**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**









**FORM 10-K**










x
            **ANNUAL
                REPORT PURSUANT TO SECTION1 3 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the fiscal year ended March 31,
                2008**





**-OR-**





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




**Commission
      File Number 033-377099-S**










**T-BAY
      HOLDINGS, INC.**


(Exact
      Name of registrant as specified in its charter)




**NEVADA**
            
            **91-1465664**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)****




**18****th****Floor, YongSheng Building**
              **ZhongShan
                Xi Road**
              **Xuhui
                District, Shanghai, China**
              (Address
                of principal executive offices)
            
            (Zip
                code)





Issuer’s
      telephone number, including area code: **86-021
      51539900**





(Former
      name, former address or former fiscal year, if changed since last
      report)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o     No ü





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o   No ü





Indicate
      by check mark whether the registrant: (1) 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 ü No o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) is not contained herein, and will no
      be contained, to the best of registrant’s knowledge, indefinitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K. Yes o     No ü





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





Large
                accelerated filer o
            Accelerated
                filer oNon-accelerated
                filer
            Smaller
                reporting company ü








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





As
      of
      March 31, 2008, the aggregate market value of the registrant’s common stock held
      by non-affiliates of the registrant was $28,037,763 based on the closing sale
      price as reported on the Over-the-Counter Bulletin Board. As of June 30, 2008,
      there were 30,088,174 shares of common stock outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





None








T-Bay
      Holdings, Inc.




**FORM
      10-K**





For
      the
      Year Ended March 31, 2008




**TABLE
      OF CONTENTS**




**PART
                I**ITEM
                1.
            
            Business
            5ITEM
                1A.
            
            Risk
                Factors
            12ITEM
                1B.
            
            Unresolved
                Staff Comments
            19ITEM
                2.
            
            Properties
            20ITEM
                3.
            
            Legal
                Proceedings
            20ITEM
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            20**PART
                II**ITEM
                5.
            
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            20ITEM
                6.
            
            Selected
                Financial Data
            21ITEM
                7.
            
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            22ITEM
                7A.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            30ITEM
                8.
            
            Financial
                Statements and Supplementary Data
            F-1ITEM
                9.
            
            Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure
            31ITEM
                9A.
            
            Controls
                and Procedures
            31ITEM
                9B.
            
            Other
                Information
            33**PART
                III**ITEM
                10.
            
            Directors
                and Executive Officers of the Registrant
            34ITEM
                11.
            
            Executive
                Compensation
            36ITEM
                12.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            38ITEM
                13.
            
            Certain
                Relationships and Related Transactions
            40ITEM
                14.
            
            Principal
                Accountant Fees and Services
            40**PART
                IV**ITEM
                15
            
            Exhibits,
                Financial Statement Schedules
            40**SIGNATURES**
            
            41


Page
          3 of
          42





**INFORMATION
      REGARDING FORWARD-LOOKING STATEMENTS**




This
      Annual Report on Form 10-K contains forward-looking statements. These statements
      relate to future events or our future financial performance. These statements
      involve known and unknown risks, uncertainties and other factors that may cause
      our actual results, levels of activity, performance or achievements to be
      materially different from any future results, levels of activity, performance,
      or achievements expressed or implied by forward-looking statements. In some
      cases, you can identify forward-looking statements by terminology such as "may,"
      "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
      "predict," "potential" or "continue," the negative of such terms or other
      comparable terminology. These statements are only predictions. Actual events
      or
      results may differ materially.




Although
      we believe that the expectations reflected in the forward-looking statements
      are
      reasonable, we cannot guarantee future results, levels of activity, performance
      or achievements. Moreover, neither we nor any other person assumes
      responsibility for the accuracy and completeness of the forward-looking
      statements. We undertake no duty to update any of the forward-looking statements
      after the date of this report to conform such statements to actual results
      or to
      changes in our expectations.




Readers
      are also urged to carefully review and consider the various disclosures made
      by
      us which attempt to advise interested parties of the factors which affect our
      business, including without limitation the disclosures made in *PART
      I. ITEM 1A: Risk Factors* and *PART
      II. ITEM 6 "Management's Discussion and Analysis or Plan of
      Operatio* n"
      included herein.


Page
            4 of
            42





**PART
      I.**





**Item
      1.**   **Business.**





**Overview**




The
      Company was incorporated under the laws of the State of Utah on August 8, 1984
      with the name of "Sharus Corporation" with authorized common stock of 50,000,000
      shares with par value of $0.001 per share. On June 13, 1989 the domicile of
      the
      Company was changed to the state of Nevada in connection with a name change
      to
      "Golden Quest, Inc." On January 7, 2002, the name was changed to "T-Bay
      Holdings, Inc." as part of a reverse stock split of 400 shares of outstanding
      stock for one share. On January 17, 2005 the Company carried out a reverse
      stock
      split of 20 shares of outstanding stock for one share.   After the
      reverse split, the Company has authorized common stock of 100,000,000 shares
      common stock and 10,000,000 shares of preferred stock both with par value of
      $0.001.





On
      August
      1, 2005, the Company entered into an Agreement and Plan of Reorganization (the
      “Agreement”) between Wise Target International Limited, (“Wise Target”), Amber
      Link International Limited (“Amber Link”), Ms. Meilian Li and Mr. Xiaofeng Li.
 Pursuant to the terms of the Agreement, following due diligence, the
      Company acquired all of the outstanding stock of Wise Target and Amber Link,
      making them wholly owned subsidiaries of the Company.  Wise Target and
      Amber Link together own and control 95% of Shanghai Sunplus Communication
      Technology Co., Ltd., (“Sunplus”), a Sino-foreign joint venture. The Agreement
      required the Company to issue 18,550,000 shares of restricted common stock
      in
      exchange for all of the issued and outstanding shares of Wise Target and Amber
      Link.  This transaction was subsequently completed on August 16,
      2005.





We
      conduct our business through our 95% owned subsidiary, Shanghai Sunplus
      Communication Technology Co., Ltd., a Sino-foreign joint venture established
      in
      China in 2002, which provides a wide span of mobile handset design and other
      services to leading mobile handset brand owners in China.  Sunplus also
      provides total solution services to its customers, starting from new product
      concept identification, handset exterior design, hardware and software design,
      material procurement, production, and after-sale maintenance services.
      Historically, our customers included multinational brand names such as Motorola,
      NEC, Siemens, China Telecom, Panasonic and Alcatel. Starting from the last
      fiscal year, we also conduct our business through Amber Link. Our major
      customers in China in fiscal year ended March 31, 2008 were Shenzhen Naide
      Technology Co., Ltd., Shenzhen Henkai Co. Ltd., Shenzhen Xuanhua Electronic
      Technology Co. Ltd., Beijing Hocom Co., Ltd. and Shenzhen Noato Technology
      Co.,
      Ltd.





We
      focus
      on the vast and booming wireless telecommunication market in China. By working
      closely with top technology partners, we provide tailored mobile handset design
      solution services according to our customers’ specifications. We believe we have
      strong capabilities to design mobile handsets to support a broad range of
      wireless communications standards, baseband platforms and components. We also
      provide production support to facilitate our customers’ manufacturing and supply
      chain management processes. In addition, our special project teams work closely
      with our customers to monitor and coordinate the progress of each new design
      project. To further strengthen our presence in the market, we have also begun
      to
      work with our customers in providing customized handset solutions to mobile
      service operators. We believe the design solutions and services provided by
      us
      can help our customers in enhancing competitive strength and gaining market
      share.





**Corporate
      Structure**





Sunplus
      is jointly owned by Wise Target, Amber Link and Shanghai Fanna Industrial
      Product Design Co., Ltd. (“Shanghai Fanna”).  Wise Target and Amber link
      are investment holding companies incorporated in the British Virgin Islands
      whereas Shanghai Fanna is a privately-owned company established in China in
      2001. On August 16, 2005, T-Bay Holdings completed a reverse merger with Wise
      Target and Amber Link, which jointly hold 95% interests of Sunplus.


Page
          5 of
          42


In
      January 2007, Sunplus established Zhangzhou JiaXun Communication Facility
      Co.,Ltd. (“JiaXun”), a 100% owned subsidiary in Zhangzhou in Fujian province. In
      March 2007, JiaXun and Sunplus respectively acquired 20% and 80% interest in
      Fujian QiaoXing Industry Co.,Ltd.(“Fujian QiaoXing”) for the construction
      of a technology park for long term development in the mobile
      telecommunication industry. Fujian QiaoXing was established on February 13,
      2004, with a registered capital of RMB20,000,000 ($2,590,000).





The
      current corporate structure of T-Bay Holdings is as follows:





tbay logo





**Company
      History of Sunplus**





October
      2002 - Sunplus was established in Shanghai, with only 40 employees.





December
      2002 - Sunplus established its strategic cooperation with Skyworks, followed
      by
      the first mobile phone modules based on Skyworks’ chips platform. The first
      module developed by Sunplus was used by Panda Electronics Inc. (“Panda”) for
      making 150,000 mobile handsets and also was used by one of our major customers,
      CECT.





May
      2003
      - Sunplus launched its first phone model design.


Page
          6 of
          42


April
      2003 - Sunplus started collaboration with French Wavecom in module R&D.
 The module was completed six months later, which was ordered by Huizhou
      Jialili Telecommunication Co., Ltd. (“Huizhou Jialili”), in its phone model T2,
      which became one of its most popular products.





December
      2003 - Sunplus completed the development of an electronics platform, which
      was
      sold to Huaguan Electronics Inc. (“Huaguan”) for RMB 20 million ($2,480,000),
      which was followed by a 150,000 sets order from Panda and 200,000 units order
      from CECT.





As
      of
      January 2004 - more than 500,000 mobile phone handsets designed by Sunplus
      were
      sold in the China market. Major models included A606 Yinghu for Huaguan, Q747
      Zhizhun for Philips, T520 Beetles for Hong Kong Zhongjian Telecom. Subsequently,
      Sunplus continuously received large orders from Panda, CECT, Huizhou Jialili,
      most of which exceed 200,000 units.





January
      2004 - Sunplus established a partnership with Shenzhen Ankai Microelectronics
      Technology Co., Ltd. in order to establish a multimedia chips platform, which
      combines Ankai’s applications of multimedia chips and Skyworks’s radio
      functions.





Our
      product, T520 Beetles, was awarded by Sina.com as the Most Popular Mobile Phone
      for Female.





May
      2005
      - our design SP-8 for the product CECT S569 was awarded top 100 iF Asia design.
      SP-8 was also awarded the Fashion Color Nominate Prize.





On
      August
      16, 2005 - we completed a reverse merger with Amber Link and Wise Target and
      currently we own 95% of Sunplus.





May
      2006
      - Sunplus received the ISO9001:2000 certification of quality management
      system.





August
      2006 - Sunplus and VIA Technologies Inc., Ltd. (TSEC: 2388), a leading chipset
      solution provider, established a partnership for Global Systems for Mobile
      Communications (GSM) handsets development.





December
      2006 - Sunplus and MediaTek Inc., Ltd. (“MTK”) (TSEC: 2454), a leading chipset
      solution provider based in Taiwan, entered into a partnership agreement to
      jointly develop multi-media Global Systems for Mobile Communications (GSM)
      handsets for the mobile telecommunications market in China.





January
      2007 - Sunplus re-launched a partnership with Anyka Inc., a Silicon Valley
      based
      company, which enabled us to access the new technology of Infineon, a leading
      chipset solutions provider headquartered in Germany.





January
      2007 - Sunplus established JiaXun





February
      2007 - Sunplus acquired RF design team from Simiens&BenQ, and extended our
      design service in RF design industry.





March
      2007 - JiaXun, a 100% subsidiary of Sunplus, and Sunplus respectively acquired
      20% and 80% interests in Fujian QiaoXing, which will focus on the manufacture
      of
      telephone and mobile components.





May
      2007
      - Sunplus received six copyrights for its designed software. All of them are
      games and applications for mobile phone.





May
      2007
      - Sunplus established its Tech-Support Center in Shenzhen.





May
      2007
      - Sunplus was awarded “Software Company” by Ministry of Information Industry of
      China.




October
      2007 - Sunplus kicked off the world’s first phone solution which combined with
      ECG (Electrocardiogram) monitor function.


Page
          7 of
          42


February
      2008 - Sunplus reached agreement with Infineon Technologies Asia Pacific Pte
      Ltd. to develop Tire
      Pressure Monitor System (TPMS) sensors .
      It’s
      the first step by Sunplus to enter the Auto-Mobile Electronic Design
      market.





In
      2008 -
      Sunplus has developed GSM-R device and system for railway network in
      China.




**Services
      and Products**





We
      seek
      to maintain and strengthen our position as a provider of high quality mobile
      handset design services.  We tailor-make our services and products based on
      the requirements of our customers.  Our services mainly
      include:





*Design
      Service*





Mobile
      handset design:  We have special project teams to work closely with our
      customers to monitor and coordinate the progress of each new design
      project.





Industrial
      and mechanical design:  We design the exterior outlook and mechanical
      structure of a mobile handset.  We adopt the user-orientation design
      concept and focus our product design on the personality of target
      end-users.





Hardware
      design:  In addition to the design of the core printed circuit board
      layout, we have also set up special engineering teams on the design of baseband
      and radio frequency parts of mobile handsets based on chip platforms.





Software
      design:  We design the software system for the mobile handset and its
      functional modules.  We are capable of developing our own software in
      man-machine-interface and the driver software for LCD display, camera, harmonic
      ring tones and MP3 functions.





Auto
      Mobile wireless device design: As of June 2008, we developed a GPS device and
      Tire Pressure Monitor System (TPMS) sensors. We are capable of designing other
      devices and systems related to the automobile wireless technology.





Railway
      wireless system design: We developed GSM-R device and system for railway
      network. We are capable of developing devices and systems related to railway
      wireless technology.





Other
      Design Services:   We can also design other electronic devices based
      on wireless technology. Currently, we are considering extending our design
      in
      GPS device, Radio Frequency design.





*Production
      Services*





Based
      on
      the request of our customers, we also manufacture the components and/or the
      entire mobile handsets.  We subcontract the production work to third party
      manufacturers mostly in the Shanghai area.  We have a quality assurance
      team to monitor the production process to ensure the products can meet our
      quality requirements.





Components:
       These mainly include printed circuit boards (PCB) and printed circuit
      board assembly (PCBA).  They are the backbones of mobile
      handsets.





Whole
      mobile handsets: Based on special requests of the customers which may not have
      the resources or facilities to manufacture the whole mobile handsets, we
      periodically assemble and deliver complete handsets.


Page
          8 of
          42


*After-sale
      Services*





For
      the
      mobile handsets we manufacture for our customers, we will also provide
      maintenance services during the product warranty period.





**Business
      Model**





We
      are
      one of the largest wireless telecommunication design houses in China. We
      generate our revenue mainly by charging design services fees and royalty fees
      and by selling mobile phone components and whole handsets.





*Revenue
      from Design Services*





We
      charge
      design fees directly or indirectly for design solutions or services provided
      by
      us. The design fee consists of NRE (non-recurring engineering) fees and royalty
      fees.





NRE
      fees
      are one-off fees for a certain design project. Typically, NRE fee is required
      before we formally launch the project. We will start the development of a
      certain solution only if we have received the pre-paid NRE fee. To minimize
      the
      operation risk, the NRE fee should be no less than the projected R&D fee for
      a certain design solution.





We
      also
      charge royalty fees based upon the product sales volume of our customers. When
      the whole handset is sold in the market, we charge royalty fees monthly on
      every
      handset manufactured by our customers using our designs. We usually ask for
      a
      minimum volume term in our contracts to encourage larger volume order in a
      certain period of time.





*Revenue
      from Sales of Handsets and Components*





We
      also
      provide production support to facilitate our customers’ manufacture of mobile
      handsets and components. By closely working with our OEMs, we manufacture and
      sell PCBs, PCBAs and handsets to our customers. We are fully responsible for
      material purchases, cost control and quality control.





**Competitive
      Strengths**





*Strategic
      Relationships with Business Partners*





As
      the
      mobile handset industry is characterized by rapid technological changes, it
      is
      essential for us to keep abreast of and have access to the latest technologies
      by working closely with the world’s leading technology and platform providers.
      We continue to work closely with VIA Technologies Inc. (VIA), MediaTek Inc.,
      Ltd.(MTK), Anyka Inc.(Anyka), Infineon Inc.(Infineon) as our strategic partners
      which enables us to expand our product coverage. We believe we are one of the
      first independent mobile handset design houses in China to work with Skyworks,
      Inc (Skyworks), which has established a dedicated support team in Shanghai
      to
      support us in our design process.





We
      have
      also established good relationships with subcontractors which provide production
      services for mobile phone components and handsets.





*Quick
      Market Response*





We
      pursue
      a market-oriented product development strategy, grasping end-users’ preferences
      and tastes. Our experience and expertise enables us to complete a design
      solution in only two to three months, to ensure our designs are one step ahead
      of our competitors and leading market trends.


Page
          9 of
          42


*Strong
      R&D capability*





We
      have a
      professional and competent team to handle the wide spectrum of mobile phone
      design jobs, including industrial design, structural design, electronics design,
      software design and machine-man interface design. Some of our engineers used
      to
      be employed by mobile communication leaders such as Motorola, Siemens or BenQ.
      Our professional industrial design team was the IF Asia Design Award Winner
      in
      2005.





We
      are
      one of few design houses in China that are able to develop new mobile phones
      based on chip-level modules, which can enhance the flexibility of the product
      design in terms of handset size and functionalities.





*Customized
      Products and Market Knowledge*





We
      design
      many of our products based on our customers’ specifications. We work closely
      with mobile device manufacturers and brand name owners to understand their
      needs
      and product roadmaps. We also interface with our customers regularly to
      understand the mobile handset market, consumer preferences and trends in the
      industry. This allows us to predict future trends and to assist our customers
      in
      the development of new products and functions and the setting of a price
      range.





**Current
      Business Development**





During
      the fiscal year ended March 31, 2008, we launched 31 mobile handset solutions
      based on 3 different chipset platforms covering the high-end, mid-end and
      low-end markets. We kept working closely with strategic partners VIA, MTK,
      Anyka, Infineon , Skyworks and other technology partners, which greatly expanded
      and diversified our product portfolio to cover more market segments. During
      the
      fiscal year ended March 31, 2008, we developed mobile phone solutions with
      new
      functions including but not limited to dual-SIM card, ECG monitor, push-to-talk,
      finger print recognition, gravity sensor, PHS (Personal Handy-phone System),
      Dual-T card and Digital TV tuning. We can tailor-make solutions featuring
      functions such as handwriting recognition, digital cameras, Dual speakers,
      GPRS,
      FM radio, dictionaries, webcams, blue tooth, E-mail, MP3, MPEG4 3GP, WAP, USB,
      T-Flash, MMS, CMOS, TV-out, fingerprint authentication, firewall and sound
      recorder.





In
      the
      fiscal year 2008, we also completed design of two 3G solutions, one of which
      was
      TDS-CDMA solution and another was WCDMA solution. The TDS-CDMA solution was
      designed specially for the China domestic market.





Our
      designs are targeted to specific market segments in China. We provide one
      solution with the function of an ECG monitor for medical institutions. It is
      the
      first mobile phone solution with health care function in China and in the world.
      Another design, with a push-to-talk function, was targeted to a market of
      employees in hotels and convention centers.





We
      aim to
      help our customers enhance their competitive capacity by accelerating the
      product-to-market process. We believe we were among the first design houses
      in
      China to provide phone solutions of multimedia, handwriting, TV-output, GSM+PHS,
      Dual Sim Card, finger print recognition, and ECG monitor to our customers.
       We hope this will enable our customers to launch products with these
      functionalities earlier than other brands.




The
      Company is dedicated to developing wireless technology applications for
      different industries. We reached an agreement with Infineon to co-develop Tire
      Pressure Monitor System (TPMS) as the first step into the automobile design
      business.





We
      have
      set up a tech-support center in Shenzhen as one step to support our increasing
      customers in Shenzhen. The office takes up approximately 93 square meters at
      NongYuan Street, FuTian District.


Page
          10
          of 42




*Products
      Geographic Coverage*





In
      terms
      of revenue, over 90% of our mobile handsets designed by us were within the
      China
      and Hong Kong markets. The company did not sell products to consumers directly,
      but sell through the networks of our customers. According to sales information
      provided by our customers, products designed or manufactured by us were sold
      in
      major cities, secondary cities and small towns throughout China, covering all
      provinces of China.





Starting
      from 2006, we began to sell whole mobile handsets products through our sales
      agents. Our products are sold to nine different countries mainly in Southeast
      Asia, Eastern Europe and Latin America.





*Quality
      Assurance*





We
      believe that a high standard quality management system is crucial for
      maintaining our reputation. Our quality assurance team monitors hardware,
      software and mechanical design teams’ performance to ensure strict adherence to
      the quality standards required by our customers. The team conducts product
      reliability tests, including accelerated life tests, climatic stress tests
      and
      mechanical endurance tests. The team is also responsible for components
      qualification, prototype quality assurance, and submission of prototypes for
      FTA
      (Full Type Approval) and CTA (China Testing Alliance) certifications. In
      addition, the team collects and organizes all relevant written documents
      produced and used throughout the design process.





FTA
      certifies that a mobile handset submitted for testing has passed tests for
      its
      reliability and conformance with global standards.





CTA
      certifies that the use of telecommunication terminal equipment in the national
      telecommunications network has been approved and complies with the requirements
      for network access and the national standards established by the Ministry of
      Information Industry.





Through
      our quality assurance team, we adopt stringent quality procedures at the design
      stage, incoming quality assurance of components and parts, assembly testing
      and
      final quality testing. Our selection criteria for suppliers include reputation,
      time to supply, availability of components and parts, etc.





*Sales
      and marketing*





Our
      sales
      force consists of approximately 20 salespeople and support personnel. Most
      of
      them have many years of experience in the telecommunication industry. They
      are
      responsible for maintaining and establishing client relationships, trying to
      fulfill customers’ special needs, and introducing new technologies and
      applications in telecommunication field.





**Intellectual
      Property**





We
      believe protection of our intellectual property rights is extremely important
      for our continuous success. As of the March 31, 2008, we have registered 17
      patents, of which 15 have been approved. All of them are patents for product
      appearance. Besides, we have registered six copyrights for software. All of
      them
      are games and applications for mobile phone.





**Our
      Competitors**





There
      are
      more than a hundred mobile phone design houses in China, including market
      leaders such as China TechFaith Wireless Communication Technology Limited,
      Shanghai Longcheer Telecommunication Co.,Ltd and SIMCom Information Technology
      Ltd. Other major design houses include Beijing Tianyu Communication Equipment
      Co.Ltd, Shanghai WenTai Communication Technology Co., Ltd., Shanghai Huaqi
      Telecom Technology Co., Ltd., Shenzhen Jinwave Technology Co., Ltd. and Shenzhen
      Yulong Communication Technology Co., Ltd. We believe Shanghai Longcheer and
      Shanghai Simcom are our most direct competitors.


Page
          11
          of 42





Certain
      of our competitors are substantially larger and have significantly greater
      financial, marketing, research and development, technological and operating
      resources and broader product lines than we do.





We
      think
      that competition in our markets is based primarily on technology innovation,
      product performance, reputation, delivery times, customer support and price.
      We
      believe we are among the few design houses which are capable of software design
      and hardware design as well as performing the whole spectrum of design
      activities and developing functions or applications at chipset-level
      modules.





**Employees**





As
      of
      March 31, 2008, we had approximately 130 full-time employees employed in Greater
      China. From time to time we employ independent contractors to support our
      production, engineering, marketing, and sales departments.





**Web
      Site Access to Our Periodic SEC Reports**





You
      may
      read and copy any public reports we filed with the SEC at the SEC’s Public
      Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You
      may
      obtain information on the operation of the Public Reference Room by calling
      the
      SEC at 1-800-SEC-0330. The SEC also maintains an Internet site http://www.sec.gov that
      contains reports and information statements, and other information that we
      filed
      electronically.





**Item
      1A.**  **Risk
      Factors.**





Set
      forth
      below is a description of factors that may affect our business, results of
      operations and share price from time to time.





***Our
      sales and profitability depend on the continued growth of the mobile
      communications industry as well as the growth of the new market segments within
      that industry in which we have recently invested. If the mobile communications
      industry does not grow as we expect, or if the new market segments on which
      we
      have chosen to focus and in which we have recently invested grow less than
      expected, or if new faster-growing market segments emerge in which we have
      not
      invested, our sales and profitability may be adversely
      affected.***





Our
      business depends on continued growth in mobile communications in terms of the
      number of existing mobile subscribers who upgrade or simply replace their
      existing mobile devices, the number of new subscribers and increased usage.
      As
      well, our sales and profitability are affected by the extent to which there
      is
      increasing demand for, and development of, value-added services, leading to
      opportunities for us to successfully market mobile devices that feature these
      services. These developments in our industry are to a certain extent outside
      of
      our control. For example, we are dependent on operators in highly penetrated
      markets to successfully introduce services that cause a substantial increase
      in
      usage of voice and data. Further, in order to support a continued increase
      in
      mobile subscribers in certain low-penetration markets, we are dependent on
      operators to increase their sales volumes of lower-cost mobile devices and
      to
      offer affordable rate. If operators are not successful in their attempts to
      increase subscriber numbers, stimulate increased usage or drive replacement
      sales, our business and results of operations could be materially adversely
      affected.





Our
      industry continues to undergo significant changes. First, the mobile
      communications, information technology, media and consumer electronics
      industries are converging in some areas into one broader industry leading to
      the
      creation of new type of mobile devices, services and ways to use mobile devices.
      Second, while participants in the mobile communications industry once provided
      complete products and solutions, industry players are increasingly providing
      specific hardware and software layers for products and solutions. As a result
      of
      these changes, new market segments within our industry have begun to emerge
      and
      we have made significant investments in new business opportunities in certain
      of
      these market segments, such as smartphones, imaging, games, music and enterprise
      mobility infrastructure. However, a number of the new market segments in the
      mobile communications industry are still in the early states of their
      development, and it may be difficult for us to accurately predict which new
      market segments are the most advantageous for us to focus on. As a result,
      if
      the segments on which we have chosen to focus grow less than expected, we may
      not receive a return on our investment as soon as we expect, or at all. We
      may
      also forego growth opportunities in new market segments of the mobile
      communications industry on which we do not focus.


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***Our
      results of operations, particularly our profitability, may be adversely affected
      if we do not successfully manage price erosion related to our
      products.***





In
      the
      future, if, for competitive reasons, if we need to lower the selling prices
      of
      certain of our products and if we cannot lower our costs at the same rate or
      faster, this may have a material adverse effect on our business and results
      of
      operations, particularly our profitability. To mitigate the impact of product
      and service mix shifts on our profitability, we implement product segmentation
      with the aim of designing appropriate features with an appropriate cost basis
      for each customer segment. Likewise, we endeavor to mitigate the impact on
      our
      profitability of price erosion of certain features and functionalities by
      seeking to correctly time the introduction of new products, in order to align
      such introductions with declines in the prices of relevant components. We cannot
      predict with any certainty whether or to what extent we may need to lower prices
      for competitive reasons again and how successful we will be in aligning our
      cost
      basis to the pricing at any given point in time. Price erosion is a normal
      characteristic of the mobile devices industry, and the products and solutions
      offered by us are also subject to natural price erosion over time. If we cannot
      reduce our costs at the same rate, our business may be materially adversely
      affected.





***We
      must develop or otherwise acquire complex, evolving technologies to use in
      our
      business. If we fail to develop these technologies or to successfully
      commercialize them as new advanced products and solutions that meet customer
      demand, or fail to do so on a timely basis, it may have a material adverse
      effect on our business, our ability to meet our targets and our results of
      operations.***





In
      order
      to succeed in our markets, we believe that we must develop or otherwise acquire
      complex, evolving technologies to use in our business. However, the development
      and use of new technologies, applications and technology platforms for our
      mobile devices involves time, substantial costs and risks both within and
      outside of our control. This is true whether we develop these technologies
      internally, by acquiring or investing in other companies or through
      collaboration with third parties.





The
      technologies, functionalities and features on which we choose to focus may
      not
      achieve as broad or timely customer acceptance as we expect. This may result
      from numerous factors including the availability of more attractive alternatives
      or a lack of sufficient compatibility with other existing technologies, products
      and solutions. Additionally, even if we do select the technologies,
      functionalities and features that customers ultimately want, we or the companies
      that work with us may not be able to bring them to the market at the right
      time.





Furthermore,
      as a result of ongoing technological developments, our products and solutions
      are increasingly used together with components or layers that have been
      developed by third parties, whether or not we have authorized their use with
      our
      products and solutions. However, such components, such as batteries, or layers,
      such as software applications, may not be compatible with our products and
      solutions and may not meet our and our customers' quality, safety or other
      standards. As well, certain components or layers that may be used with our
      products may enable our products and solutions to be used for objectionable
      purposes, such as to transfer content that might be hateful or derogatory.
      The
      use of our products and solutions with incompatible or otherwise substandard
      components or layers, or for purposes that are inappropriate, is largely outside
      of our control and could harm our reputation in the industry.


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***We
      need to understand the different markets in which we operate and meet the needs
      of our customers, which include mobile network operators, distributors,
      independent retailers and enterprise customers. We need to have a competitive
      product portfolio, and to work together with our operator customers to address
      their needs. Our failure to identify key market trends and to respond timely
      and
      successfully to the needs of our customers may have a material adverse impact
      on
      our market share, business and results of operations.***





We
      serve
      a diverse range of customers, ranging from mobile network operators,
      distributors, independent retailers to enterprise customers, across a variety
      of
      markets. In many of these markets, the mobile communications industry is at
      different stages of development, and many of these markets have different
      characteristics and dynamics, for example, in terms of mobile penetration rates
      and technology, feature and pricing preferences. Establishing and maintaining
      good relationships with our customers and understanding trends and needs in
      their markets require us to constantly obtain and evaluate a complex array
      of
      feedback and other data. We must do this efficiently in order to be able to
      identify key market trends and address our customers' needs proactively and
      in a
      timely manner. If we fail to analyze correctly and respond timely and
      appropriately to customer feedback and other data, our business may be
      materially adversely affected.





Certain
      mobile network operators require mobile devices to be customized to their
      specifications, by requesting certain preferred features, functionalities or
      design, together with co-branding with the network operator's brand. We believe
      that customization is an important element in gaining increased operator
      customer satisfaction and we are working together with operators on product
      planning as well as accelerating product hardware and software customization
      programs. These developments may result in new challenges as we provide
      customized products, such as the need for us to produce mobile devices in
      smaller lot sizes, which can impede our economies of scale, or the potential
      for
      the erosion of the Sunplus brand, which we consider to be one of our key
      competitive advantages.





In
      order
      to meet our customers' needs, we need to introduce new devices on a timely
      basis
      and maintain a competitive product portfolio. For us, a competitive product
      portfolio means a broad and balanced offering of commercially appealing mobile
      devices with attractive features, functionality and design for all major user
      segments and price points. If we do not achieve a competitive portfolio, we
      believe that we will be at a competitive disadvantage, which may lead to lower
      revenue and lower profits.




The
      competitiveness of our portfolio is also influenced by the value of the Sunplus
      brand. A number of factors, including actual or even alleged defects in our
      products and solutions, may have a negative effect on our reputation and erode
      the value of the Sunplus brand.





***Competition
      in our industry is intense. Our failure to respond successfully to changes
      in
      the competitive landscape may have a material adverse impact on our business
      and
      results of operations.***





The
      markets for our products and solutions are intensely competitive. Industry
      participants compete with each other mainly on the basis of the breadth and
      depth of their product portfolios, price, operational and manufacturing
      efficiency, technical performance, product features, quality, customer support
      and brand recognition. We are facing increased competition from both our
      traditional competitors in the mobile communications industry as well as a
      number of new competitors, particularly from countries where production costs
      tend to be lower. Some of these competitors have used, and we expect will
      continue to use, more aggressive pricing strategies, different design approaches
      and alternative technologies than ours. In addition, some competitors have
      chosen a strategy of focusing on productization based on commercially available
      technologies and components, which may enable them to introduce products faster
      and with lower levels of research and development spending than our
      company.




As
      a
      result of developments in our industry, we also expect to face new competition
      from companies in related industries, such as consumer electronics manufacturers
      and business device and solution providers, including but not limited to Dell,
      HP, Microsoft, Nintendo, Palm, Research in Motion and Sony. Additionally,
      because mobile network operators are increasingly offering mobile devices under
      their own brand, we face increasing competition from non-branded mobile device
      manufacturers. If we cannot respond successfully to these competitive
      developments, our business and results of operations may be materially adversely
      affected.


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***Reaching
      our sales, profitability, volume and market share targets depends on numerous
      factors. These include our ability to offer products and solutions that meet
      the
      demands of the market and to manage the prices and costs of our products and
      solutions, our operational efficiency, the pace of development and acceptance
      of
      new technologies, our success in the business areas that we have recently
      entered, and general economic conditions. Depending on those factors, some
      of
      which we may influence and others of which are beyond our control, we may fail
      to reach our targets and we may fail to provide accurate forecasts of our sales
      and results of operations.***





A
      variety
      of factors discussed throughout these Risk Factors could affect our ability
      to
      reach our targets and give accurate forecasts. Although, we can influence some
      of these factors, some of them depend on external factors that are beyond our
      control.  In our mobile device businesses, we seek to maintain healthy
      levels of sales and profitability through offering a competitive portfolio
      of
      mobile devices, growing faster than the market, working to improve our
      operational efficiency, controlling our costs, and targeting timely and successful
      product introductions and shipments. The quarterly and annual sales and
      operating results in our mobile device businesses also depend on a number of
      other factors that are not within our control. Such factors include the global
      growth in mobile device volumes, which is influenced by, among other factors,
      regional economic factors, competitive pressures, regulatory environment, the
      timing and success of product and service introductions by various market
      participants, including network operators, the commercial acceptance of new
      mobile devices, technologies and services, and operators' and distributors'
      financial situations. Our sales and operating results are also impacted by
      fluctuations in exchange rates and at the quarterly level by seasonality. In
      developing markets, the availability and cost, through affordable tariffs,
      of
      mobile phone service compared with the availability and cost of fixed line
      networks may also impact volume growth.





In
      our
      mobile networks business, we also seek to maintain healthy levels of sales
      and
      profitability and try to grow faster than the market. Our networks business's
      quarterly and annual net sales and operating results can be affected by a number
      of factors, some of which we can influence, such as our operational efficiency,
      the level of our research and development investments and the deployment
      progress and technical success we achieve under network contracts. Other
      relevant factors include operator investment behavior, which can vary
      significantly from quarter to quarter, competitive pressures and general
      economic conditions although these are not within our control.





The
      new
      business areas that we have entered may be less profitable than we currently
      foresee, or they may generate more variable operating results than we currently
      foresee. We expect to incur short-term operating losses in certain of these
      new
      business areas given our early stage investments in research and development
      and
      marketing in particular. Also our efforts in managing prices and costs in the
      long-term, especially balancing prices and sales volumes with research and
      development costs, may prove to be inadequate.





Although
      we may announce forecasts of our results of operations, uncertainties affecting
      any of these factors, particularly during difficult economic conditions, render
      our forecasts difficult to make, and may cause us not to reach the targets
      that
      we have forecasted, or to revise our estimates.





***Our
      sales and results of operations could be adversely affected if we fail to
      efficiently manage our manufacturing and logistics without interruption, or
      fail
      to ensure that our products and solutions meet our and our customers' quality,
      safety and other requirements and are delivered in
      time.***





Our
      manufacturing and logistics are complex, require advanced and costly equipment
      and include outsourcing to third parties. These operations are continuously
      modified in an effort to improve manufacturing efficiency and flexibility.
      We
      may experience difficulties in adapting our supply to the demand for our
      products, ramping up or down production at our facilities, adopting new
      manufacturing processes, finding the most timely way to develop the best
      technical solutions for new products, or achieving manufacturing efficiency
      and
      flexibility, whether we manufacture our products and solutions ourselves or
      outsource to third parties. Such difficulties may have a material adverse effect
      on our sales and results of operations and may result from, among other things:
      delays in adjusting or upgrading production at our facilities, delays in
      expanding production capacity, failure in our manufacturing and logistics
      processes, failures in the activities we have outsourced, and interruptions
      in
      the data communication systems that run our operations. Also, a failure or
      an
      interruption could occur at any stage of our product creation, manufacturing
      and
      delivery processes, resulting in our products and solutions not meeting our
      and
      our customers' quality, safety and other requirements, or being delivered late,
      which could have a material adverse effect on our sales, our results of
      operations and reputation and the value of the Sunplus brand.


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***We
      depend on our suppliers for the timely delivery of components and for their
      compliance with our supplier requirements, such as, most notably, our and our
      customers' product quality, safety and other standards. Their failure to do
      so
      could adversely affect our ability to deliver our products and solutions
      successfully and on time.***





Our
      manufacturing operations depend to a certain extent on obtaining adequate
      supplies of fully functional components on a timely basis. Our principal supply
      requirements are for electronic components, mechanical components and software,
      which all have a wide range of applications in our products. Electronic
      components include integrated circuits, microprocessors, standard components,
      memory devices, cameras, displays, batteries and chargers while mechanical
      components include covers, connectors, key mats and antennas. In addition,
      a
      particular component may be available only from a limited number of suppliers.
      Suppliers may from time to time extend lead times, limit supplies or increase
      prices due to capacity constraints or other factors, which could adversely
      affect our ability to deliver our products and solutions on a timely basis.
      Moreover, even if we attempt to select our suppliers and manage our supplier
      relationships with scrutiny, a component supplier may fail to meet our supplier
      requirements, such as, most notably, our and our customers' product quality,
      safety and other standards, and consequently some of our products are
      unacceptable to us and our customers, or we may fail in our own quality
      controls. Moreover, a component supplier may experience delays or disruption
      to
      its manufacturing, or financial difficulties. Any of these events could delay
      our successful delivery of products and solutions, which meet our and our
      customers' quality, safety and other requirements, or otherwise adversely affect
      our sales and our results of operations. Also, our reputation and brand value
      may be affected due to real or merely alleged failures in our products and
      solutions.





***We
      are developing a number of our new products and solutions together with other
      companies. If any of these companies were to fail to perform, we may not be
      able
      to bring our products and solutions to market successfully or in a timely way
      and this could have a material adverse impact on our sales and
      profitability.***





We
      continue to invite the providers of technology, components or software to work
      with us to develop technologies or new products and solutions. These
      arrangements involve the commitment by each company of various resources,
      including technology, research and development efforts, and personnel. Although
      the target of these arrangements is a mutually beneficial outcome for each
      party, our ability to introduce new products and solutions that meet our and
      our
      customers' quality, safety and other standards successfully and on schedule
      could be hampered if, for example, any of the following risks were to
      materialize: the arrangements with the companies that work with us do not
      develop as expected, the technologies provided by the companies that work with
      us are not sufficiently protected or infringe third parties' intellectual
      property rights in a way that we cannot foresee or prevent, the technologies,
      products or solutions supplied by the companies that work with us do not meet
      the required quality, safety and other standards or customer needs, our own
      quality controls fail, or the financial standing of the companies that work
      with
      us deteriorates.





***Our
      operations rely on complex and highly centralized information technology systems
      and networks. If any system or network disruption occurs, this reliance could
      have a material adverse impact on our operations, sales and operating
      results.***





Our
      operations rely to a significant degree on the efficient and uninterrupted
      operation of complex and highly centralized information technology systems
      and
      networks, which are integrated with those of third parties. Any failure or
      disruption of our current or future systems or networks could have a material
      adverse effect on our operations, sales and operating results. Furthermore,
      any
      data leakages resulting from information technology security breaches could
      also
      adversely affect us.


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All
      information technology systems are potentially vulnerable to damage or
      interruption from a variety of sources. We pursue various measures in order
      to
      manage our risks related to system and network disruptions, including the use
      of
      multiple suppliers and available information technology security. However,
      despite precautions taken by us, an outage in a telecommunications network
      utilized by any of our information technology systems, virus or other event
      that
      leads to an unanticipated interruption of our information technology systems
      or
      networks could have a material adverse effect on our operations, sales and
      operating results.





***Our
      products and solutions include increasingly complex technology involving
      numerous new proprietary technologies, as well as some developed or licensed
      to
      us by certain third parties. As a consequence, evaluating the protection of
      the
      technologies we intend to use is more and more challenging, and we expect
      increasingly to face claims that we have infringed third parties' intellectual
      property rights. The use of increasingly complex technology may also result
      in
      increased licensing costs for us, restrictions on our ability to use certain
      technologies in our products and solution offerings, and/or costly and
      time-consuming litigation. Third parties may also commence actions seeking
      to
      establish the invalidity of intellectual property rights on which we
      depend.***





Our
      products and solutions include increasingly complex technology involving
      numerous new proprietary technologies, as well as some developed or licensed
      to
      us by certain third parties. As the amount of such proprietary technologies
      needed for our products and solutions continues to increase, the number of
      parties claiming rights continues to increase and become more fragmented within
      individual products, and as the complexity of the technology and the overlap
      of
      product functionalities increases, the possibility of more infringement and
      related intellectual property claims against us also continues to increase.
      The
      holders of patents potentially relevant to our product and solution offerings
      may be unknown to us, or may otherwise make it difficult for us to acquire
      a
      license on commercially acceptable terms. There may also be technologies
      licensed to and relied on by us that are subject to claims of infringement
      or
      other corresponding allegations by others which could damage our ability to
      rely
      on such technologies.





In
      addition, although we endeavor to ensure that companies that work with us
      possess appropriate intellectual property rights or licenses, we cannot fully
      avoid risks of intellectual property rights infringement created by suppliers
      of
      components and various layers in our products and solutions or by companies
      with
      which we work in cooperative research and development activities. Similarly,
      we
      and our customers may face claims of infringement in connection with our
      customers' use of our products and solutions. Finally, as all technology
      standards, including those used and relied on by us, include some intellectual
      property rights, we cannot fully avoid risks of a claim for infringement of
      such
      rights due to our reliance on such standards. We believe that the number of
      third parties declaring their intellectual property to be relevant to these
      standards is increasing, which may increase the likelihood that we will be
      subject to such claims in the future.





Any
      restrictions on our ability to sell our products and solutions due to expected
      or alleged infringements of third party intellectual property rights and any
      intellectual property rights claims, regardless of merit, could result in
      material losses of profits, costly litigation, the payment of damages and other
      compensation, the diversion of the attention of our personnel, product shipment
      delays or the need for us to develop non-infringing technology or to enter
      into
      royalty or licensing agreements. If we were unable to develop non-infringing
      technology, or if royalty or licensing agreements were not available on
      commercially acceptable terms, we could be precluded from making and selling
      the
      affected products and solutions. As new features are added to our products
      and
      solutions, we may need to acquire further licenses, including from new and sometimes
      unidentified owners of intellectual property. The cumulative costs of obtaining
      any necessary licenses are difficult to predict and may over time have a
      negative effect on our operating results.


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In
      addition, other companies may commence actions seeking to establish the
      invalidity of our intellectual property, for example, patent rights. In the
      event that one or more of our patents are challenged, a court may invalidate
      the
      patent or determine that the patent is not enforceable, which could harm our
      competitive position. If any of our key patents are invalidated, or if the
      scope
      of the claims in any of these patents is limited by a court decision, we could
      be prevented from licensing the invalidated or limited portion of our
      intellectual property rights. Even if such a patent challenge is not successful,
      it could be expensive and time consuming, divert management attention from
      our
      business and harm our reputation. Any diminution of the protection that our
      own
      intellectual property rights enjoy could cause us to lose some of the benefits
      of our investments in R&D, which may have a negative effect on our results
      of operations.





***If
      we are unable to recruit, retain and develop appropriately skilled employees,
      we
      may not be able to implement our strategies and, consequently, our results
      of
      operations may suffer.***





We
      must
      continue to recruit, retain and through constant competence training develop
      appropriately skilled employees with a comprehensive understanding of our
      businesses and technologies. As competition for skilled personnel remains keen,
      we seek to create a corporate culture that encourages creativity and continuous
      learning. We are also continuously developing our compensation and benefit
      policies and taking other measures to attract and motivate skilled personnel.
      Nevertheless, we have encountered in the past, and may encounter in the future,
      shortages of appropriately skilled personnel, which may hamper our ability
      to
      implement our strategies and harm our results of operations.





***The
      global networks business relies on a limited number of customers and large
      multi-year contracts. Unfavorable developments under such a contract or in
      relation to a major customer may affect our sales, our results of operations
      and
      cash flow adversely.***





Large
      multi-year contracts, which are typical in the networks industry, include a
      risk
      that the timing of sales and results of operations associated with these
      contracts will be different than expected. Moreover, they usually require the
      dedication of substantial amounts of working capital and other resources, which
      impacts our cash flow negatively. Any non-performance by us under these
      contracts may have significant adverse consequences for us because network
      operators have demanded and may continue to demand stringent contract
      undertakings such as penalties for contract violations.





***Our
      sales derived from, and assets located in, emerging market countries may be
      adversely affected by economic, regulatory and political developments in those
      countries. As sales from these countries represent an increasing portion of
      our
      total sales, economic or political turmoil in these countries could adversely
      affect our sales and results of operations. Our investments in emerging market
      countries may also be subject to other risks and
      uncertainties.***





We
      generate sales from and have invested in various emerging market countries.
      As
      sales from these countries represent an increasing portion of our total sales,
      economic or political turmoil in these countries could adversely affect our
      sales and results of operations. Our investments in emerging market countries
      may also be subject to risks and uncertainties, including unfavorable taxation
      treatment, exchange controls, challenges in protecting our intellectual property
      rights, nationalization, inflation, incidents of terrorist activity, currency
      fluctuations, or the absence of, or unexpected changes in, regulation as well
      as
      other unforeseeable operational risks.





***Allegations
      of health risks from the electromagnetic fields generated by base stations
      and
      mobile devices, and the lawsuits and publicity relating to them, regardless
      of
      merit, could affect our operations negatively by leading consumers to reduce
      their use of mobile devices or by causing us to allocate monetary and personnel
      resources to these issues.***





There
      has
      been public speculation about possible health risks to individuals from exposure
      to electromagnetic fields from base stations and from the use of mobile devices.
      While a substantial amount of scientific research conducted to date by various
      independent research bodies has indicated that these radio signals, at levels
      within the limits prescribed by public health authority safety standards and
      recommendations, present no discernable adverse effect on human health, we
      cannot be certain
      that future studies, irrespective of their scientific basis, will not suggest
      a
      link between electromagnetic fields and adverse health effects that would
      adversely affect our sales and share price. Research into these issues is
      ongoing by government agencies, international health organizations and other
      scientific bodies in order to develop a better scientific and public
      understanding of these issues.


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Although
      Sunplus products and solutions are designed to meet all relevant safety
      standards and recommendations globally, no more than a perceived risk of adverse
      health effects of mobile communications devices could adversely affect us
      through a reduction in sales of mobile devices or increased difficulty in
      obtaining sites for base stations, and could have a negative effect on our
      reputation and brand value as well as harm our share price.





***Changes
      in various types of regulation in countries around the world could affect our
      business adversely.***





Our
      business is subject to direct and indirect regulation in each of the countries
      in which we, and the companies with which we work or our customers do business.
      As a result, changes in various types of regulations applicable to current
      or
      new technologies, products or services could affect our business adversely.
      For
      example, it is in our interest that the Federal Communications Commission
      maintains a regulatory environment that ensures the continued growth of the
      wireless sector in the United States. In addition, changes in regulation
      affecting the construction of base stations and other network infrastructure
      could adversely affect the timing and costs of new network construction or
      expansion and the commercial launch and ultimate commercial success of these
      networks.




Moreover,
      the implementation of new technological or legal requirements, such as the
      requirement in the United States that all handsets must be able to indicate
      their physical location, could impact our products and solutions, manufacturing
      or distribution processes, and could affect the timing of product and solution
      introductions, the cost of our production, products or solutions as well as
      their commercial success. Finally, export control, tariff, environmental, safety
      and other regulation that adversely affects the pricing or costs of our products
      and solutions as well as new services related to our products could affect
      our
      net sales and results of operations. The impact of these changes in regulation
      could affect our business adversely even though the specific regulations do
      not
      always directly apply to us or our products and solutions.





**Our
      stock price has been historically volatile and may continue to be volatile,
      which may make it more difficult for you to resell shares when you want at
      prices you find attractive.**





The
      trading price of our ordinary shares has been and may continue to be subject
      to
      considerable daily fluctuations. During the twelve months ended March 31, 2008,
      the closing sale prices of our ordinary shares on the Over-the-Counter Bulletin
      Board ranged from $1.91to $4.30 per share and the closing sale price on June
      30,
      2008 was $2.20 per share. Our stock price may fluctuate in response to a number
      of events and factors, such as quarterly variations in operating results,
      announcements of technological innovations or new products and media properties
      by us or our competitors, changes in financial estimates and recommendations
      by
      securities analysts, the operating and stock price performance of other
      companies that investors may deem comparable, new governmental restrictions
      or
      regulations and news reports relating to trends in our markets. In addition,
      the
      stock market in general, and the market prices for China-related and
      Internet-related companies in particular, have experienced extreme volatility
      that often has been





**Item
      1B.**  **Unresolved
      Staff Comments.**





None.


Page
          19
          of 42


**Item
      2.**   **Properties.**





As
      of
      March 31, 2008, we have an R&D headquarter in Shanghai, a Tech-Support
      Center in Shenzhen and a factory in Fujian.





Our
      principal executive offices occupy a whole floor of space with total area of
      1,737 square meters on the 18th floor YongSheng Building, Zhongshan Xi Road,
      Xuhui District, Shanghai, China. These leased premises house the design
      department, product testing facilities, maintenance and administrative
      departments. The lease is $19,000 per month.





Our
      Tech-Support Center in Shenzhen occupies 93 square meters at NongYuan Street,
      FuTian District.





Through
      our subsidiary Fujian QiaoXing, we hold two rights to use land with an area
      of
      124,321.9 square meters and 130,112.9 square meters in JinFeng Technology
      Zone in Fujian Province, on which our new manufacturing facility is under
      construction. The two land use rights will expire in September 2054. We also
      own
      two factory buildings with construction area of 7,420 square meters and 5,500
      square meters, respectively.





**Item
      3.**   **Legal
      Proceedings.**





In
      August
      2006, Sunplus Technology Co., Ltd., a company incorporated in the Republic
      of
      China filed a suit against Sunplus. The plaintiff brought suit demanding that
      Sunplus cease using the “Sunplus” name and the Company website. In April 2007,
      the court granted the demand and Sunplus appealed the ruling in Shanghai
      Superior People’s Court. In July 2007, both parties appeared in court. In August
      2007, the Shanghai Superior People’s Court granted the demand to the plaintiff
      and Sunplus had to cease using the domain name “Sunplus” and the Company website
      www.sunpluschina.com.cn. Sunplus did not suffer any substantial pecuniary
      damages and is in the progress of changing the domain name and the Company
      website.





We
      are
      not involved in any material pending legal proceedings at this time, and
      management is not aware of any contemplated proceeding by any governmental
      authority.





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





None.




**PART
      II.**





**Item 5.**
            **Market
                for Registrant’s Common Equity, Related Stockholder Matters and****Issuer
                Purchases of Equity
                Securities.**





Our
      common stock is listed on the Over-the-Counter Bulletin Board under the symbol
      “TBYH.OB”. As of June 30, 2008, there were: (i) 319 shareholders of record,
      without giving effect to determining the number of shareholders who hold shares
      in "street name" or other nominee status; (ii) no outstanding options to
      purchase shares of our common stock; (iii) 30,088,174 outstanding shares of
      our
      common stock, of which 11,839,056 shares are either freely tradable or eligible
      for sale under Rule 144 or Rule 144K, and (v) no shares subject to registration
      rights.




The
      following table sets forth, for the fiscal quarters indicated, the high and
      low
      closing prices as reported by the Over-the-Counter Bulletin Board. These
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission, and may not represent actual transactions.


Page
          20
          of 42




The
      following table sets forth, for the fiscal quarters indicated, the high and
      low
      closing prices as reported by the Over-the-Counter Bulletin Board. These
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission, and may not represent actual transactions.





**Sales
      Price**





High
            
            Low**Fiscal
                2008**First
                Quarter
            
            $
            4.30
            
            $
            2.25Second
                Quarter
            
            $
            4.20
            
            $
            2.15Third
                Quarter
            
            $
            3.80
            
            $
            2.00Fourth
                Quarter
            
            $
            3.20
            
            $
            1.91**Fiscal
                2007**First
                Quarter
            
            $
            3.25
            
            $
            2.10Second
                Quarter
            
            $
            2.82
            
            $
            1.35Third
                Quarter
            
            $
            2.10
            
            $
            1.46Fourth
                Quarter
            
            $
            3.15
            
            $
            1.82




**Dividend
      Policy**





We
      have
      never paid cash dividends and have no plans to do so in the foreseeable future.
      Our future dividend policy will be determined by our Board of Directors and
      will
      depend upon a number of factors, including our financial condition and
      performance, our cash needs and expansion plans, income tax consequences, and
      the restrictions that applicable laws and our credit arrangements then
      impose.





**Recent
      Sales of Unregistered Securities**




During
      the year ended March 31, 2008, we did not issue any securities that were not
      registered under the Securities Act of 1933, as amended (the “Securities
      Act”).





**Item
      6.**   **Selected
      Financial Data.**





The
      following tables summarize the consolidated financial data of T-Bay Holdings,
      Inc. for the periods presented. You should read the following financial
      information together with the information under “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations” and our consolidated
      financial statements and the related notes to these consolidated financial
      statements appearing elsewhere in this Form 10-K.





**Year Ended**
              **March 31**In thousands, except share amounts**2006**
            
            **2007**
            
            **2008**Revenue
            
            $
            25,527
            
            $
            35,236
            
            $
            45,681Cost
                of sales
            
            $
            9,612
            
            $
            17,606
            
            $
            23,539Gross
                profit
            
            $
            15,915
            
            $
            17,630
            
            $
            22,142Depreciation
                and amortization
            
            $
            167
            
            $
            656
            
            $
            965Selling
                and distribution expenses
            
            $
            234
            
            $
            292
            
            $
            280General
                and administrative expenses
            
            $
            3,334
            
            $
            3,009
            
            $
            3,643Other
                income
            
            $
            23
            
            $
            7
            
            $
            185Interest
                expense
            
            $
            1
            
            $
            3
            
            $
            3Income
                before income taxes and minority interest
            
            $
            12,369
            
            $
            14,333
            
            $
            18,401Income
                tax expense
            
            $
            1,746
            
            $
            1,701
            
            $
            3,188Minority
                interests
            
            $
            541
            
            $
            429
            
            $
            659Net
                income attributable to the Shareholders of the Company
            
            $
            10,082
            
            $
            12,203
            
            $
            14,554Income
                per Share — basic
            
            $
            0.34
            
            $
            0.41
            
            $
            0.48Income
                per Share — diluted
            
            $
            0.34
            
            $
            0.41
            
            $
            0.48




Page
          21 of
          68





**Year Ended**
              **March
                31**In thousands, except share amounts**2006**
            
            **2007**
            
            **2008****Balance
                Sheet Data:**Cash
                and cash equivalents
            
            $
            4,673
            
            $
            67
            
            $
            23,355Total
                current assets
            
            $
            29,590
            
            $
            27,522
            
            $
            43,389Total
                assets
            
            $
            30,029
            
            $
            52,473
            
            $
            65,664Accounts
                Payables
            
            $
            2,493
            
            $
            2,570
            
            $
            688Total
                current liabilities
            
            $
            7,521
            
            $
            19,450
            
            $
            9,198Long-term
                liabilities
            
            $
            3,564
            
            $
            3,967
            
            $
            4,177Total
                stockholders’ equity
            
            $
            17,837
            
            $
            31,720
            
            $
            49,689




**Item
      7.**   **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation.**





The
      information in this discussion contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. These forward-looking
      statements involve risks and uncertainties, including statements regarding
      our
      capital needs, business strategy and expectations. Any statements contained
      herein that are not statements of historical facts may be deemed to be
      forward-looking statements. In some cases, you can identify forward-looking
      statements by terminology such as "may", "will", "should", "expect", "plan",
      "intend", "anticipate", "believe", "estimate", "predict", "potential" or
      "continue", the negative of such terms or other comparable terminology. Actual
      events or results may differ materially. We disclaim any obligation to publicly
      update these statements, or disclose any difference between its actual results
      and those reflected in these statements. The information constitutes
      forward-looking statements within the meaning of the Private Securities
      Litigation Reform Act of 1995.





**Overview**





For
      the
      fiscal year ended March 31, 2008, our net revenue increased by $10,445,000
      from
      $35,236,000 to $45,681,000, which represented a 29.6% growth. Our net profit
      increased by $2,351,000, or 19.3%, from $12,203,000 to $14,554,000. We reported
      per share earnings of $0.48 in fiscal year ended March 31, 2008, an increase
      of
      $0.07, or 17.1%, compared to $0.41 in the fiscal year ended March 31, 2007.





**Net
      Revenue**


****


**(in
                thousands of US dollars)**
            
            **Fiscal Year Ended March 31****2008**
            
            **2007**
            
            **Variance**
            
            **%****Sales
                of mobile phone components**
            
            $
            22,746
            
            
            15,779
            
            $
            6,967
            
            
            44.2
            %**Revenue
                from design services**
            
            $
            22,935
            
            
            19,457
            
            $
            3,478
            
            
            17.9
            %**NET
                REVENUE**
            
            $
            45,681
            
            
            35,236
            
            $
            10,445
            
            
            29.6
            %





Our
      net
      revenue was $45,681,000 for the fiscal year ended March 31, 2008, an increase
      of
      $10,445,000, or 29.6%, from $35,236,000 in the previous fiscal year.
 Revenue from sales of mobile phone components was $22,746,000 compared to
      $15,779,000 in the last fiscal year, representing a 44.2% increase. Revenue
      from
      design services also increased to $22,935,000 from $19,457,000 in the last
      fiscal year.





Our
      net
      revenue increase mainly resulted from the growth in sales of mobile phone
      components-PCB and PCBA boards.  Since March 2005, to better utilize our
      resources, we decided to focus on revenue from design services rather than
      manufacturing and selling whole mobile handsets for our clients. If necessary,
      we coordinate the production services provided by third parties with our
      clients’ needs. We believe this will enable us to shift our resources from
      manufacturing and logistics to R&D and design services, which are our core
      strengths. In the fiscal year ended March 31, 2008, customers placed more orders
      of PCB and PCBA boards, and as a result the percentage of our revenue from
      sales
      of mobile phone components increased substantially as compared with the previous
      year.


Page
          22 of
          68


For
      the
      fiscal year ended March 31, 2008, revenue from design services represented
      50.2%
      of total revenue, while revenue from sales of mobile phone components was 49.8%,
      compared to 55.2% from design services and 44.8% from sales of mobile phone
      components in the fiscal year ended March 31, 2007.





**Detailed
      information on sale of mobile phone components**





Sale
      of
      mobile phone components increased from $15,779,000 in fiscal 2007 to $22,746,000
      in fiscal 2008, representing a 44.2% growth. The increase was mainly
      attributable to the growth in the sales of PCB and PCBA boards, the key
      components in the manufacture of mobile handsets.





We
      design
      and manufacture PCB and PCBA boards according to our customers’ specifications.
      Besides the amount of revenue from selling PCB and PCBA boards to our customers,
      we charge royalty fees by the number of PCB and PCBA boards we provide. We
      manufactured more PCB and PCBA boards for our customers for the fiscal year
      ended March 31, 2008 when compared to the fiscal year ended March 31, 2007.
      The
      increase in sales volume of PCB and PCBA boards led to the increase in sale
      of
      components. The average sell price of our product was stable in the
      market.





We
      have
      been selling our products in overseas markets through our sales agents in
      Mainland China and Hong Kong since March 2006. Our products were sold to
      end-users in nine different countries mainly in Southeast Asia, Eastern Europe
      and Latin America.





**Detailed
      information on revenue from design services**





Revenue
      from design services increased from $19,457,000 to $22,935,000, or17.9%. The
      increase was mainly attributable to the increase in mobile handset total
      solutions launched during the fiscal year.





We
      continue to cooperate with VIA, Anyka and Infineon as well as MTK to develop
      mobile solutions for the China market. New solutions based on VIA, MTK, and
      Anyka+Infineon have made our design popular in China and foreign
      market.





During
      fiscal year ended March 31, 2008, we launched 31 mobile handset solutions based
      on 3 different chipset platforms covering the high-end, mid-end and low-end
      markets. We developed solutions with functions of dual-SIM card, ECG monitor,
      push-to-talk, finger print recognition, gravity sense, PHS, Dual-T card and
      Digital TV tuning. We tailor-make solutions featuring functions such as
      handwriting recognition, digital camera, Dual speaker, GPRS, FM radio,
      dictionary, PC Cam, blue tooth, E-mail, MP3, MPEG4 3GP, WAP, USB&T-Flash,
      MMS, CMOS, TV-out, fingerprint authentication, firewall and sound recorder.





Each
      of
      our solutions was designed to target specific market segments. We provide a
      solution with ECG monitor for medical institutions; solutions with function
      of
      Walkie-talkie for hotels and convention centers employees, solutions of GSM
      and
      PHS for end users in remote areas and Dual SIM card solutions for business
      travelers. The promotion of diversified solutions improved our competitiveness
      and provided higher profit margins than ‘regular’ solutions.





**Cost
      of Revenue**





For
      the
      fiscal year ended March 31, 2008, the cost of revenue increased to $23,539,000
      from $17,606,000 in the fiscal year ended March 31, 2007, representing a 33.7%
      increase.  Cost of revenue primarily consisted of the purchase cost of raw
      and processed materials and indirect costs of salaries of engineers and
      designers, R&D expenses and quality control.


Page
          23 of
          68


**Detailed
      information on Cost of Revenue**





**(in
                thousands of US dollars)**
            
            **Fiscal Year Ended**
              **March 31****2008**
            
            **2007**
            
            **Variance**
            
            **%****Cost
                of revenue**
            
            $
            23,539
            
            $
            17,606
            
            $
            5,933
            
            
            33.7**Raw
                materials**
            
            $
            20,464
            
            $
            14,940
            
            $
            5,524
            
            
            37.0**R&D**
            
            $
            420
            
            $
            92
            
            $
            328
            
            
            356.5**Model
                making**
            
            $
            177
            
            $
            180
            
            $
            (3
            )
            
            (1.7
            )**Salaries**
            
            $
            1,133
            
            $
            1,012
            
            $
            121
            
            
            12.0**Business
                tax**
            
            $
            1,149
            
            $
            777
            
            $
            372
            
            
            47.9**Other
                indirect costs**
            
            $
            196
            
            $
            605
            
            $
            (409
            )
            
            (67.6
            )





The
      increase was mainly attributable to the increase in purchase of raw materials.
      As we designed and manufactured more PCB and PCBA boards for our customers,
      we
      purchased more raw materials in the current fiscal year than in the fiscal
      year
      ended March 31, 2007. Key materials for manufacture such as chipsets and PCB
      blank boards accounted for a large proportion of cost of raw materials. The
      cost
      of raw material was up by $5,524,000, or 37.0%, from $14,940,000 for the fiscal
      year ended March 31, 2007.





**Research
      and Development Costs**





During
      the two years ended March 31, 2008 and 2007, research and development costs
      amounting to $420,000 and $92,000 respectively, were charged to operations
      and
      are included in cost of revenue. The increase in R&D costs was due to
      development of new solutions.





**Gross
      profit**





Our
      gross
      profit was $22,142,000 for the fiscal year ended March 31, 2008 as compared
      to
      $17,630,000 for the fiscal year ended March 31, 2007, representing a 25.6%
      growth. The increase in gross profit was mainly attributable to the increase
      of
      revenue from design services which has a higher profit margin than the revenue
      from sale of mobile phone components.





**Operating
      Expenses**





Operating
      expenses consist of selling expenses and general and administrative (G&A)
      expenses. For the fiscal year ended March 31, 2008, operating expenses were
      $3,923,000, as compared to $3,301,000 for the fiscal year ended March 31, 2007,
      representing an 18.8 % increase.





Detailed
      information of operating expenses for the year ended March 31, 2008 is as
      follows:





**Fiscal
                Year Ended**
              **March
                31****(in
                thousands of US dollars)**
            
            **2008**
            
            
            
            **2007****%
                of net revenue**
            
            
            
            **%
                of net revenue****Amount**
            
            
            
            **Amount****Operating
                Expenses**
            
            $
            3,923
            
            
            8.6
            %
            $
            3,301
            
            
            9.4
            %**Selling
                Expenses**
            
            $
            280
            
            
            0.6
            %
            $
            292
            
            
            0.9
            %**G&A
                Expenses**
            
            $
            3,643
            
            
            7.9
            %
            $
            3,009
            
            
            8.5
            %




Page
          24 of
          68


Operating
      expenses during the fiscal year ended March 31, 2008 were $3,923,000, 8.6%
      of
      revenue, compared to $3,301,000, 9.4% of revenue for the fiscal year ended
      March
      31, 2007.





Selling
      expenses decreased from $292,000 to $280,000. The decrease was mainly
      attributable to less marketing-related expenses, such as the expense for
      business trips following the establishment of our Shenzhen Tech Support
      Center.





G&A
      expenses were $3,643,000, 7.9% of revenue, compared to $3,009,000 in the last
      fiscal year. The increase in G&A expenses was mainly due to the increase of
      allowance for doubtful receivables and rental expenses.




We
      increased the allowance for doubtful receivables by $700,000 for the year ended
      31 March 2008. The allowance for doubtful receivables was $1,125,000 as of
      March
      31, 2008 compared to $425,000 as of March 31, 2007.  Allowance for
      doubtful receivables is maintained for all customers based on a variety of
      factors, including the length of time the receivables are past due, significant
      one-time events and historical experience.





Rental
      expenses increased as we set up the Shenzhen Tech Support Center and rented
      an
      office which occupies 93 square meters at NongYuan Street, FuTian
      District.





**Interest
      Expense**





During
      the fiscal year ended March 31, 2008, we did not borrow any funds. **** We
      have
      incurred interest expenses of $3,000 during the fiscal year ended March 31,
      2008
      for discounted bills.





**Minority
      Interests**





Minority
      interests represent the portion of income of Sunplus, Fujian QiaoXing and JiaXun
      that we do not own.  In fiscal year ended 2008, minority interests were
      attributable to the minority interests owned by Shanghai Fanna, which owns
      directly 5% of Sunplus, and indirectly 5% of Fujian QiaoXing and Jia Xun.





**Income
      Tax**





Sunplus
      is subject to PRC Income Tax.  Pursuant to the PRC Income Tax Laws, the
      prevailing statutory rate of enterprise income tax in Shanghai is 25% as of
      January 1, 2008. It was 27% prior to January 1, 2008.





Pursuant
      to the relevant laws and regulations in the PRC, Sunplus was entitled to an
      exemption from PRC income tax for two years starting from its first profitable
      year.  As Sunplus’ statutory year-end is December 31, the exemption applied
      from January 1, 2003 to December 31, 2004.  Sunplus was also entitled to
      three years of 50% exemption after the expiration of the two years of full
      exemption.  The 50% exemption applies from January 1, 2005 to December 31,
      2007. Therefore, Sunplus was subject to a 13.5% income tax through December
      31,
      2007 and 25% thereafter.





For
      the
      fiscal year ended March 31, 2008, Sunplus made an income tax provision of
      $3,188,000 in total, compared to $1,701,000 in the last fiscal year ended March
      31, 2007.





Fujian
      QiaoXing and JiaXun have not yet commenced operations and are not subject to
      any
      tax in the fiscal year ended March 31, 2008 and 2007.





**Net
      income**





As
      a
      result of the above items, net income was $14,554,000 for the fiscal year ended
      March 31, 2008, as compared to $12,203,000 for fiscal year ended March 31,
      2007,
      representing a 19.3% growth. The growth is mainly the result of significant
      increase of income from the revenue from design services.


Page
          25 of
          68


**Earnings
      per share**





We
      reported earning per share of $0.48, based on 30,088,174 outstanding weighted
      shares for the fiscal year ended March 31, 2008. Our outstanding common stock
      was 30,088,174 shares as of March 31, 2008. We do not have any preferred stock
      issued or outstanding.





**Assets**





**Cash
      and cash equivalents**





****
            
            **Fiscal Year Ended March 31,****(in thousands of US dollars)****2008**
            
            **2007********Cash
                and cash equivalents**
            
            
            23,355
            
            
            67





Cash
      and
      cash equivalents were $23,355,000 as of March 31, 2008. The Company improved
      its
      cash position through cash management and increased collection of
      long-outstanding accounts receivable from customers during this fiscal year.





**Accounts
      receivable, net**





As
      of
      March 31, 2008, accounts receivable amounted to $17,718,000, a decrease of
      $1,599,000 compared to $19,317,000 as of March 31, 2007. The decrease was mainly
      because the Company has enhanced its management on accounts receivable. The
      Company revaluated its risk of receivables and made an effort to collect
      historical accounts receivable. The Company also shortened the average credit
      period for new customers.





The
      receivables are mostly from customers with whom we have established long term
      good relationships. The credit terms we provide to our customers vary and depend
      on their size, industry reputation and historical credit performance. We believe
      there is not a high risk that we have uncollectible receivables in excess of
      the
      allowance provided.





The
      Company also recognized an additional allowance of $700,000 for doubtful
      receivables in the fiscal year ended March 31, 2008, as compared to $62,000
      for
      the fiscal year ended March 31, 2007, to ensure accounts and other receivable
      are not overstated due to un-collectibility. If circumstances related to
      customers change, estimates of the recoverability of receivables would be
      further adjusted.





Detailed
      information on accounts receivables, net





**Fiscal Year Ended March 31,**
              **(in thousands of US dollars)**2008
            
            2007Accounts
                receivable
            
            
            18,843
            
            
            19,742Allowance
                of doubtful debts
            
            
            (1,125
            )
            
            (425
            )Accounts
                receivable, net
            
            
            17,718
            
            
            19,317




Page
          26 of
          68


**Notes
      receivable**





As
      of
      March 31, 2008, there was no notes receivable, as compared to $4,014,000 as
      of
      March 31, 2007. Notes receivable are mainly settlement of accounts receivable
      from customers who issued commercial notes as payments.





**Inventories**





Inventories
      comprised raw materials, work in progress and finished goods and are stated
      at
      the lower of cost or market value. Market value represents replacement cost
      for
      raw materials and net realizable value for finished goods and work in progress.
      Substantially all inventory costs are determined using the weighted average
      basis. Costs of finished goods include direct materials, subcontracting charges
      and other overhead before the goods are ready for sale. Inventory costs do
      not
      exceed market value.





**Fiscal Year Ended March 31**(in thousands of US dollars)**2008**
            
            **2007**Inventories
            
            
            242
            
            
            878





As
      of
      March 31, 2008, the Company had inventories valued at $242,000, a decrease
      of
      $636,000, or 72.4%, compared to $878,000 as at March 31, 2007. The significant
      decrease was attributed to the disposal of our inventories.





Inventories
      consisted of the following for the years ended March 31:





**Fiscal Year Ended March 31**(in thousands of US dollars)**2008**
            
            **2007******Raw
                materials
            
            
            583
            
            
            860Work
                in progress
            
            
            29
            
            
            503Finished
                goods
            
            
            -
            
            
            191Total
            
            
            612
            
            
            1,554Less:
                allowance for losses
            
            
            (370
            )
            
            (676
            )Inventories,
                net
            
            
            242
            
            
            878





Raw
      materials of $583,000 mainly consist of chipsets, PCB blank boards and
      multi-processor for PCBs and PCBAs manufacture. We maintain a certain level
      of
      key materials as a buffer to avoid a disruption of operating activities, and
      to
      ensure on-time delivery of the PCB and PCBA boards to our
      customers.





The
      work
      in progress of $29,000 consists of capitalized costs for ongoing
      projects.





During
      the fiscal year ended March 31, 2008, provision of $306,000 has been written
      off
      against inventory cost. As of March 31, 2008, the provision of $370,000 was
      for
      obsolete raw materials.


Page
          27 of
          68


**Property,
      Plant and Equipment**





**Fiscal Year Ended March 31****(in thousands of US dollars)****2008**
            
            **2007******Property,
                Plant and Equipment
            
            
            4,131
            
            
            3,951





As
      of
      March 31, 2008, our property, plant and equipment amounted to $4,131,000.





The
      detailed information on property, plant and equipment is as
      follows:





**Fiscal Year Ended March 31**(in thousands of US dollars)****
            
            **2008**
            
            **2007**Cost****Building
            
            
            768
            
            
            -Machinery
            
            
            4,804
            
            
            4,364Office
                equipment
            
            
            459
            
            
            404Motor
                vehicles
            
            
            87
            
            
            104Total
            
            
            6,118
            
            
            4,872Accumulated
                depreciationBuilding
            
            
            43
            
            
            -Machinery
            
            
            1,571
            
            
            643Office
                equipment
            
            
            333
            
            
            238Motor
                vehicles
            
            
            40
            
            
            40Total
            
            
            1,987
            
            
            921Carrying
                valueBuilding
            
            
            725Machinery
            
            
            3,233
            
            
            3,721Office
                equipment
            
            
            126
            
            
            166Motor
                vehicles
            
            
            47
            
            
            64Total
            
            
            4,131
            
            
            3,951




**Land
      Use Rights**





As
      of
      March 31, 2008, we have two land use rights in the amount of $10,647,000 in
      JinFeng Technology Zone in Fujian Province. Land-use rights are stated at cost
      less amortization. Amortization of land-use rights is calculated on the
      straight-line method, based on the period over which the right is granted by
      the
      relevant authorities in Fujian Province, PRC. The increase of land use rights
      from $9,488,000 to $10,647,000 was due to foreign currency
      translation.





**Goodwill**





On
      March
      19, 2007, Sunplus and Jiaxun acquired 80% and 20%, respectively, of Fujian
      Qiaoxing. As of the acquisition date, the Group recorded the fair market value
      of Fujian Qiaoxing’s assets and liabilities.  Fair market value is defined
      as the amount at which an asset could be bought or sold in a current transaction
      between willing parties.  The value of Fujian Qiaoxing’s land use rights
      was determined by reference to the open market value.  To the extent that
      the purchase price exceeded the fair value of the assets and liabilities
      assumed, goodwill was recorded.   The increase of goodwill from $4,873,000
      to $5,362,000 was due to foreign currency translation.


Page
          28 of
          68


**Liabilities**





**(in
                thousands of US dollars)**
            
            **Fiscal Year Ended March 31****2008**
            
            **2007******Liabilities
            
            
            13,375
            
            
            19,450Current
                liabilities
            
            
            9,198
            
            
            15,483Long-term
                liabilities
            
            
            4,177
            
            
            3,967





Our
      total
      liabilities as of March 31, 2008 were $13,375,000, which consisted of $9,198,000
      in current liabilities and $4,177,000 in long-term liabilities.





Long-term
      liabilities amounted to $4,177,000 as of March 31, 2008, all of which were
      liabilities due to shareholders.





**Liquidity
      and Capital Resources**





For
      the
      fiscal year ended March 31, 2008, we were principally engaged in providing
      design solutions of wireless communication devices and sales of mobile phone
      components. We did not declare or pay dividends in the fiscal year
      2008.





Cash
      and
      cash equivalents increased from $67,000 to $23,355,000 as of March 31,
      2008.





We
      generated $17,988,000 from operating activities for fiscal year ended March
      31,
      2008, as compared to $15,719,000 generated from operating activities for 2007.
      Net cash flow generated from operating activities increased mainly due to
      decrease in accounts receivable and note receivables and offset by the effect
      of
      decrease in accruals and other payable. For design business, our accounts
      receivable cycle typically averages approximately eight months.





Net
      cash
      generated from investing activities amounted to $4,105,000 for the fiscal year
      ended March 31, 2008 as compared with net cash used in investing activities
      of
      $21,348,000 for the fiscal year ended March 31, 2007. During the fiscal year
      ended March 31, 2008, we received a $4,864,000 refund of deposit from the
      acquisition of plant and equipment. During the fiscal year ended March 31,
      2007,
      we paid $12,565,000 for the acquisition of Fujian Qiaoxing.





For
      fiscal year ended 2008, net cash flow generated from financing activities was
      $896,000 as compared with $953,000 in 2007.





As
      of
      March 31, 2008, we had capital commitments of $37,000 in relation to acquisition
      of intangible assets.





We
      believe that the revenue from operations is sufficient to support our
      operational, capital commitments, debt repayment, interest requirements and
      dividend policy, as well as to meet our working capital needs.





**Critical
      Accounting Policies**





The
      financial statements are prepared in accordance with accounting principles
      generally accepted in the U.S., which requires us to make estimates and
      assumptions in certain circumstances that affect amounts reported in the
      accompanying financial statements and related footnotes. In preparing these
      financial statements, management has made its best estimates and judgments
      of
      certain amounts included in the financial statements, giving due consideration
      to materiality. We do not believe there is a great likelihood that materially
      different amounts would be reported related to the accounting policies described
      below. However, application of these accounting policies involves the exercise
      of judgment and use of assumptions as to future uncertainties and, as a result,
      actual results could differ from these estimates.




Page
          29 of
          68


**Revenue
      Recognition**





Our
      revenues are mainly derived from design fees of mobile handset design services
      and sales of mobile phone components. We earn our revenue mainly through NRE
      fees, royalties, and sales of products.





*NRE
      fee.* NRE
      fees
      stands for Non Refundable Engineering fees, a fixed one-off fee after an
      agreement has been signed by both the customers and the Company. The NRE fees
      are no less than the total expense of project design which normally includes
      the
      cost of market study, product concept identification, hardware design, software
      design, engineer expense, mechanical engineering design, testing and quality
      assurance, pilot production and production support. The NRE fees are recognized
      when payments are received.





*Royalty.* In
      addition to NRE fees, we also charge royalties to our customers. The royalty
      is
      calculated at a certain rate for each unit manufactured or sold by our
      customers. The rate is variable based on the volume of mobile handsets
      manufactured or sold. Royalty income is recognized when the confirmation of
      manufacturing or selling volume is obtained from customers.





C *omponent
      and product sales.* Revenue
      from sales of components including but not limited to PCBAs, PCBs, whole
      handsets designed by us and manufactured by OEMs, and wireless modules is
      recognized when products are delivered to our customers.





**Goodwill**





Goodwill
      is tested for impairment annually if circumstances changes and recognized as
      an
      asset and carried at cost less impairment. In accordance with SFAS No. 142,
      goodwill is tested for impairment on an annual basis.  We recognized
      goodwill when there is an excess of the cost of acquisition over the Group’s
      interest in the fair value of the identifiable assets and liabilities of a
      subsidiary at the date of acquisition. Goodwill impairment losses recognized
      cannot be reversed and goodwill arising on the acquisition of subsidiaries
      is
      presented separately in the balance sheet.





**Allowance
      for doubtful receivables**


Our
      determination of the allowance for doubtful receivables is based on a general
      reserve established for all cutomers based on a range of percentages applied
      to
      aging categories. These percentages are based on historical collection and
      write-off experience.





**Item
      7A.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**





The
      majority of our revenues derived and expenses and liabilities incurred are
      in
      Chinese Renminbi (“RMB”) with a relatively small amount in Hong Kong dollars
      (“HK$”) and the United States dollars (“$”). Thus, our revenues and operating
      results may be impacted by exchange rate fluctuations in the currencies of
      China
      and Hong Kong. We have not tried to reduce our exposure to exchange rate
      fluctuations by using hedging transactions. However, we may choose to do so
      in
      the future. The availability and effectiveness of any hedging transactions
      may
      be limited and we may not be able to successfully hedge our exchange rate risks.
      Accordingly, we may experience economic losses and negative impacts on earnings
      and equity as a result of foreign exchange rate fluctuations.


Page
          30 of
          68




**Item
      8.**   **Financial
      Statements and Supplementary Data.**





**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**





Report
                of Independent Registered Public Accounting Firm
            
            F-2Consolidated
                Balance Sheets
            
            F-3Consolidated
                Statements of Operations
            
            F-5Consolidated
                Statements of Changes in Stockholders’ Equity
            
            F-6Consolidated
                Statements of Cash Flows
            
            F-7Notes
                to Consolidated Financial Statements
            
            F-8 – F-21


F-1




tbay logo




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




The
      Board
      of Directors and Stockholders of


T-Bay
      Holdings, Inc.




We
      have
      audited the accompanying consolidated balance sheet of T-Bay Holdings, Inc.
      and
      subsidiaries (the “Company”) as of March 31, 2008 and 2007, and the related
      consolidated statements of operations, changes in stockholders’ equity, and cash
      flows for each of the two years in the period ended March 31, 2008. These
      consolidated financial statements are the responsibility of the Company's
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audits.




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




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of the Company
      as
      of March 31, 2008 and 2007 and the results of its operations and cash flows
      for
      each of the two years in the period then ended in conformity with accounting
      principles generally accepted in the United States of America.


*Certified
                  Public Accountants**Hong
                  Kong*




July
      15,
      2008




F-2


**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**March
      31, 2008 and 2007**


**(In
      thousands of United States dollars)**





MARCH
                31,Note(s)
            
            2008
            
            2007**ASSETS**CURRENT
                ASSETSCash
                and cash equivalents
            
            
            
            
            $
            23,355
            
            $
            67Notes
                receivables
            
            
            
            
            
            -
            
            
            4,014Accounts
                receivable, net
            
            
            3
            
            
            17,718
            
            
            19,317Prepayments,
                deposits and other receivables, netRelated
                parties
            
            
            10
            
            
            -
            
            
            17Third
                parties
            
            
            
            
            
            2,074
            
            
            3,208Value
                Added Tax (“VAT”) recoverable
            
            
            
            
            
            -
            
            
            21Inventories
            
            
            4
            
            
            242
            
            
            878Total
                current assets
            
            
            
            
            
            43,389
            
            
            27,522PROPERTY,
                PLANT AND EQUIPMENT, NET
            
            
            5
            
            
            4,131
            
            
            3,951CONSTRUCTION
                IN PROGRESS
            
            
            
            
            
            2,035
            
            
            1,910DEPOSIT
                FOR PROPERTY, PLANT AND EQUIPMENT
            
            
            
            
            
            -
            
            
            4,698LAND
                USE RIGHTS AND OTHER INTANGIBLE ASSETS
            
            
            6
            
            
            10,747
            
            
            9,519GOODWILL
            
            
            6
            
            
            5,362
            
            
            4,873**TOTAL
                ASSETS**
            
            
            
            
            $
            65,664
            
            $
            52,473**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIESAccounts
                payable
            
            
            
            
            $
            688
            
            $
            2,570Accruals
                and other payablesRelated
                parties
            
            
            10
            
            
            247
            
            
            199Third
                parties
            
            
            
            
            
            4,649
            
            
            7,857Receipts
                in advance
            
            
            
            
            
            2,098
            
            
            2,675Income
                tax payable
            
            
            
            
            
            1,516
            
            
            2,182Total
                current liabilities
            
            
            
            
            
            9.198
            
            
            15,483LONG-TERM
                LIABILITIESDue
                to shareholders
            
            
            10
            
            
            4,177
            
            
            3,967Total
                liabilities
            
            
            
            
            
            13,375
            
            
            19,450MINORITY
                INTERESTS
            
            
            
            
            
            2,600
            
            
            1,303COMMITMENTS
                AND CONTINGENCIES
            
            
            12STOCKHOLDERS’
                EQUITYPreferred
                stock, authorized 10,000,000 shares, parvalue
                $0.001, issued and outstanding Nil
            
            
            2(s)
            
            
            -
            
            
            -Common
                stock, authorized 100,000,000 shares, par value $0.001, issued and
                outstanding 30,088,174
            
            
            
            
            
            30
            
            
            30Additional
                paid-in capital
            
            
            
            
            
            1,462
            
            
            1,462Public
                welfare fund
            
            
            
            
            
            2,109
            
            
            1,430Statutory
                surplus fund
            
            
            
            
            
            4,219
            
            
            2,859Retained
                earnings
            
            
            
            
            
            37,016
            
            
            23,975Accumulated
                other comprehensive income
            
            
            
            
            
            4,853
            
            
            1,964Total
                stockholders’ equity
            
            
            
            
            
            49,689
            
            
            31,720**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            
            
            
            $
            65,664
            
            $
            52,473





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


F-3


**T-BAY
      HOLDINGS, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**For
      the years ended March 31, 2008 and 2007**


**(In
      thousands of United States dollars, except per share data)**





Note(s)
            
            YEAR ENDED MARCH 31,2008
            
            2007NET
                REVENUE
            
            
            
            
            $
            45,681
            
            $
            35,236COST
                OF REVENUE
            
            
            
            
            
            23,539
            
            
            17,606GROSS
                PROFIT
            
            
            
            
            
            22,142
            
            
            17,630OPERATING
                EXPENSESSelling
                expenses
            
            
            
            
            
            280
            
            
            292General
                and administrative expenses
            
            
            
            
            
            3,643
            
            
            3,009TOTAL
                OPERATING EXPENSES
            
            
            
            
            
            3,923
            
            
            3,301INCOME
                FROM OPERATIONS
            
            
            
            
            
            18,219
            
            
            14,329OTHER
                INCOME
            
            
            
            
            
            185
            
            
            7INTEREST
                EXPENSE
            
            
            
            
            
            (3
            )
            
            (3
            )INCOME
                BEFORE INCOME TAX AND MINORITY INTERESTS
            
            
            
            
            
            18,401
            
            
            14,333INCOME
                TAX: CURRENT
            
            
            7
            
            
            (3,188
            )
            
            (1,701
            )INCOME
                BEFORE MINORITY INTERESTS
            
            
            
            
            
            15,213
            
            
            12,632MINORITY
                INTERESTS
            
            
            
            
            
            (659
            )
            
            (429
            )NET
                INCOME
            
            
            
            
            
            14,554
            
            
            12,203OTHER
                COMPREHENSIVE INCOMEForeign
                currency translation adjustment
            
            
            
            
            
            2,889
            
            
            1,548COMPREHENSIVE
                INCOME
            
            
            
            
            $
            17,443
            
            $
            13,751WEIGHTED
                AVERAGE NUMBEROF
                SHARES (in thousands)
            
            
            
            
            
            30,088
            
            
            30,088EARNINGS
                PER SHARE (in dollars)
            
            
            2(q)
            
            $
            0.48
            
            $
            0.41





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


F-4


**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**


**For
      the years ended March 31, 2008 and 2007**


**(In
      thousands of United States dollars)**


COMMON STOCK
              
              ADDITIONAL
                PAID-IN
                CAPITAL
              
              PUBLIC
                WELFARE
                FUND
              
              STATUTORY
                SURPLUS
                FUND
              
              RETAINED
                EARNINGS
              
              ACCUMULATED
                OTHER
                COMPREHENSIVE
                INCOME
              
              TOTAL
                STOCKHOLDERS’
                EQUITYNo. of
                sharesBalance, April
                  1, 2006
              
              
              30,088,174
              
              $
              30
              
              $
              1,462
              
              $
              809
              
              $
              1,617
              
              $
              13,503
              
              $
              416
              
              $
              17,837Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              12,203
              
              
              -
              
              
              12,203Transfer
              
              
              -
              
              
              -
              
              
              -
              
              
              577
              
              
              1,154
              
              
              (1,731
              )
              
              -
              
              
              -Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              44
              
              
              88
              
              
              -
              
              
              1,548
              
              
              1,680Balance,
                  March 31, 2007
              
              
              30,088,174
              
              
              30
              
              
              1,462
              
              
              1,430
              
              
              2,859
              
              
              23,975
              
              
              1,964
              
              
              31,720Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              14,554
              
              
              -
              
              
              14,554Transfer
              
              
              -
              
              
              -
              
              
              -
              
              
              504
              
              
              1,009
              
              
              (1,513
              )
              
              -
              
              
              -Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              175
              
              
              351
              
              
              -
              
              
              2,889
              
              
              3,415Balance,
                  March 31, 2008
              
              
              30,088,174
              
              $
              30
              
              $
              1,462
              
              $
              2,109
              
              $
              4,219
              
              $
              37,016
              
              $
              4,853
              
              $
              49,689





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


F-5


**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**For
      the years ended March 31, 2008 and 2007**


**(In
      thousands of United States dollars)**





FOR THE YEAR ENDED MARCH 31,2008
            
            2007**CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                income
            
            $
            14,554
            
            $
            12,203Adjustments
                to reconcile net income to net cash generated from operatingactivities:Depreciation
            
            
            929
            
            
            642Amortization
            
            
            36
            
            
            14Allowances
                for doubtful receivables
            
            
            700
            
            
            62(Reversal
                of allowance)/allowance for inventories
            
            
            (306
            )
            
            244Minority
                interests
            
            
            659
            
            
            429(Gain)/
                Loss on disposal of property, plant and equipment
            
            
            (5
            )
            
            5Changes
                in operating assets and liabilities:Decrease/(Increase)
                in accounts receivable
            
            
            2,316
            
            
            (4,210
            )Decrease
                in notes receivable
            
            
            4,156
            
            
            3,949Decrease/(Increase)
                in prepayments, deposits and other receivables
            
            
            1,184
            
            
            (1,004
            )Increase/(decrease)
                in VAT recoverable
            
            
            21
            
            
            (1
            )Decrease
                in inventories
            
            
            988
            
            
            909Decrease
                in accounts payable
            
            
            (1,035
            )
            
            (7
            )(Decrease)/
                Increase in accruals and other payables
            
            
            (4,686
            )
            
            1,161(Decrease)/
                Increase in receipts in advance
            
            
            (690
            )
            
            1,152(Decrease)/Increase
                in income tax payable
            
            
            (833
            )
            
            171Net
                cash provided by operating activities
            
            
            17,988
            
            
            15,719**CASH
                FLOWS FROM INVESTING ACTIVITES**Cash
                outflow from acquisition of subsidiary (Note 11)
            
            
            -
            
            
            (12,565
            )Acquisition
                of property, plant and equipment
            
            
            (675
            )
            
            (4,096
            )Proceeds
                received from disposal of property, plant and equipment
            
            
            13
            
            
            14Deposit
                received/(paid) for property, plant and equipment
            
            
            4,864
            
            
            (4,698
            )Acquisition
                of intangible assets
            
            
            (97
            )
            
            (3
            )Net
                cash provided by/(used in) investing activities
            
            
            4,105
            
            
            (21,348
            )**CASH
                FLOW****S
                FROM FINANCING ACTIVITIES**Increase
                in minority interests
            
            
            638
            
            
            351Increase
                in amounts due to shareholders
            
            
            258
            
            
            602Net
                cash provided by financing activities
            
            
            896
            
            
            953Effect
                of exchange rate changes on cash
            
            
            299
            
            
            70**Net
                increase in cash and cash equivalents**
            
            
            23,288
            
            
            (4,606
            )**Cash
                and cash equivalents at beginning of year**
            
            
            67
            
            
            4,673**Cash
                and cash equivalents at end of year**
            
            $
            23,355
            
            $
            67SUPPLEMENTAL
                INFORMATIONIncome
                taxes paid
            
            $
            3,854
            
            $
            1,530Interest
                paid
            
            $
            3
            
            $
            3





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


F-6


**T-BAY
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008 and 2007**





**1.
      The Company and subsidiaries**





T-Bay
      Holdings, Inc. (the “Company” or T-Bay) was incorporated under the laws of the
      State of Utah on August 8, 1984 as “Sharus Corporation” with authorized common
      stock of 50,000,000 shares with a par value of $0.001. On June 13, 1989, the
      domicile of the Company was changed to the state of Nevada in connection with
      a
      name change to “Golden Quest, Inc.”.  On January 7, 2002, the name was
      changed to “T-Bay Holdings, Inc.” as part of a reverse stock split of 400 shares
      of outstanding stock for one share and on November 23, 2004, the Company
      increased the authorized common stock to 100,000,000 shares with a par value
      of
      $0.001 as part of a reverse stock split of 20 outstanding shares for one
      share.





On
      August
      16, 2005, pursuant
      to an Agreement and Plan of Reorganization, T-Bay issued 18,550,000 shares
      of
      its common stock for all of Amber Link International Limited’s (“Amber Link”)
      and Wise Target International Limited’s (“Wise Target”) outstanding shares of
      common stock (the “Merger”). Amber Link and Wise Target are two of the owners of
      Shanghai Sunplus Communication Co., Ltd. (“Sunplus”). As of March 31, 2008 and
      2007, Wise Target owned a 75% interest and Amber Link owned a 20% interest
      in
      Sunplus. After the Merger and as of March 31, 2008 T-Bay indirectly owned a
      95%
      interest in Sunplus.





Wise
      Target was incorporated on April 24, 2002 under the International Business
      Companies Act in the British Virgin Islands.





Amber
      Link was incorporated on May 10, 2002 under the International Business Companies
      Act in the British Virgin Islands. During the year ended March 31, 2007, Amber
      Link commenced the sales of mobile phones and components.





Sunplus
      was established on October 17, 2002 under the laws of the People’s Republic of
      China (“PRC”) as a Sino-foreign joint venture specialized in the development,
      production and sales of electronic telecommunication devices. Sunplus commenced
      operations on May 1, 2003. At March 31, 2008, Sunplus has approximately 130
      staff, mostly engineers and software programmers.





On
      February 12, 2007, Sunplus established a wholly-owned subsidiary, Zhangzhou
      JiaXun Communication Facility Co., Ltd. (“Zhangzhou JiaXun”) under the laws of
      the PRC. Zhangzhou JiaXun is an investment holding company.





On
      March
      19, 2007, Sunplus and Zhangzhou JiaXun acquired 80% and 20%, respectively,
      of
      Fujian Qiaoxing Industry Co., Ltd. (“Fujian Qiaoxing”) (Note 11). Fujian
      Qiaoxing has not commenced operations as of March 31, 2008.


F-7


tbay logo





**2.
      Summary of Significant Accounting Policies**





**(a)
      Basis of Preparation and Consolidation**





The
      consolidated financial statements for the year ended March 31, 2008 and 2007
      included the financial statements of T-Bay and its subsidiaries (hereinafter,
      referred to collectively as the “Group”) and are prepared in conformity with
      accounting principles generally accepted in the United States of America (US
      GAAP). All significant inter-company balances and transactions have been
      eliminated in consolidation.





The
      consolidated balance sheets as of March 31, 2008 and 2007 include T-Bay, Wise
      Target, Amber Link, Sunplus, Zhangzhou JiaXun and Fujian Qiaoxing. The
      consolidated statement of operations for the year ended March 31, 2008 includes
      T-Bay, Wise Target, Amber Link, Sunplus, Zhangzhou JiaXun and Fujian Qiaoxing.
      The consolidated statement of operations for the year ended March 31, 2007
      included T-Bay, Wise Target, Amber Link and Sunplus for the full year and
      Zhangzhou JiaXun and Fujian Qiaoxing from date of establishment/acquisition.





**(b)
      Goodwill**





Goodwill
      arising on consolidation represents the excess of the cost of acquisition over
      the Group’s interest in the fair value of the identifiable assets and
      liabilities of subsidiary at the date of acquisition. Goodwill is recognized
      as
      an asset and carried at cost less impairment. In accordance with SFAS No. 142,
      goodwill is tested for impairment on an annual basis. Recognized impairment
      losses of goodwill cannot be reversed.





Goodwill
      arising on the acquisition of subsidiaries is presented separately in the
      balance sheet.





**(c)
      Use of Estimates**





In
      preparing financial statements in conformity with US GAAP, management is
      required to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and the disclosure of contingent assets and liabilities
      at the date of the financial statements and revenues and expenses during the
      reported periods. Significant estimates include useful lives of depreciable
      and
      amortizable assets and allowance for doubtful receivables. Actual results could
      differ from those estimates.


F-8


**(d)
      Cash and Cash Equivalents**





The
      Group
      considers all highly liquid investments with original maturities of three months
      or less at the time of purchase to be cash equivalents. As of March 31, 2008
      and
      2007, the Group did not have any cash equivalents.





**(e)
      Allowance for Doubtful Receivables**





The
      Group
      recognizes an allowance for doubtful receivables to ensure accounts and other
      receivable are not overstated due to uncollectibility. Allowance for doubtful
      receivables is maintained for all customers based on a variety of factors,
      including the length of time the receivables are past due, significant one-time
      events and historical experience. An additional allowance for individual
      accounts is recorded when the Group becomes aware of a customer’s or other
      debtor’s inability to meet its financial obligation, such as in the case of
      bankruptcy filings or deterioration in the customer’s or other debtor’s
      operating results or financial position. If circumstances related to customers
      or debtors change, estimates of the recoverability of receivables would be
      further adjusted (See Note 3).


**(f)
      Inventories**





Inventories
      comprise raw materials, work in progress and finished goods and are stated
      at
      the lower of cost or market. Market value represents replacement cost for raw
      materials and net realizable value for finished goods and work in progress.
      Substantially all inventory costs are determined using the weighted average
      basis. Costs of finished goods include direct materials, subcontracting charges
      and other overhead before the goods are ready for sale. Inventory costs do
      not
      exceed net realizable value.





**(g)
      Property, Plant and Equipment**





Property,
      plant and equipment is stated at cost. Depreciation is provided principally
      by
      use of the straight-line method over the estimated useful lives of the related
      assets. Expenditure for maintenance and repairs, which does not improve or
      extend the expected useful life of the assets, is expensed to operations while
      major repairs are capitalized.





Management
      estimates that property, plant and equipment have a 10% residual value. The
      estimated useful lives are as follows:





Buildings
            20
                yearsMachinery
            5
                yearsOffice
                equipment
            5
                yearsMotor
                vehicles
            5
                years





The
      gain
      or loss on disposal of property, plant and equipment is the difference between
      the net sales proceeds and the carrying amount of the relevant assets, and,
      if
      any, is recognized in the statement of operations and comprehensive
      income.





**(h)
      Construction in progress**





Construction
      in progress represents factory buildings under construction and machinery under
      installation and is stated at cost and not depreciated. Construction in progress
      is reclassified to the appropriate category of property, plant and equipment
      when completed and ready for use.


F-9




**(i)
      Land use rights**





Land-use
      rights are stated at cost, less amortization. Amortization of land-use rights
      is
      calculated on the straight-line method, based on the period over which the
      right
      is granted by the relevant authorities in Fujian Province, PRC.





**(j)
      Intangible Assets**





Intangible
      assets consist of software and patents and are amortized using the straight-line
      method over their estimated useful life of 5 years.





**(k)
      Impairment of Assets**





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
      "Accounting for Impairment or Disposal of Long-Lived Assets", the Group
      evaluates its long-lived assets to determine whether later events and
      circumstances warrant revised estimates of useful lives or a reduction in
      carrying value due to impairment. If indicators of impairment exist and if
      the
      value of the assets is impaired, an impairment loss would be recognized. As
      of
      March 31, 2008 and 2007, no impairment loss has been recognized.





**(l)
      Income Taxes**





The
      Group
      accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes".
      Under SFAS No. 109, deferred tax assets and liabilities are recognized for
      the
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases. Deferred tax assets and liabilities are measured using
      enacted tax rates expected to apply to taxable income in the years in which
      those temporary differences are expected to be recovered or settled. Under
      SFAS
      No. 109, the effect on deferred tax assets and liabilities of a change in tax
      rates is recognized in income in the period that includes the enactment
      date.





The
      Group
      reviews the differences between the tax bases under PRC tax laws and financial
      reporting under US GAAP. As of March 31, 2008 and 2007, no material differences
      were found; therefore, there were no material deferred tax assets or liabilities
      arising from the operations of the subsidiaries in the PRC.





Under
      current PRC tax laws, no tax is imposed in respect to distributions paid to
      owners except individual income tax.





**(m)
      Revenue Recognition**





Revenue
      from goods sold is recognized when title has passed to the purchaser, which
      generally is at the time of delivery. Revenue from design services is recognized
      when earned on the basis of the terms specified in the underlying contractual
      agreements.


F-11


**(n)
      Research and development costs**





Research
      and development costs consist of expenditure incurred during the course of
      planned research and investigation aimed at discovery of new knowledge which
      will be useful for developing new products or significantly enhancing existing
      products, and the implementation of such through design and testing of product
      alternatives. All expenses incurred in connection with the Group’s research and
      development activities are charged to current income. During the two years
      ended
      March 31, 2008 and 2007, research and development costs amounting to $420,000
      and $92,000, respectively, were charged to operations and are included in cost
      of revenue.





**(o)
      Foreign Currency Transactions**





The
      functional currencies of the Group are U.S. dollars, Hong Kong dollars and
      Renminbi, and its reporting currency is U.S. dollars.  The
      Group’s balance sheet accounts are translated into U.S. dollars at the year-end
      exchange rates and all revenue and expenses are translated into U.S. dollars
      at
      the average exchange rates prevailing during the periods in which these items
      arise.





Translation
      gains and losses are deferred and accumulated as a component of other
      comprehensive income in stockholders’ equity. Transaction gains and losses that
      arise from exchange rate fluctuations from transactions denominated in a
      currency other than the functional currency are included in the consolidated
      statement of operations as incurred.





The
      PRC
      government imposes significant exchange restrictions on fund transfers out
      of
      the PRC that are not related to business operations. These restrictions have
      not
      had a material impact on the Group because it has not engaged in any significant
      transactions that are subject to the restrictions.





**(p)
      Fair Value of Financial Instruments**





SFAS
      No.
      107, “Disclosures about Fair Values of Financial Instruments”, requires
      disclosing fair value to the extent practicable for financial instruments that
      are recognized or unrecognized in the balance sheet. The fair value of the
      financial instruments disclosed herein is not necessarily representative of
      the
      amount that could be realized or settled, nor does the fair value amount
      consider the tax consequences of realization or settlement.





For
      certain financial instruments, including cash, accounts, notes and other
      receivables, accounts payable, accruals and other payables, it was assumed
      that
      the carrying amounts approximate fair value because of the near term maturities
      of such obligations.





**(q)
      Earnings Per Share**





Basic
      earnings per share is computed by dividing the earnings for the year by the
      weighted average number of common shares outstanding for the year. Diluted
      earnings per share reflects the potential dilution of securities by including
      other potential common stock, including stock options and warrants, in the
      weighted average number of common shares outstanding for the year, if dilutive.
      There are no common stock equivalents in 2008 and 2007.


F-12


**(r)
      Profit Appropriation**





In
      accordance with PRC regulations, the PRC subsidiaries are required to make
      appropriations to the statutory surplus reserve, based on after-tax net income
      determined in accordance with PRC GAAP. Appropriation to the statutory surplus
      reserve should be at least 10% of the after-tax net income determined in
      accordance with PRC GAAP until the reserve is equal to 50% of the entity’s
      registered capital. Appropriations to the statutory public welfare fund and
      discretionary surplus reserve fund are made on the same basis as statutory
      surplus fund, normally at 5%-10% or higher rates and are generally optional
      at
      the discretion of the Board of Directors. Statutory surplus reserve is
      non-distributable other than in liquidation.





**(s)
      Preferred stock**





No
      shares
      of preferred stock have been issued or are outstanding. Dividends, voting rights
      and other terms, rights and preferences of the preferred shares have not been
      designated but may be designated by our board of directors from time to
      time.





**3.
      Allowance for Doubtful Receivables**





MARCH
                31,2008
            
            2007US$’000
            
            US$’000Balance,
                beginning of year
            
            
            425
            
            
            363Additions
            
            
            700
            
            
            62Balance,
                end of year
            
            
            1,125
            
            
            425




**4.
      Inventories**





As
      of
      March 31, 2008 and 2007, inventories consisted of the following:





MARCH
                31,2008
            
            2007US$’000
            
            US$’000Raw
                materials
            
            
            583
            
            
            860Work
                in progress
            
            
            29
            
            
            503Finished
                goods
            
            
            -
            
            
            191612
            
            
            1,554Less:
                allowance for losses
            
            
            (370
            )
            
            (676
            )Total
            
            
            242
            
            
            878





The
      changes in the inventory allowances are summarized as follows:





MARCH
                31,2008
            
            2007US$’000
            
            US$’000Balance,
                beginning of year
            
            
            676
            
            
            432(Reversal)/additions
            
            
            (306
            )
            
            244Balance,
                end of year
            
            
            370
            
            
            676




F-13


**5.
      Property, Plant and Equipment, Net**





MARCH
                31,2008
            
            2007US$’000
            
            US$’000CostBuilding
            
            
            768
            
            
            -Machinery
            
            
            4,804
            
            
            4,364Office
                equipment
            
            
            459
            
            
            404Motor
                vehicles
            
            
            87
            
            
            1046,118
            
            
            4,872Accumulated
                depreciationBuilding
            
            
            43
            
            
            -Machinery
            
            
            1,571
            
            
            643Office
                equipment
            
            
            333
            
            
            238Motor
                vehicles
            
            
            40
            
            
            401,987
            
            
            921Carrying
                valueBuilding
            
            
            725
            
            
            -Machinery
            
            
            3,233
            
            
            3,721Office
                equipment
            
            
            126
            
            
            166Motor
                vehicles
            
            
            47
            
            
            644,131
            
            
            3,951





Depreciation
      expense for each of the years ended March 31, 2008 and 2007 was approximately
      $929,000 and $983,000, respectively.








**6.
      Goodwill and Other Intangible Assets, Net**





Changes
      in the carrying amount of goodwill for the year ended March 31, 2008 were as
      follows:-





GoodwillUS$’000Balance,
                March 31, 2007
            
            
            4,873Foreign
                currency translation
            
            
            489Balance,
                March 31, 2008
            
            
            5,362





SFAS
      No.
      142,“Goodwill and Other Intangible Assets,” requires the Company to perform an
      assessment at least annually as to whether there is an indication that the
      carrying values of goodwill and other intangible assets are impaired at the
      reporting unit level. The annual impairment test is performed at the year ending
      date.


F-14


Changes
      in the carrying amount of land use rights and other intangible assets for the
      year ended March 31, 2008 were as follows:





Land
                use
              rights
            
            Software
            
            Patent
            
            TotalUS$’000
            
            US$’000
            
            US$’000
            
            US$’000Cost:Balance,
                March 31, 2007
            
            
            9,488
            
            
            68
            
            
            3
            
            
            9,559Additions
            
            
            -
            
            
            97
            
            
            -
            
            
            97Foreign
                currency translation
            
            
            1,159
            
            
            13
            
            
            1
            
            
            1,173Balance,
                March 31, 2008
            
            
            10,647
            
            
            178
            
            
            4
            
            
            10,829Less:
                Accumulated amortisationBalance,
                March 31, 2007
            
            
            -
            
            
            (39
            )
            
            (1
            )
            
            (40
            )Amortisation
                expenses
            
            
            -
            
            
            (35
            )
            
            (1
            )
            
            (36
            )Foreign
                currency translation
            
            
            -
            
            
            (6
            )
            
            -
            
            
            (6
            )Balance,
                March 31, 2008
            
            
            -
            
            
            (80
            )
            
            (2
            )
            
            (82
            )Net
                balance, March 31, 2008
            
            
            10,647
            
            
            98
            
            
            2
            
            
            10,747





The
      estimated amortization expense for the five years ending March 31, 2009, 2010,
      2011, 2012 and 2013 amounts to approximately $36,000,  $23,000,  $22,000,  $17,000
      and $2,000, respectively.





**7.
      Income Taxes**





Amber
      Link and Wise Target are not subject to income taxes in any tax
      jurisdiction.





No
      provision for income tax for T-Bay has been made as it incurred a loss for
      the
      two years ended March 31, 2008 and 2007.





Sunplus
      is subject to PRC Income Tax. Pursuant to the New PRC Income Tax Laws, the
      prevailing statutory rate of enterprise income tax is 25% as of January 1,
      2008;
      prior to that date, it was 27%.





Zhangzhou
      JiaXun and Fujian Qiaoxing have not commenced operations.





Pursuant
      to the old laws and regulations in the PRC, Sunplus was entitled to an exemption
      from PRC income tax for two years starting from its first profitable year.
      As
      Sunplus’ statutory year-end is December 31, the tax exemption applied to the
      period from January 1, 2003 to December 31, 2004. Sunplus was also entitled
      to
      three years of 50% exemption after the expiration of the two years of full
      exemption. The 50% tax exemption applied to the period from January 1, 2005
      to
      December 31, 2007. For the period from April 1, 2006 to December 31, 2007,
      Sunplus is subject to PRC Income Tax at a reduced rate of 13.5%. Starting from
      January 1, 2008, Sunplus is subject to PRC Income Tax at the prevailing
      statutory rate of 25%.


F-15





A
      reconciliation between taxes computed at the United States statutory rate of
      34%
      and the Group’s effective tax rate is as follows:-





YEAR
                ENDED MARCH 31,2008
            
            2007US$’000
            
            US$’000Income
                before income tax
            
            
            18,401
            
            
            14,333Income
                tax on pretax income at statutory rate
            
            
            6,256
            
            
            4,873Effect
                of different tax rates of subsidiary operating in other
                jurisdictions
            
            
            (2,188
            )
            
            (2,219
            )Tax
                effect of non-deductible expenses
            
            
            504
            
            
            665Tax
                effect of non-taxable income
            
            
            (1
            )
            
            (40
            )Valuation
                allowance
            
            
            118
            
            
            120Tax
                effect of exemption
            
            
            (1,501
            )
            
            (1,698
            )Income
                tax
            
            
            3,188
            
            
            1,701





As
      of
      March 31, 2008 and 2007, T-Bay had accumulated net operating loss carryforwards
      for United States federal tax purposes of approximately of $5,501,000 and
      $5,223,000, respectively, that are available to offset future taxable income.
       Realization of the net operating loss carryforwards is dependent upon
      future profitable operations.  In addition, the carryforwards may be
      limited upon a change of control in accordance with Internal Revenue Code
      Section 382, as amended.  Accordingly, management has recorded a valuation
      allowance to reduce deferred tax assets associated with the net operating loss
      carryforwards to zero at March 31, 2008 and 2007 . The
      net
      operating loss carryforwards expire in years 2012 through 2028.





As
      of
      March 31, 2008 and 2007, deferred tax assets consist of:-





MARCH
                31,2008
            
            2007US$’000
            
            US$’000Net
                operating loss carryforwards
            
            
            1,896
            
            
            1,778Less:
                valuation allowance
            
            
            (1,896
            )
            
            (1,778
            )Net
            
            
            -
            
            
            -




**8.
      Concentrations and Credit Risk**





The
      Group
      operates principally in the PRC (including Hong Kong) and grants credit to
      its
      customers in this geographic region. Although the PRC is economically stable,
      it
      is always possible that unanticipated events in foreign countries could disrupt
      the Group’s operations.





Financial
      instruments that potentially subject the Group to a concentration of credit
      risk
      consist of cash, accounts and notes receivable.





At
      March
      31, 2008 and 2007, the Group had credit risk exposure of uninsured cash in
      banks
      of approximately $23,355,000 and $67,000, respectively.





A
      substantial portion of revenue was generated from one group of customers for
      the
      year ended March 31, 2008 and 2007.


F-16


The
      net
      sales to customers representing at least 10% of net total sales are as
      follows:





YEAR
                ENDED MARCH 31,2008
            
            2007US$’000
            
            %
            
            US$’000
            
            %Customer
                A
            
            
            1,520
            
            
            3
            
            
            7,542
            
            
            21Customer
                B
            
            
            723
            
            
            2
            
            
            3,385
            
            
            10Customer
                C*
            
            
            -
            
            
            -
            
            
            3,382
            
            
            10Customer
                D
            
            
            6,977
            
            
            15
            
            
            2,766
            
            
            8Customer
                E
            
            
            4,902
            
            
            11
            
            
            1,147
            
            
            3Customer
                F
            
            
            4,410
            
            
            10
            
            
            1,065
            
            
            3Customer
                group A*
            
            
            3,755
            
            
            8
            
            
            8,823
            
            
            25





*At
      March
      31, 2008 and 2007, this group of customers accounted for 10% and 41%,
      respectively, of net accounts receivable. The accounts receivable have repayment
      terms of not more than twelve months. The Group does not require collateral
      to
      support financial instruments that are subject to credit risk.





The
      following customers had balances greater than 10% of the total accounts
      receivable as of March 31, 2008 and 2007:





MARCH
                31,2008
            
            2007US$’000
            
            %
            
            US$’000
            
            %Customer
                C*
            
            
            -
            
            
            -
            
            
            3,322
            
            
            17Customer
                D
            
            
            3,603
            
            
            19
            
            
            3,478
            
            
            18Customer
                G
            
            
            3,220
            
            
            17
            
            
            3,984
            
            
            20Customer
                H
            
            
            2,529
            
            
            13
            
            
            8
            
            
            -Customer
                I
            
            
            2,517
            
            
            13
            
            
            -
            
            
            -Customer
                J
            
            
            2,030
            
            
            11
            
            
            -
            
            
            -Customer
                K*
            
            
            128
            
            
            1
            
            
            2,188
            
            
            11Customer
                L
            
            
            -
            
            
            -
            
            
            2,527
            
            
            13Customer
                group A*
            
            
            1,941
            
            
            10
            
            
            7,952
            
            
            41





*
      Customer Group A includes customers C and K and other customers in the same
      group that individiually do not meet the greater than 10%
      threshhold





**9.
      Retirement and Welfare Benefits**





The
      full-time employees of the PRC subsidiaries are entitled to staff welfare
      benefits including medical care, casualty, housing benefits, education benefits,
      unemployment insurance and pension benefits through a PRC government-mandated
      multi-employer defined contribution plan. The PRC subsidiaries are required
      to
      accrue the employer-portion for these benefits based on certain percentages
      of
      the employees’ salaries. The total provision for such employee benefits was
      $212,000 and $297,000 for the two years ended March 31, 2008 and 2007,
      respectively. The PRC subsidiaries are required to make contributions to the
      plans out of the amounts accrued for all staff welfare benefits except for
      education benefits. The PRC government is responsible for the staff welfare
      benefits including medical care, casualty, housing benefits, unemployment
      insurance and pension benefits to be paid to these employees.


F-17


**10.
      Related Party Transactions**





The
      Group
      engages in business transactions with the following related
      parties:


a.
      Li
      Xiaofeng, a stockholder of T-Bay.


b.
      Li
      Meilian, a stockholder of T-Bay.





The
      Group
      has the following transactions and balances with related parties:-





MARCH
                31,2008
            
            2007US$’000
            
            US$’000Other
                receivables – Li Xiaofeng
            
            
            -
            
            
            17Other
                payable – Li Meilian
            
            
            247
            
            
            199Long-term
                liabilitiesOther
                payable – Li Meilian
            
            
            3,404
            
            
            3,194Other
                payable – Li Xiaofeng
            
            
            773
            
            
            7734,177
            
            
            3,967





The
      balances have no stated terms for repayment and are not interest bearing. The
      payables to Li Meilian and Li Xiaofeng are not repayable within the next twelve
      months.





**11.
      Acquisition of subsidiary**





On
      March
      19, 2007, Sunplus and Zhangzhou JiaXun acquired 80% and 20%, respectively,
      of
      Fujian Qiaoxing from a third party. The acquisition was to allow the Group
      to
      manufacture in their own facilities. This transaction was accounted for using
      the purchase method of accounting. As of the acquisition date, the Group
      recorded the fair market value of Fujian Qiaoxing’s assets and liabilities. Fair
      market value is defined as the amount at which an asset could be bought or
      sold
      in a current transaction between willing parties. The value of Fujian Qiaoxing’s
      land use rights was determined by reference to the open market value. To the
      extent that the purchase price exceeded the fair value of the assets and
      liabilities assumed, goodwill was recorded. The resulting land use rights
      acquired in connection with the acquisition will be amortized over 47 years.
      The
      allocation of the purchase price to assets acquired and liabilities assumed
      was
      as follows:-





March 31, 2007Acquisition
                of subsidiary
            
            US$’000Net
                assets acquired:-Property,
                plant and equipment
            
            
            24Construction
                in progress
            
            
            1,910Land
                use rights
            
            
            9,488Cash
                and bank balances
            
            
            33Other
                receivables
            
            
            1,645Other
                payables
            
            
            (3,986
            )Net
                assets acquired
            
            
            9,114Goodwill
                on consolidation
            
            
            4,873Consideration
            
            
            13,987


F-18





US$’000Satisfied
                by:Cash
            
            
            12,598Other
                payable
            
            
            1,389Total
                consideration
            
            
            13,987





An
      analysis of the net outflow of cash and cash equivalents in respect of the
      acquisition of Fujian Qiaoxing is


as
      follows:-





US$’000Cash
                and bank balances acquired
            
            
            33Less:
                cash consideration paid
            
            
            (12,598
            )Net
                cash outflow
            
            
            (12,565
            )





Proforma
      information was not presented as it is not significant.








**12.
      Commitments and Contingencies**





a.
            As
                of March 31, 2008, Sunplus leased office premises under an agreement
                expiring in 2008 to 2009.





Rental
      expenses for the two years ended March 31, 2008 and 2007 amounted to $439,000
      and $315,000, respectively, and are included in general and administrative
      expenses in the consolidated statements of operations.





The
      future minimum lease payments under the above-mentioned lease as of March 31,
      2008 are as follows:-




US$’000Year
                Ending March 31,2009
            
            
            1262010
            
            
            8Total
            
            
            134





b.
            As
                of March 31, 2008, the Group had capital commitments in relation
                to
                acquisition of intangible assets of
                $37,000.





c.
            In
                August 2006, Sunplus Technology Co., Ltd., a company incorporated
                in the
                Republic of China filed a suit against Sunplus. The plaintiff brought
                suit
                demanding that Sunplus cease using the “Sunplus” name and the Company
                website. In April 2007, the court granted the demand and Sunplus
                appealed
                the ruling in Shanghai Superior People’s Court. In July 2007, both parties
                appeared in court. In August 2007, the Shanghai Superior People’s Court
                granted the demand to the plaintiff and Sunplus had to cease using
                the
                domain name “Sunplus” and the Company website www.sunpluschina.com.cn.
                Sunplus did not suffer any substantial pecuniary damages and is in
                the
                process of changing the domain name and the Company website.


F-19


**13.
      New Accounting Pronouncements**





On
      September 15, 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements” (“SFAS No. 157”). SFAS No. 157 addresses the
      way companies should measure fair value when they are required to use a fair
      value measure for recognition and disclosure purposes under generally accepted
      accounting principles. SFAS No. 157 will require the fair value of an
      asset or liability to be based on a market based measure which will reflect
      the
      credit risk of the company. SFAS No. 157 will also require expanded
      disclosure requirements which will include the methods and assumptions used
      to
      measure fair value and the effect of fair value measures on earnings.
      SFAS No. 157 will be applied prospectively and will be effective for
      fiscal years beginning after November 15, 2007 and to interim periods
      within those fiscal years. The adoption is not expected to have a material
      impact on the consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Liabilities - including an amendment of FAS 115 (“SFAS No.
      159”), which allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item’s fair value in subsequent reporting
      periods must be recognized in earnings. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      entities that elect different measurement attributes for similar assets and
      liabilities. SFAS No. 159 is effective for the first fiscal year beginning
      after
      November 15, 2007. The adoption is not expected to have a material impact on
      the
      consolidated financial statements.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
      in Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS
      No. 160”). SFAS No. 160 requires that a noncontrolling interest in a
      subsidiary be reported as equity and the amount of consolidated net income
      specifically attributable to the noncontrolling interest be identified in the
      consolidated financial statements. It also calls for consistency in the manner
      of reporting changes in the parent’s ownership interest and requires fair value
      measurement of any noncontrolling equity investment retained in a
      deconsolidation. SFAS No. 160 is effective for fiscal years, and interim
      periods within those fiscal years, beginning on or after December 15, 2008.
      The Company is currently evaluating the impact adopting SFAS No. 160 will
      have on its consolidated financial condition, results of operations, and cash
      flows.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
      Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) broadens the guidance of
      SFAS No. 141, extending its applicability to all transactions and other
      events in which one entity obtains control over one or more other businesses.
      It
      broadens the fair value measurement and recognition of assets acquired,
      liabilities assumed, and interests transferred as a result of business
      combinations. SFAS No. 141(R) expands on required disclosures to improve
      the statement users’ abilities to evaluate the nature and financial effects of
      business combinations. SFAS No. 141(R) is effective for the first annual
      reporting period beginning on or after December 15, 2008. The Company is
      currently evaluating the impact SFAS No. 141(R) will have on its
      consolidated financial statements and does not expect the adoption of SFAS
      No. 141(R) to have a material effect on its consolidated financial
      condition, results of operations, or cash flows.


F-20




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"). SFAS 161 expands and amends the
        disclosure requirements for derivative instruments and hedging activities.
        SFAS
        161 is effective for financial statements issued for fiscal years and interim
        periods beginning after November 15, 2008. The Company is in the process
        of
        determining what effect, if any, the application of the provisions of SFAS
        161
        will have on its financial position, results of operations or cash
        flows.
  F-21
  **Item
        9.**  **Changes
        in and Disagreements With Accountants on Accounting and Financial
        Disclosure.**
 
 Not
        applicable.
 
 **Item
        9A(T).**  **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 ("CEO") and our Chief Financial Officer ("CFO"),
        of the
        effectiveness of the design and operation of our disclosure controls and
        procedures, or “disclosure controls,” pursuant to Exchange Act Rule
        13a-15(b). Disclosure controls are controls and procedures designed to
        reasonably ensure that information required to be disclosed in our reports
        filed
        under the Exchange Act, such as this annual report, is recorded, processed,
        summarized and reported within the time periods specified in the U.S. Securities
        and Exchange Commission’s rules and forms. Disclosure controls include, without
        limitation, controls and procedures designed to ensure that information required
        to be disclosed in our reports filed under the Exchange Act is accumulated
        and
        communicated to our management, including our CEO and CFO, or persons performing
        similar functions, as appropriate, to allow timely decisions regarding required
        disclosure. Our disclosure controls include some, but not all, components
        of our
        internal control over financial reporting. In making this evaluation, our
        management considered the material weaknesses in our internal control over
        financial reporting and the status of remediation as discussed below. Based
        upon
        that evaluation, our CEO and CFO concluded that our disclosure controls and
        procedures were not effective as of March 31, 2008.However, giving full
        consideration to the material weaknesses described below, we performed adequate
        analyses and procedures, including among other things, transaction reviews
        and
        account reconciliations, in order to provide assurance that our consolidated
        financial statements included in this annual report were prepared in accordance
        with generally accepted accounting principles (“GAAP”) and present fairly, in
        all material respects, our financial position, results of operations and
        cash
        flows for the periods presented in conformity with GAAP.
 
 **(b)
        Management’s Report on Internal Control Over Financial
        Reporting**
 
 Our
        management is responsible for establishing and maintaining effective internal
        control over financial reporting. This system is designed to provide reasonable
        assurance regarding the reliability of financial reporting and the preparation
        of consolidated financial statements for external purposes in accordance
        with
        GAAP.
 
 Our
        internal control over financial reporting includes those policies and procedures
        that: (1) pertain to the maintenance of records that, in reasonable detail,
        accurately and fairly reflect our transactions and dispositions of our assets;
        (2) provide reasonable assurance that transactions are recorded as necessary
        to
        permit preparation of consolidated financial statements in accordance with
        generally accepted accounting principles, and that our receipts and expenditures
        are being made only in accordance with authorizations of our management and
        directors; and (3) provide reasonable assurance regarding prevention or timely
        detection of unauthorized acquisition, use, or disposition of our assets
        that
        could have a material effect on the consolidated financial
        statements.
 
 Our
        management performed an assessment of the effectiveness of our internal control
        over financial reporting as of March 31, 2008, utilizing the criteria described
        in the “Internal Control — Integrated Framework” issued by the Committee of
        Sponsoring Organizations of the Treadway Commission (COSO). The objective
        of
        this assessment was to determine whether our internal control over financial
        reporting was effective as of March 31, 2008. Management’s assessment included
        evaluation of such elements as the design and operating effectiveness of
        key
        financial reporting controls, process documentation, accounting policies,
        and
        our overall control environment.
  Page
            31 of
            42
 
 A
        material weakness is a deficiency, or a combination of deficiencies, in internal
        control over financial reporting such that there is a reasonable possibility
        that a material misstatement of the Company’s annual or interim financial
        statements will not be prevented or detected on a timely basis. In our
        assessment of the effectiveness of internal control over financial reporting
        as
        of March 31, 2008, we identified the following material weaknesses, which
        had
        not been fully remedied and continued to exist:
 
 ·
              There
                  was a lack of 1) effective communication of the importance of internal
                  controls over financial reporting throughout the structure of the
                  Company
                  and 2) an adequate tone set by management around control
                  consciousness.
 
 ·
              We
                  do not have sufficient in-house capacity to review and supervise
                  the
                  accounting operations. Our policies and procedures with respect
                  to the
                  review, supervision and monitoring of accounting operations were
                  not
                  operating in a fully effective manner. Timely review of vouchers,
                  general
                  ledger and sub-ledger was not
                  sufficient.
 
 ·
              Our
                  accounting staff was not familiar with U.S. GAAP and SEC reporting
                  requirements. In addition, we did not maintain effective controls
                  over the
                  preparation and review of the period-end closing procedures to
                  ensure the
                  completeness and accuracy of the consolidated financial statements
                  and
                  that balances and disclosures reported in the consolidated financial
                  statements reconciled to the underlying supporting schedules and
                  accounting records.
 
 ·
              There
                  was a lack of effective anti-fraud program designed to detect and
                  prevent
                  fraud relating to an effective whistle-blower program, consistent
                  background checks of personnel in positions of responsibility and
                  an
                  ongoing program to manage identified fraud
                  risks.
 
 ·
              We
                  did not maintain an effective risk assessment and management mechanism.
                  Specifically, we do not have sufficient internal mechanisms to
                  prevent
                  management override in a fully effective
                  manner.
 
 ·
              Our
                  internal audit function was not sufficient. Specifically, there
                  were no
                  personnel with an appropriate level of experience, training and
                  there were
                  no lines of reporting to allow an internal audit group to function
                  effectively in determining the adequacy of our internal control
                  over
                  financial reporting and monitoring the ongoing effectiveness
                  thereof.
 
 ·
              We
                  do not have sufficient safeguards of documentation such as contracts
                  and
                  agreements.
  In
        light
        of these material weaknesses management concluded that our internal control
        over
        financial reporting was not effective as of March 31, 2008.
 
 This
        annual report does not include an attestation report of our independent
        registered public accounting firm regarding internal control over financial
        reporting. Management's report was not subject to attestation by our independent
        registered public accounting firm pursuant to temporary rules of the Securities
        and Exchange Commission that permit us to provide only management's report
        in
        this annual report.
 
 **(c)
        Remediation and Changes in Internal Controls**
 
 Subsequent
        to March 31, 2008, but prior to the filing of this Form 10-K, the Company
        has
        taken the following actions to remedy the material weaknesses more specifically
        described and addressed in Part B of this Item:
 
 ·
              In
                  regard to the lack of effective communication, management held
                  a meeting
                  to review the implementation of further elements of internal controls;
                  we
                  reviewed the employee handbook and work flow; sent notices out
                  to all
                  employees; to add further internal control elements in the area
                  of work
                  assessment; we have set up a special fund for internal control
                  improvement. We are also considering hiring a SOX 404
                  consultant.
  Page
            32 of
            42
 
 ·
              In
                  regard to insufficient in-house capacity, we have set up an internal
                  control center which directly reports to the board directors; we
                  have
                  instructed the human resources department to hire capable personnel
                  with
                  relevant accounting knowledge; we have worked out a standard procedure
                  to
                  monitor accounting operation and timely review of vouchers, general
                  ledger
                  and sub-ledger; we ensure proper review of vouchers, general ledger
                  and
                  sub-ledger prior to the filing of this Form
                  10-K.
 
 ·
              In
                  regard to the accounting staff not being familiar with U.S. GAAP,
                  we will
                  hire a financial supervisor and accountant with knowledge and expertise in
                  U.S. GAAP; we have appointed an independent director, who has over
                  15
                  years of experience in accounting and finance field. He, together
                  with the
                  other two independent directors have reviewed and approved the
                  financial
                  statements prior to the filing of this Form 10-K; we have designated
                  one
                  member of the accounting staff to collect US GAAP updates and assess
                  impact to the Company’s financial statements of the new US accounting
                  standards.
 
 ·
              In
                  regard to 1) the lack of effective anti-fraud program designed
                  to detect
                  and whistle-blower program, management has approved an anti-fraud
                  program
                  as well as a whistle-blower program; 2) the Company will perform
                  consistent background checks of personnel in positions of responsibility;
                  and 3) the Company has set-up a standard procedure to identify
                  and manage
                  fraud risk.
 
 ·
              In
                  regard to the lack of sufficient internal mechanisms to prevent
                  management
                  override, we have appointed three new independent directors in
                  June 2008
                  and we are in the process of forming an Audit Committee; they will
                  review
                  the historical records and budget and review and amend the work
                  flow to
                  provide further internal control elements. Our independent directors
                  have
                  reviewed and approved the financial statements prior to the filing
                  of this
                  Form 10-K.
 
 ·
              In
                  regard to insufficient internal audit function, we have set up
                  an internal
                  control center which directly reports to board directors and will
                  report
                  to the Audit Committee when it is formed; we have instructed the
                  human
                  resources department to hire capable personnel with relevant internal
                  audit experience for the internal audit
                  function.
 
 ·
              In
                  regard to the lack of sufficient safeguard of documentation, we
                  have
                  implemented procedures to safeguard all important documentation;
                  we
                  purchased new sets of safeguard equipments to secure important
                  documentation. We have reviewed all of our contracts and agreements
                  prior
                  to the filing of this Form 10K and stored them
                  properly.
 
 **Item
        9B.**  **Other
        Information.**
 
 As
        of the
        date of this filing, the Company is in the process of filing an application
        for
        listing with the American Stock Exchange.
 
 On
        June
        17, 2008, the Company filed with the Commission a Form 8-K stating that it
        had
        accepted the resignations of Mr. Meilian Li and Mr. Zhaohui Luo and has
        appointed the following as independent directors: Mr. Jiangcheng Fang, Mr.
        Chao
        Jiang and Mr. Chengning Zhang. Furthermore, the Company has appointed Mr.
        Jie
        Shi as its Chief Executive Officer and as a director. Mr. Xiaofeng Li, who
        was
        the Company’s Chief Exeucitve Officer will remain as director and has been
        appointed as the Chief Executive Officer of the Company’s main operating
        subsidiary, Shanghai Sunplus Communication Technology Co., Ltd.
  Page
            33 of
            42
 
 **PART
        III.**
 
 **Item
        10.**  **Directors,
        Executive Officers and Corporate Governance.**
 
 DIRECTORS
        AND EXECUTIVE OFFICERS
  Our
        directors and officers, as of March 31, 2008, are set forth below. The directors
        hold office for their respective term and until their successors are duly
        elected and qualified. Vacancies in the existing Board are filled by a majority
        vote of the remaining directors. The officers serve at the will of the Board
        of
        Directors.
 
 Name
              
              Age
              
              Position
              
              Director
                  SinceXiaofeng
                  Li
              
              31
              
              Chief
                  Executive Officer and Director
              
              August
                  2005Murry
                  Zuhe Xiao
              
              40
              
              Chief
                  Financial Officer
              
              August
                  2005Meilian
                  Li
              
              36
              
              Chairman
                  of the Board
              
              August
                  2005Zhaohui
                  Luo
              
              39
              
              Director
              
              August
                  2005Eric
                  Xue
              
              33
              
              Chief
                  Technical Officer
              
              August
                  2005
 
 Note
                  -
              As
                  of June 11, 2008, the Company has reorganized the Board of Directors
                  and
                  Officers. Please see Item 9B - Other Information on Page 61 of
                  this Form
                  10-K for further information. Since this Form 10-K is being filed
                  after
                  June 11, 2008, the Company’s new Chief Executive Officer, Mr. Jie Shi will
                  be signing as the Principal Executive
                  Officer.
 
 The
        following is a brief summary of the business experience of our
        management.
 
 **Mr.
        Xiaofeng Li, Director and Chief Executive Officer.** Mr.
        Li holds a Bachelor Degree from Shanghai University, Industrial Design
        Department. From August 1998 to February 2001, Mr. Li was employed by Inventec
        Appliances Corp. where he was an Industrial Designer.  From 2001 to March
        2002, Mr. Li was employed by Shanghai Fanna Industrial Product Design Co.,
        Ltd.
        as executive director and general manager.  Since April 2002, Mr. Li has
        been Chairman of the Board of Shanghai Sunplus Communication Technology Co.,
        Ltd.
 
 **Mr.
        Murry Zuhe Xiao, Chief Financial Officer.** Mr.
        Xiao is a Fellow Member of the Institute of Financial Accountant Association,
        a
        member of the Society of Registered Financial Planners, and a Member of China
        Institute of Certified Public Accountants.  Mr. Xiao holds a post graduate
        Certificate in Professional Accounting from City University, Hong Kong.  He
        also holds a degree in Economics from the Jiang Xi University of Finance
        and
        Economics.  Since 1999, Mr. Xiao had worked for Qiao Xing Universal
        Telephone, Inc. as Finance Manager for about 4 years   Mr. Xiao joined
        our Company in 2005.
 
 **Ms.
        Meilian Li, Chairman of the Board.** Ms.
        Li
        holds a Bachelor Degree in Accounting from Guangzhou Nanyang College.  From
        2000 to the present, Ms. Li has held the position of Board Chairman of Shenzhen
        Youlian Transportation, Inc. where she is responsible for human resource
        management, strategic planning and financial management.
  Page
            34 of
            42
 
 **Mr.
        Zhaohui Luo, Director.** Mr.
        Luo holds a Masters of Business Administration from East China Normal
        University.  From 1993 to 2002, Mr. Luo was director and general manager of
        Huizhou Ganghui Electronic Engineering System Co., Ltd. He serves as a General
        Manger for Guangdong Consun Group, Shanghai Office since 2002.
 
 **Mr.
        Eric Xue, Chief Technical Officer** .
         Mr. Eric Xue served as Chief Technical Officer of Sunplus since 2003 in
        charge of research and development of hardware and software.  Mr. Xue
        worked as Section Manager in Motorola Electronics In Shanghai from 2000 until
        2002. He previously worked at Inventic Application, Inc. as an electrical
        engineer.  Mr. Xue holds a Bachelor degree of Electronic and Communication
        Systems from Huadong Shifan University.
 
 (a)
        Significant Employees
  Other
        than our officers, there are no employees who are expected to make a significant
        contribution to our corporation.
  (b)
        Family Relationships
  There
        are
        no family relationships among any of our directors and executive officers.
        There
        are no family relationships among our officers, directors, or persons nominated
        for such positions.
  LEGAL
        PROCEEDINGS
  No
        officer, director, or persons nominated for these positions, and no promoter
        or
        significant employee of our corporation has been involved in legal proceedings
        that would be material to an evaluation of our management.
  AUDIT
        COMMITTEE
 
 The
        Board
        of Directors is in the process of drafting an Audit Committee Charter which
        it
        plans to approve prior to filing the Listing Application with the American
        Stock
        Exchange. The Board will ensure that the Audit Committee has a qualified
        "audit
        committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation
        S-K,
        and is "independent" as the term is used in Item 407(d) of Regulation S-K
        and
        the listing requirements of the American Stock Exchange.
  CODE
        OF
        ETHICS
  The
        Company adopted a Code of Ethics and Business Conduct authorizing the
        establishment of a committee to ensure that our disclosure controls and
        procedures remain effective. Our Code also defines the standard of conduct
        expected by our officers, directors and employees. The Code was filed as
        Exhibit
        99.1 to our Form 10-KSB for the fiscal year ended December 31, 2002 filed
        with
        the Commission on December 2, 2003 and is incorporated herein by
        reference.
  COMPLIANCE
        WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
  Section
        16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
        and executive officers and beneficial holders of more than 10% of our common
        stock to file with the Commission initial reports of ownership and reports
        of
        changes in ownership of our equity securities on Forms 3, 4 and 5. Based
        on
        the copies of filings received by the Company during the most recent fiscal
        year
        the directors, officers, and beneficial owners of more than ten percent of
        the
        equity securities of the Company registered pursuant to Section 12 of the
        Exchange Act have filed on a timely basis all required Forms 3, 4, and 5
        and any
        amendments thereto.
  Page
            35 of
            42
 
 **Item
        11.**  **Executive
        Compensation.**
 
 ***Background
        and Compensation Philosophy***
 
 Our board of directors consists
        of three (3) individuals :
        (1) Mr.
        Xiaofeng Li, our Chief Executive Officer, and beneficial owner of 8.64 %
        of our
        common stock; (2) Ms. Meilian Li, a beneficial owner of 53.01% of our common
        stock; and (3) Mr. Zhaohui Luo. Our board of directors
        have historically determined the compensation to be paid to our executive officers based on our financial and operating performance and prospects, the level of compensation
        paid to similarly situated executives in comparably sized companies and
        contributions made by the officers’ to our success.
        Each of the named officers will be measured by a series of performance criteria
        by the board of directors ,
        or the
        compensation committee when it is established, on
        a
        yearly basis. Such criteria will be set forth based on certain objective
        parameters such as job characteristics, required professionalism, management
        skills, interpersonal skills, related experience, personal performance and
        overall corporate performance.
 
 Our board of directors
        have not
        adopted or established a formal policy or procedure for determining the amount
        of compensation paid to our executive officers. Mr. Li has
        been
        and may continue to be involved when our board of directors deliberate
        compensation issues related to his
        or Mr. Xiao’s compensation.
 
 As
        our
        executive leadership and b oard of directors
        grow ,
        our board of directors may
        decide to form a compensation committee charged with the oversight of executive
        compensation plans, policies and programs.
 
 ***Elements
        of Compensation***
 
 We
        provide our executive officers solely with a base salary to compensate them
        for
        services rendered during the year. Our policy of compensating our executives
        with a cash salary has served us well.
        Because of our history of attracting and retaining executive talent, we do
        not
        believe it is necessary at this time to provide our executives discretionary
        bonuses, equity incentives, or other benefits in
        order for us to
        continue to be successful.
 
 ***Base
        Salary***
 
 The
        yearly base salary of Mr. Xiaofeng Li for the fiscal years ended March 31,
        2008
        and 2007 was $61,000 and $57,594. Mr. Murry Zuhe Xiao received $46,154 and
        $50,223 for the fiscal years ended March 31, 2008 and 2007.
 
 ***Discretionary
        Bonus***
 
 We
        have
        not provided our executive officers with any discretionary bonuses at the
        moment
        but our board of directors may
        consider the necessity of such scheme in the future based on our financial and operating performance and prospects, the level of compensation
        paid to similarly situated executives in comparably sized companies and
        contributions made by the officers’ to our success .
 
 ***Equity
        Incentives***
 
 We have not
        established equity based incentive program and have not granted stock based
        awards as a component of compensation. In the future, we may adopt and establish
        an equity incentive plan pursuant to which awards may be granted if our board of directors determines that it is in the best interests of our stockholders and the
        Company to do
        so.
 
 ***Retirement
        Benefits***
 
 Two
        of
        our executive officers in Shanghai participated in the government -mandated
        multi-employer defined contribution retirement plan.
  Page
            36 of
            42
 
 ***Perquisites***
 
 We
        have
        not provided our executive with any material perquisites and other personal
        benefits and, therefore, we do not view perquisites as a significant or
        necessary element of our executive’s compensation.
 
 ***Deferred
        Compensation***
 
 We
        do not
        provide our executives the opportunity to defer receipt of annual
        compensation.
 
 The
        following table sets forth information for the period indicated with respect
        to
        the persons who served as our CEO, CFO and other most highly compensated
        executive officers who served on our
        board
        of directors .
  **SUMMARY
        COMPENSATION TABLE**
 
 Name and Position
              
              Year
              
              Salary
                ($)
              
              Bonus
                Shares
                ($)
              
              Stock
                Awards
                ($)
              
              Option
                Awards
                ($)
              
              Non-Equity
                Incentive Plan
                Compensation
                ($)
              
              Nonqualified
                Deferred
                Compensation
                Earnings ($)
              
              All Other
                Compensation
                ($)
              
              Total
                ($)Xiaofeng
                  Li
              
              
              2008
              
              
              61,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,232
              
              
              66,232Chief
                  Executive Officer
              
              
              2007
              
              
              57,594
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,082
              
              
              61,676Murry
                  Zuhe Xiao
              
              
              2008
              
              
              46,154
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              0
              
              
              46,154Chief
                  Financial Officer
              
              
              2007
              
              
              50,223
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              0
              
              
              50,223Eric
                  Xue
              
              
              2008
              
              
              47,057
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,232
              
              
              52,289Chief
                  Technical Officer
              
              
              2007
              
              
              44,430
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,082
              
              
              48,512
  **SERVICE
        AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS**
 
 We
        will
        bear all travelling and travel-related expenses, entertainment expenses and
        other out-of-pocket expenses reasonably incurred by Mr.
        Li,
        Mr. Xiao
        or
        Mr. Xue in the process of discharging their respective duties on our
        behalf.
 
 Except
        as
        disclosed herein, we
        have no other
        existing or proposed agreements with any of
        our officers
        and directors .
  **BONUSES
        AND DEFERRED COMPENSATION**
 
 We
        do not
        have an incentive bonus plan at this time.
 
 We
        do not
        have any deferred compensation or retirement plans. We do not have a
        compensation committee; all decisions regarding compensation are determined
        by
        our entire board of directors.
 
 **OPTION
        GRANTS IN THE LAST FISCAL YEAR**
 
 We
        did
        not grant any options or stock appreciation rights to our named executive
        officers or directors in the fiscal year 2007. As of March 31, 2008, none
        of our
        executive officers or directors owned any of our securities.
  Page
            37 of
            42
  **INDEMNIFICATION
        OF DIRECTORS AND EXECUTIVE OFFICERS**
 
 Our
        bylaws provide for the indemnification of our present and prior directors
        and
        officers or any person who may have served at our request as a director or
        officer of another corporation in which we own shares of capital stock or
        of
        which we are a creditor, against expenses actually and necessarily incurred
        by
        them in connection with the defense of any actions, suits or proceedings
        in
        which they, or any of them, are made parties, or a party, by reason of being
        or
        having been director(s) or officer(s) of us or of such other corporation,
        in the
        absence of negligence or misconduct in the performance of their duties. This
        indemnification policy could result in substantial expenditure by us, which
        we
        may be unable to recoup.
 
 Insofar
        as indemnification by us for liabilities arising under the Securities Exchange
        Act of 1934 may be permitted to our directors, officers and controlling persons
        pursuant to provisions of the Amended Articles of Incorporation and Bylaws,
        or
        otherwise, we have been advised that in the opinion of the SEC, such
        indemnification is against public policy and is, therefore, unenforceable.
        In
        the event that a claim for indemnification by such director, officer or
        controlling person of us is in the successful defense of any action, suit
        or
        proceeding is asserted by such director, officer or controlling person in
        connection with the securities being offered, we will, unless in the opinion
        of
        our counsel the matter has been settled by controlling precedent, submit
        to a
        court of appropriate jurisdiction the question whether such indemnification
        by
        us is against public policy as expressed in the Act and will be governed
        by the
        final adjudication of such issue.
 
 At
        the
        present time, there is no pending litigation or proceeding involving a director,
        officer, employee or other agent of ours in which indemnification would be
        required or permitted. We are not aware of any threatened litigation or
        proceeding which may result in a claim for such indemnification.
 
 **Compensation
        of Directors**
  Our
        Board
        of Directors receive no compensation.
 
 **Item
        12.**  **Security
        Ownership of Certain Beneficial Owners and Management and Related Stockholder
        Matters.**
 
 **Security
        Ownership - Certain Beneficial Owners**
  Beneficial
        ownership is shown as of June 30, 2008, for shares held by (i) each person
        or
        entity known to us to be the beneficial owner of more than 5% of our issued
        and
        outstanding shares of common stock based solely upon a review of filings
        made
        with the Commission and our knowledge of the issuances by us, (ii) each of
        our
        directors, (iii) our Chief Executive Officer and our three other most highly
        compensated officers whose compensation exceeded $100,000 during the fiscal
        year
        ended March 31, 2008, or the Named Executive Officers, and (iv) all of our
        current directors and executive officers as a group. Unless otherwise indicated,
        the persons listed below have sole voting and investment power with respect
        to
        the shares and may be reached at  18thFloor,
        YongSheng Building, ZhongShan Xi Road, Xuhui District, Shanghai,
        China.
 
 **Security
        Ownership - Certain Beneficial Owners**
 
 No
        individual shareholder, outside of those listed below in “Security Ownership -
        Management” held 5% or more of the Company’s stock as of June 30,
        2008.
  Page
            38 of
            42
 
 **Security
        Ownership - Management**
 
 AmountAnd
              
              
              
              
              
              PercentageNature of
              
              
              
              
              
              of ClassBeneficial
              
              
              
              
              
              BeneficiallyBeneficial Owner (including address)
              
              Title of class
              
              Ownership(1)
              
              
              
              Total
              
              OwnedXiaofeng
                  Li (2)(3)
              
              
              Common
              
              
              2,299,118
              
              
              D
              
              
              2,299,118
              
              
              7.64
              %18thFl, YongSheng Building
                Xhong
                  Shang Xi Road
                Xuhui
                  District, Shanghai, ChinaMurry
                  Zuhe Xiao (2)(3)
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -18thFl, YongSheng Building
                Xhong
                  Shang Xi Road
                Xuhui
                  District, Shanghai, ChinaMeilian
                  Li (4)
              
              
              Common
              
              
              15,950,000
              
              
              D
              
              
              15,950,000
              
              
              53.01
              %18thFl, YongSheng Building
                Xhong
                  Shang Xi Road
                Xuhui
                  District, Shanghai, ChinaZhaohui
                  Luo (4)
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -18thFl, YongSheng Building
                Xhong
                  Shang Xi Road
                Xuhui
                  District, Shanghai, ChinaEric
                  Xue (3)
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              -18thFl, YongSheng Building
                Xhong
                  Shang Xi Road
                Xuhui
                  District, Shanghai, ChinaOfficers
                  and Directors as a group
                Five
                  (5) People
              
              
              Common
              
              
              18,249,118
              
              
              
              
              
              18,249,118
              
              
              60.65
              %
 
 Notes:
 
 (1)
              (D)
                  stands for direct ownership; (I) stands for indirect
                  ownership
 
 (2)
              Officer
 
 (3)
              Director
 
 (4)
              Mr.
                  Luo was a member of the Board of Directors as of March 31, 2008.
                  On June
                  11, 2008, Mr. Luo resigned from the Board of Directors. (Please
                  see the
                  Form 8-K filed on June 17, 2008 with the
                  Commission.)
 
 **Changes
        in Control**
 
 There
        are
        no arrangements, known to the Registrant, including any pledge by any person
        of
        securities of the Registrant which may at a subsequent date result in a change
        in control of the Registrant.
  Page
            39 of
            42


**Item
      13.**  **Certain
      Relationships and Related Transactions, and Director
      Independence.**





**Certain
      Relationships and Related Transactions**





None.





**Director
      Independence**





As
      of
      March 31, 2008, the Board of Directors consisted on three (3) members: Mr.
      Xiaofeng Li, Mr. Meilian Li and Mr. Zhaohui Luo. No director meets the
      requirement to be considered “independent” as defined by Rule 407(a) of
      Regulation S-K.





**Item
      14.**  **Principal
      Accounting Fees and Services.**





The
      following is a summary of the fees billed to us by Moore Stephens for
      professional services rendered for the years ended March 31, 2008 and 2007:





Service
            
            
            **2008**
            
            
            **2007**Audit
                Fees
            
            $
            154,000
            
            $
            136,000Audit
                Related FeesTax
                FeesAll
                Other FeesTOTAL
            
            $
            154,000
            
            $
            136,000




Audit
      fees consist of the aggregate fees billed for services rendered for the audit
      of
      our annual financial statements, the reviews of the financial statements
      included in our Forms 10-QSB and for any other services that are normally
      provided by our independent auditors in connection with our statutory and
      regulatory filings or engagements.




Audit
      related fees consist of the aggregate fees billed for professional services
      rendered for assurance and related services that reasonably related to the
      performance of the audit or review of our financial statements that were not
      otherwise included in Audit Fees.




Tax
      fees
      consist of the aggregate fees billed for professional services rendered for
      tax
      compliance, tax advice and tax planning. These services include assistance
      regarding federal, state and local tax compliance and consultation in connection
      with various transactions and acquisitions.




All
      other
      fees consist of the aggregate fees billed for products and services provided
      by
      our independent auditors and not otherwise included in Audit Fees, Audit Related
      fees or Tax Fees.





**Item
      15. Exhibits, Financial Statement Schedules.**





(a)(1)
      Financial Statements





The
      financial statements and notes are listed in the Index to Financial Statements
      on page F-1 of this Report.


Page
          40 of
          42


(a)(2)
      Exhibits




14
            *Code
                of Ethics (Exhibit 14 to Form 10-KSB for the year ended December
                31, 2003
                filed with the Commission on June 2,
                2004)




21
            *Subsidiaries
                List





31.1
            *Certification
                of Chief Executive Officer pursuant to 13a-14 and 15d-14 of the Exchange
                Act




31.2
            *Certification
                of Chief Financial Officer pursuant to 13a-14 and 15d-14 of the Exchange
                Act




32.1
            *Certificate
                pursuant to 18 U.S.C. ss. 1350 for Michael Mak, Chief Executive Officer




32.2
            *Certificate
                pursuant to 18 U.S.C. ss. 1350 for Michael Mak, Chief Financial
                Officer




*
      - Filed
      herein





(a)(3)
      Financial Statement Schedules




Financial
      statement schedules not filed herein have been omitted as they are not
      applicable or the required information or equivalent information has been
      included in the financial statements or the notes thereto.





**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) 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.




**T-BAY
                HOLDINGS, INC.**/s/
                Jie ShiDated:
                July 15, 2008
            Jie
                Shi, Chief Executive Officer
              (Principal
                executive officer)




/s/
                Murry Zuhe XiaoMurry
                Zuhe Xiao, Chief Financial Officer
              (Principal
                financial officer)Dated:
                July 15, 2008




Page
          41 of
          42


Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities indicated on July 14, 2008.




Each
      person whose signature appears below constitutes and appoints Xiaofeng Li and
      Murry Zuhe Xiao as his true and lawful attorneys-in-fact and agents, each acting
      alone, with full power of substitution and re-substitution, for him and in
      his
      name, place and stead, in any and all capacities, to sign any and all amendments
      to this Annual Report on Form 10-K and to file the same, with all exhibits
      thereto, and other documents in connection therewith, with the U.S. Securities
      and Exchange Commission, granting unto said attorneys-in-fact and agents, each
      acting alone, full power and authority to do and perform each and every act
      and
      thing requisite and necessary to be done in and about the premises, as fully
      to
      all intents and purposes as he might or could do in person, hereby ratifying
      and
      confirming all said attorneys-in-fact and agents, each acting alone, or his
      substitute or substitutes, may lawfully do or cause to be done by virtue
      thereof.


**Signature**
              
              **Title**
              
              **Date**/s/
                  Jie Shi
              
              Chief
                  Executive OfficerJie
                  Shi
              
              (Chief
                  principal officer) and Director
              
              July
                  15, 2008/s/
                  Murry ZuheXiaoMurry
                  Zuhe Xiao
              
              Chief
                  Financial Officer (Chief financial officer)
              
              July
                  15, 2008/s/
                  XiaofengLiXiaofeng
                  Li
              
              Director
              
              July
                  15, 2008/s/
                  Jiangcheng FangJiangcheng
                  Fang
              
              Director
              
              July
                  15, 2008/s/
                  Chao JiangChao
                  Jiang
              
              Director
              
              July
                  15, 2008/s/
                  Chengning ZhangChengning
                  Zhang
              
              Director
              
              July
                  15, 2008




Page
          42 of
          42