense
            
            
            (2.7
            )
            
            (2.0
            )Interest
                income
            
            
            0.2
            
            
            0.3Gain
                on warrant and embedded derivatives
            
            
            6.6
            
            
            17.6Amortization
                of debt issuance costs
            
            
            (1.0
            )
            
            (1.0
            )Accretion
                of debt discount
            
            
            (4.6
            )
            
            (3.7
            )Other
                income, net
            
            
            0.1
            
            
            0.0(1.3
            )
            
            11.2(Loss)
                income before income taxes
            
            
            (36.1
            )
            
            1.9Income
                tax expense (benefit)
            
            
            -
            
            
            -Net
                (loss) income
            
            
            (36.1
            )%
            
            1.9
            %





***Net
      Sales***





Net
      sales
      for the quarter ended March 31, 2008, decreased to $12.7 million from $27.5
      million for the quarter ended March 31, 2007, a decrease of $14.8 million
      or 53.7%. When compared to the corresponding period in the prior year, in the
      quarter ended March 31, 2008 California sales of $8.1 million were down 53.7%;
      Florida sales of $1.9 million were down 60.3% and Arizona sales of $2.8
      million were down 47.9%.





The
      decrease in sales in 2008 in California was primarily due to a general slowdown
      in the education and commercial markets. The change in the education market
      is
      caused primarily by delays imposed by our customers on various large educational
      projects, a relative flattening of California school enrollment in recent years
      and general economic conditions. The decrease in the commercial market can
      be
      attributed to the slowdown in the construction and housing markets.




California
      public school enrollment has been essentially flat over the last three years
      and, while funds from recently enacted bond measures are available, spending
      for
      new schools has slowed from prior years. This leveling off of school enrollment
      has led to decreased demand for new school construction, causing a higher
      percentage of school bond funds to be utilized for modernization of existing
      structures and less on new permanent construction or facilities. Even the fast
      growing school districts are proceeding more conservatively in light of the
      slowdown in other districts. The modernization work has benefited the leasing
      companies, but has not resulted in relocatable classroom sales for Modtech
      because the leasing companies have not had to purchase significant numbers
      of
      new classrooms.





The
      sales
      decrease in Florida in 2008 was due to slowness in the education market as
      a
      result of declining school enrollment.





The
      sales
      decrease in Arizona in 2007 is due to the decreased volume of orders in the
      education markets for Arizona and Nevada.





***Gross
      (Loss) Profit***





Gross
      loss for the quarter ended March 31, 2008 was $1.3 million compared to a gross
      profit of $1.1 million for the corresponding prior year period, a decline
      of $2.4 million. Gross loss as a percentage of net sales was (10.5%) in the
      quarter ended March 31, 2008, compared to a gross profit margin of 4.0% in
      the
      quarter ended March 31, 2007.





Our
      gross
      profit margin declined as revenues declined because we were not able to
      adequately cover our fixed manufacturing costs, particularly due to continued
      production delays in key education projects and decreased sales volume in the
      education markets in California, Florida and Arizona.





19





***Selling,
      General and Administrative Expenses***





In
      the
      quarter ended March 31, 2008, selling, general and administrative (“SG&A”)
      expenses decreased $0.6 million over the prior year to $3.1 million with
      SG&A costs representing 24.3% of net sales compared to 13.3% of net sales in
      the prior year. The decrease in SG&A was attributable to our cost cutting
      efforts over the last two quarters, resulting in lower salary expense,
      discretionary spending as well as lower legal and professional fees. SG&A
      has increased as a percentage of sales due to the decrease in sales discussed
      above.





***Loss
      from Operations***





Loss
      from
      operations for the quarter ended March 31, 2008, totaled $4.4 million. Operating
      losses were 34.9% of net sales for the quarter ended March 31, 2008 down from
      $2.6 million in losses, or 9.3% of net sales, for the quarter ended March
      31, 2007. The increase in operating losses was a result of the decline in net
      sales and gross margins, partially offset by the decrease in SG&A expenses
      as discussed above.





***Other
      (Expense) Income***





Interest
      expense decreased by $0.2 million in the quarter ended March 31, 2008 compared
      to the quarter ended March 31, 2007 due to lower debt levels and lower interest
      rates over the same period.





We
      recognized a non-cash gain of $0.8 million related to warrant derivatives during
      the quarter ended March 31, 2008 compared to a gain recognized of $4.8 million
      for the quarter ended March 31, 2007. These gains were due to a decrease in
      the
      trading price of our stock for the respective periods, which caused our warrant
      derivative liability to decrease.





Amortization
      of debt issuance costs was $0.1 million and $0.3 million for the quarters ended
      March 31, 2008 and 2007, respectively.





Accretion
      of debt discount for the quarter ended March 31, 2008 was $0.6 million, compared
      to an accretion of $1.0 million for the three months ended March 31, 2007.





***Income
      Tax Benefit***





No
      benefit for income tax was recorded for the quarter ended March 31, 2008.
      Although we expect to return to profitability in the latter part of 2008, no
      tax
      benefit has been recognized in the quarter ended March 31, 2008 because under
      applicable accounting standards our cumulative losses for the three years ended
      December 31, 2007 are deemed to have created significant negative evidence
      that
      it is more likely than not that we will not be able to realize our net deferred
      tax assets. Therefore, a valuation allowance has been recorded against our
      net
      deferred tax assets.





**Liquidity
      and Capital Resources**





In
      recent
      years we have funded our operations and capital expenditures primarily with
      cash
      generated internally by operations, borrowings under various credit facilities,
      cash received from exercised options and private placements of equity.





Cash
      and
      cash equivalents were $2.4 million at March 31, 2008 compared to $0.4 million
      at
      December 31, 2007. The increase was primarily due to positive cash flow from
      operating activities, as well as proceeds from the issuance of preferred stock,
      partially offset by principal payments on long-term debt.





Cash
      totaling $1.3 million was provided by operating activities during the three
      months ended March 31, 2008 compared to cash used of $4.9 million during the
      three months ended March 31, 2007. During the three months ended March 31,
      2008,
      the net loss, adjusted for non-cash expenses from depreciation and amortization,
      stock compensation expense, gain on derivative liability and accretion on debt
      discount used $3.9 million of operating cash. Changes in remaining working
      capital balances during this period provided $5.2 million in cash.





Net
      cash
      used by investing activities, consisting primarily of the purchase of property
      and equipment, was $0.1 million in the three months ended March 31, 2008 and
      $0.3 million in the three months ended March 31, 2007.





Net
      cash
      provided by financing activities was $0.9 million in the three months ended
      March 31, 2008, consisting of proceeds from the issuance of convertible
      preferred stock of $1.6 million, offset by $0.8 million in principal payments
      on
      long-term debt. This compares to net cash provided by financing activities
      of
      $3.0 million in the three months ended March 31, 2007, which consisted of
      proceeds from reduction of restricted cash of $3.2 million, offset by $0.3
      million in principal payments on long-term debt.





20




On
      February 26, 2008, we were notified by our lender Laurus Master Fund, Ltd.
      (“Laurus”) and two of its related entities that we were not in compliance with
      all covenants. In March 2008, we entered into an agreement with Laurus and
      its
      two related entities pursuant to which we obtained a waiver of the event of
      default and restructured certain other provisions of the promissory notes issued
      to Laurus in 2006, as further described below and in Note 5.





Management
      has taken the following actions, among others to address liquidity and operating
      performance issues:





·In
      March 2008 we entered into an amendment
      and waiver agreement with Laurus and its related entities. Pursuant to the
      waiver, we issued warrants to purchase 3,000,000 shares of Modtech’s common
      stock at an exercise price of $0.40 per share and additional promissory notes
      in
      the aggregate principal amount of $750,000, on which the principal amount plus
      related interest are due and payable on December 29, 2009. In return Laurus
      and
      its related entities agreed to defer principal payments of $375,000 per month
      for the period March 1, 2008 through June 30, 2008, for a total deferral of
      $1.5
      million, temporarily eliminate the covenant to maintain on a monthly basis
      at
      least $9 million in cash and eligible accounts receivable (the “Minimum
      Balance”) as of December, 31, 2007 through February 29, 2008, reduce the Minimum
      Balance from $9 million to $5.4 million for the period March 1, 2008
      through March 31, 2008 and to $6.6 million for the period April 1, 2008 through
      June 30, 2008. The monthly interest payments of approximately $110,000 per
      month
      will continue without deferral or abatement and, commencing July 1, 2008, the
      monthly principal payments will resume and the Minimum Balance will again be
      $9
      million.


·In
        March 2008, we completed an equity
        financing with existing shareholders, new investors and directors and executives
        of the company, pursuant to which we issued 14,190 shares of its newly created
        Series B Preferred Stock and 2,206 shares of its newly created Series C
        Preferred Stock, each at $100 per share for an aggregate purchase price of
        $1.6
        million.


·  We
        significantly reduced production staffing, overhead and selling general and
        administrative expenses.


·  We
        have
        developed an operating plan to manage costs in line with estimated total
        revenues for fiscal 2008, including contingencies for further cost reductions
        if
        projected revenue and improvement in operating results are not fully
        realized.


·  We
        have
        identified additional financing alternatives, including public or private
        offerings of equity or debt securities that we plan to pursue if necessary
        during 2008.





Based
      on
      the actions taken to date, and based on our current backlog and projections
      of
      future contracts, management believes that existing cash resources, working
      capital and cash flow from operations will be sufficient to meet our operating
      and liquidity requirements and that compliance with provisions of the modified
      promissory note agreements will be maintained during 2008.




21


**Item
      3. Quantitative And Qualitative Disclosures About Market
      Risk**





Market
      risk refers to the risk that a change in the level of one or more market factors
      such as interest rates, foreign currency exchange rates, or equity prices will
      result in losses for a certain financial instrument or group of instruments.
      We
      do not hold any instruments that are subject to such risks, but we are exposed
      to the risk of increased interest rates on our credit facility the risk of
      loss
      on credit extended to our customers, and risk of fluctuations in the fair value
      of our derivative liabilities on certain instruments.





INTEREST
      RATE RISK





We
      are
      exposed to the risk of fluctuation in interest rates. We do not use interest
      rate swaps or other types of derivative financial instruments to hedge our
      interest rate risk. Our outstanding term notes with Laurus Master Fund, Ltd.
      bear interest at adjustable rates equal to the prime rate, as published in
      the
      Wall Street Journal, plus 2.5% to 3.75%. As of March 31, 2008, the prime rate
      was 5.25%. The current principal debt outstanding under these notes at March
      31,
      2008 is $14.4 million. Therefore, a one-percentage point increase in interest
      rates would result in an increase in interest expense of approximately $144,000
      per annum.





CREDIT
      RISK





Our
      credit terms generally are “net 30” for dealer accounts and defined by contracts
      which vary for direct sales. We actively monitor this risk through a variety
      of
      control procedures involving senior management. Historically, credit losses
      have
      been less than 1.0% of sales and within our expectations.





DERIVATIVE
      LIABILITY RISK





We
      are
      exposed to the risk of fair value derivative liability related to outstanding
      warrants. The fair value of these derivative liabilities is primarily determined
      by fluctuations in our stock price. As our stock price increases or decreases,
      the fair value of these derivative liabilities increase or decrease, resulting
      in a corresponding current period loss or gain to be recognized. Based on the
      number of outstanding warrants, market interest rates and historical volatility
      of our stock price as of March 31, 2008, a $0.28 decrease or a $1 increase
      in
      our stock price results in a non-cash derivative gain or loss of approximately
      $0.6 million and $3.9 million, respectively. For the quarter ended March 31,
      2008, we experienced a $0.8 million non-cash gain on warrant derivatives,
      respectively, due to the decrease in our stock price from $0.89 at December
      31,
      2007 to $0.28 at March 31, 2008.




22


**Item
      4T. Controls And Procedures**





**(a)
      Evaluation of Disclosure Controls and Procedures**





As
      of the
      end of the period covered by this report, we carried out an evaluation, under
      the supervision and with the participation of our management, including our
      Chief Executive Officer and our Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures (as such
      terms are defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
      Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, and
      because of the material weaknesses discussed below, our Chief Executive Officer
      and Chief Financial Officer concluded that, as of March 31, 2008, our disclosure
      controls and procedures were not effective in ensuring that the information
      required to be filed or submitted under the Exchange Act is recorded, processed,
      summarized and reported as specified in the Securities and Exchange Commission’s
      rules and forms, and accumulated and communicated to our management, including
      our Chief Executive Officer and Chief Financial Officer, as appropriate to
      allow
      timely decisions regarding required disclosure. We believe, however, that the
      accompanying consolidated financial statements presented in this Form 10-Q
      fairly present the financial condition and results of operations for the periods
      indicated.





The
      identified material weaknesses in our internal control over financial reporting
      relate to the following matters:





·
            We
                lack the necessary depth of personnel with sufficient technical accounting
                expertise to ensure that the preparation of interim and annual financial
                statements are without material
                misstatements.





·
            Our
                procedures associated with accounting for our long-term revenue contracts
                continue to be insufficient to ensure that revenue and costs are
                properly
                reflected in our consolidated financial
                statements.





Our
      plan
      to remediate those material weakness remaining as of December 31, 2007 is as
      follows:





·
            We
                plan to either hire additional staff for our operational finance
                teams or
                utilize outside consulting resources for further documentation, testing
                and monitoring of key controls.





·
            We
                are currently re-evaluating all finance personnel to ensure that
                appropriate skills and training are maintained in all critical
                positions.





**(b)
      Changes in Internal Control over Financial Reporting**





There
      were no changes in our internal controls over financial reporting that occurred
      during the quarter ended March 31, 2008, that have materially affected or are
      reasonably likely to materially affect our internal control over financial
      reporting.




23


**PART
      II. OTHER INFORMATION**


**Item
      1. Legal Proceedings**





We
      are a
      party to various claims, complaints and other legal actions that arise in the
      normal course of business from time to time. We believe the outcome of these
      pending legal proceedings, in the aggregate, will not have a material adverse
      effect on our results of operations or financial position.





**Item
      1A. Risk Factors**





There
      have been no material changes from the risk factors disclosed in our most
      recently filed report on Form 10-K .





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**





None,
      except those previously reported on a current report on Form 8-K.


**Item
      3. Defaults upon Senior Securities**





None,
      except those previously reported on a current report on Form
      8-K.





**Item
      4. Submission of Matters to a Vote of Security Holders**





None





**Item
      5. Other Information**





None





24




**Item
      6. Exhibits**




**Exhibit****Number**
            
            **Name
                of Exhibit**3.1(1)
            
            Certificate
                of Incorporation of the Company.3.2(1.1)
            
            Bylaws
                of the Company.3.3(18)
            
            Certificate
                of Amendment of Certificate of Incorporation4.1(18)
            
            Certificate
                of Designation of Preferences4.2(18)
            
            Amended
                and Restated Certificate of Designation of Preferences10.1(2)
            
            Company’s
                1994 Stock Option Plan.10.2(2)
            
            Company’s
                1996 Stock Option Plan.10.3(2)
            
            Company’s
                1999 Stock Option Plan.10.4(2)
            
            Company’s
                2002 Stock Option Plan.10.5(3)
            
            Employment
                Agreement between the Company and Dennis L. Shogren.10.6(3.1)
            
            Employment
                Agreement between the Company and Ronald Savona.10.7(3.2)
            
            Employment
                Agreement between the Company and Kenneth S. Cragun.10.8(4)
            
            Lease
                between the Company and Pacific Continental Modular Enterprises,
                relating
                to the Barrett property in Perris, California10.9(4)
            
            Lease
                between the Company and BMG, relating to the property in Lathrop,
                California10.10(5)
            
            Conversion
                and Repurchase Agreement, dated October 31, 200610.11(6)
            
            Warrant
                to Purchase Common Stock issued December 31, 200410.12(7)
            
            Amendment
                Number 1 to Industrial Real Estate Lease between Modtech Holdings,
                Inc.
                and BMG2 Enterprises, dated July 29, 200510.13(7)
            
            Sublease
                between Modtech Holdings, Inc. and Boise Building Solutions Distribution,
                L.L.C., dated July 29, 200510.14(8)
            
            Warrant
                for 8,276 shares of common stock, dated August 5, 200510.15(9)
            
            Intercreditor
                Agreement with Bank of America, N.A., dated, March 31,
                200610.16(9)
            
            Loan
                and Security Agreement with Bank of America, N.A., dated March 31,
                200610.17(9)
            
            Amendment
                Agreement, dated March 31, 200610.18(10)
            
            Amendment
                to 2002 Stock Option Plan, dated June 13, 200610.19(11)
            
            Exchange
                of Senior Subordinated Secured Convertible Notes, dated May 3,
                200610.20(12)
            
            Securities
                Purchase Agreement with Laurus Master Fund, Ltd. (and attached exhibits),
                dated October 21, 200610.21(12)
            
            Intellectual
                Property Security Agreement, dated October 31,
                2006




25




**Exhibit****Number**
            
            **Name
                of Exhibit**10.22(12)
            
            Master
                Security Agreement with Laurus Master Fund, Ltd., dated October 31,
                200610.23(12)
            
            Registration
                Rights Agreement with Laurus Master Fund, Ltd., dated October 31,
                200610.24(12)
            
            Sale
                and Purchase Agreement and Joint Escrow Instructions with NL Ventures
                V,
                L.P. dated November 1, 200610.25(12)
            
            Lease
                Agreement with NL Ventures V Plant City, L.P. dated November 1,
                200610.26(13)
            
            Registration
                Rights Agreement with Amphora Limited, dated October 31,
                200610.27(13)
            
            Conversion
                and Repurchase Agreement, dated October 31, 200610.28(14)
            
            Amendment
                and Waiver Agreement with Laurus Master Fund, Ltd., dated December
                28,
                200610.29(14)
            
            Securities
                Purchase Agreement with Laurus Master Fund, Ltd., dated December
                28,
                200610.30(14)
            
            Secured
                Term Note issued to Laurus Master Fund, Ltd., dated December 28,
                200610.31(14)
            
            Common
                Stock Purchase Warrant issued to Laurus Master Fund, Ltd., dated
                December
                28, 200610.32(14)
            
            Amended
                and Restated Registration Rights Agreement with Laurus Master Fund,
                Ltd.,
                dated December 28, 200610.33(15)
            
            Amendment
                and Waiver Agreement with Laurus Master Fund, Ltd., Valens Offshore
                SPV I,
                Ltd. and Valens U.S. SPV I, LLC, dated February 29,
                200810.34(15)
            
            Promissory
                Note issued to Laurus Master Fund, Ltd. in the amount of $634,414.36,
                dated February 29, 200810.35(15)
            
            Promissory
                Note issued to Valens Offshore SPV I, Ltd. in the amount of $66,602.06,
                dated February 29, 200810.36(15)
            
            Promissory
                Note issued to Valens U.S. SPV I, LLC in the amount of $48,983.58,
                dated
                February 29, 200810.37(15)
            
            Common
                Stock Purchase Warrant issued to Laurus Master Fund, Ltd. for up
                to
                2,537,657 shares of stock, dated February 29, 200810.38(15)
            
            Common
                Stock Purchase Warrant issued to Valens Offshore SPV I, Ltd. for
                up to
                266,408 shares of stock, dated February 29, 200810.39(15)
            
            Common
                  Stock Purchase Warrant issued to Valens U.S. SPV I, LLC for up
                  to 195,935
                  shares of stock, dated February 29,
                  200810.40(15)
            
            Registration
                Rights Agreement with Laurus Master Fund, Ltd., dated February 29,
                200810.41(15)
            
            Registration
                Rights Agreement with Valens Offshore SPV I, Ltd., dated February
                29,
                200810.42(15)
            
            Registration
                Rights Agreement with Valens U.S. SPV I, LLC, dated February 29,
                200810.43(15)
            
            Reaffirmation
                and Ratification Agreement with Laurus Master Fund, Ltd., Valens
                Offshore
                SPV I, Ltd. and Valens U.S. SPV I, LLC, dated February 29,
                200810.44(15)
            
            Lock-Up
                Letter Agreement with Laurus Master Fund, Ltd., Valens Offshore SPV
                I,
                Ltd. and Valens U.S. SPV I, LLC, dated February 29,
                2008




26




**Exhibit****Number**
            
            **Name
                of Exhibit**10.45(15)
            
            Subscription
                Agreement with the "Buyers" (as defined therein), dated March 10,
                200810.46(15)
            
            Registration
                Rights Agreement with the Buyers as described in Exhibit 10.63 above,
                dated March 10, 200810.47(15)
            
            Amended
                and Restated Common Stock Purchase Warrant issued to Laurus Master
                Fund,
                Ltd. for up to 2,537,657 shares of stock, dated March 21,
                200810.48(15)
            
            Amended
                and Restated Common Stock Purchase Warrant issued to Valens Offshore
                SPV
                I, Ltd. for up to 266,408 shares of stock, dated March 21,
                200810.49(15)
            
            Amended
                and Restated Common Stock Purchase Warrant issued to Valens U.S.
                SPV I,
                LLC for up to 195,935 shares of stock, dated March 21,
                200831.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                200232.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002





________________________





(1)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Registration Statement on Form
                  S-4 filed with the Commission on October 27, 1998 (Commission File
                  No.
                  333-69033).





(1.1)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 10-K filed with the
                  Commission on March 15, 2004 (Commission File No.
                  000-25161).





(2)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 10-Q filed with the
                  Commission on November 12, 2004 (Commission File No.
                  000-25161).





(3)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 8-K filed with the
                  Commission on September 22, 2006 (Commission File No.
                  000-25161).





(3.1)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 8-K filed with the
                  Commission on February 13, 2006 (Commission File No.
                  000-25161).





(3.2)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 8-K filed with the
                  Commission on June 25, 2007 (Commission File No.
                  000-25161).





(4)
              Incorporated
                  by reference to Modtech, Inc.’s Registration Statement on Form S-1 filed
                  with the Commission on June 6, 1990 (Commission File No.
                  033-35239).





(5)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 8-K filed with the
                  Commission on November 1, 2002 (Commission File No.
                  000-25161).





(6)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 8-K filed with the
                  Commission on January 3, 2005 (Commission File No.
                  000-25161).





(7)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 10-Q/A filed with the
                  Commission on October 17, 2005 (Commission File No.
                  000-25161).





(8)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 8-K filed with the
                  Commission on August 9, 2005 (Commission File No.
                  000-25161).




27





(9)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 10-K filed with the
                  Commission on April 4, 2006 (Commission File No.
                  000-25161).





(10)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Definitive Proxy Statement filed
                  with the Commission on May 5, 2006 (Commission File No.
                  000-25161).





(11)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 10-Q filed with the
                  Commission on August 14, 2006 (Commission File No.
                  000-25161).





(12)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 10-Q filed with the
                  Commission on November 14,
                  2006.





(13)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 8-K filed with the
                  Commission on November 1, 2006 (Commission File No.
                  000-25161).





(14)
              Incorporated
                  by reference to Modtech Holdings, Inc. Form 8-K filed with the
                  Commission
                  on January 4, 2007 (Commission File No.
                  000-25161).





(15)
              Incorporated
                  by reference to Modtech Holdings, Inc.’s Form 10-K filed with the
                  Commission on April 14, 2008 (Commission File No.
                  000-25161).





28





**SIGNATURES**





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




MODTECH
                HOLDINGS, INC.Date:
                May 15, 2008
            
            by:
            /s/
                KENNETH S. CRAGUN**Kenneth
                S. Cragun**
              **Chief
                Financial Officer****and
                Chief Accounting Officer**by:
            /s/
                DENNIS L. SHOGREN**Dennis
                L. Shogren**
              **President
                and Chief Executive
                Officer**




29